20.The 2006 Charities Act provides Ministers with broad powers to fund charities, and the 2002 Education Act provides extensive grant-making powers similar to those in the Charities Act. The Accounting Officers stressed to us that it was entirely proper for Ministers to decide which charities in which sectors they wished to support, and that the decisions taken by Ministers had been ones that they were allowed to take. The Accounting Officers made it clear that the job of officials was to ensure that any support ministers wished to give any charity, including to Kids Company, was in line with the requirements of HM Treasury’s manual Managing Public Money and, once the decision to fund a charity had been made, that it was properly implemented in a way that delivered value for the taxpayer.
21.The Department for Education told us that up to 2013, as Kids Company had won funding on a competitive basis and delivered the outputs required, the question of seeking a ministerial direction had not arisen. When the charity failed to win funding through a competitive process in 2013, the Department prepared a “public interest case” for ministers to decide whether to fund Kids Company via a direct government grant rather than through competition, but this case did not include an assessment of value for money.
22.For the years 2013-14 and 2014-15, Kids Company received an annual non-competed grant which was funded by a number of Departments – the Departments for Education; Work & Pensions; Communities and Local Government; and Health. The Department for Education told us that the direct grant was made using powers under the 2002 Education Act and that the nature of this grant was different from the later one made by the Cabinet Office in 2015 under the 2006 Charities Act. The Department’s Accounting Officer also told us that he had not considered a direction in 2013, because he had assured himself that there was a public interest in the proposal that was being taken forward and ministers had agreed.
23.Kids Company lobbied government for funding over many years, and we were told that it was a matter of public record that there were a number of letters to successive Prime Ministers. The NAO found a consistent pattern of behaviour since 2002, each time Kids Company approached the end of a grant term: lobbying of ministers and the media about the impact of service closures and redundancies when officials resisted funding applications; ministerial interventions to seek reviews of funding options, and eventually grants being awarded.
24.Accounting Officers told us that they were under no pressure from ministers to make grants to Kids Company. In relation to giving the £4.3 million grant in one lumps sum in April 2015, on which he had considered but decided against seeking ministerial direction, the then Cabinet Office Accounting Officer told us “I certainly came under no political pressure to either give or not give a direction”. He said he was aware that Kids Company was a prime ministerial favoured charity and that many ministers across government favoured it too, but still would have sought a direction if he had decided it was the right thing to do. When asked whether at any point Ministers had put pressure on them to agree funding to Kids Company the then Cabinet Office Accounting Officer said “None of my Ministers at the time put personal pressure on me … I was under no personal pressure to do one thing or another”. The Department for Education Accounting Officer said “No, I was not put under any pressure”.
25.As the replication of its services was a condition of Kids Company’s funding between 2005 and 2014, we could not understand why it got no further than operating outside Bristol and London and why, after 13 years and £42 million, the government continued experimenting with the charity. The Department for Education explained that replication included the spreading-out of the charity itself and the development of techniques that could be picked up by other people. It added that most people had seen Kids Company as something that was developing innovative practice that was not being developed elsewhere and that the Department had been involved in sharing this practice.
26.We were also concerned that children elsewhere in the country had just as important or difficult needs as in London. The Cabinet Office’s then Accounting Officer responded that if there had been a charity in, for example, Sunderland with the same compelling methodology and the same appeal to politicians, then perhaps it would have succeeded. He also told us that if Kids Company had been able to demonstrate that what it was doing was achieving outcomes in society, other charities would have been able to copy it.
27.Many government departments had a relationship with Kids Company. The charity first received central government funding from the Home Office in 2002. The Department for Education was responsible for the charity’s funding for many years and this responsibility was transferred to the Cabinet Office in July 2013. We were also told that the charity made approaches to different departments for funding. For example, when seeking its final funding of £3 million in June 2015 it had initially approached the Department for Work & Pensions for the money. But we were concerned about how well much information on Kids Company had been shared across Whitehall. For example, we would have expected the Department for Education to have told colleagues at the Cabinet Office that Kids Company had no reserves, when it passed over responsibility for the charity. The Cabinet Office would not then have had to rely on a report from accountants.
28.While government gave £42 million to Kids Company, local authorities spent just £2 million with the charity over the period. We were concerned that Kids Company, beyond a couple of boroughs in south London, had not extended its reach into other local authority areas over the years. We were also disappointed to hear that departments had not formally spoken to local authorities to find out how Kids Company was operating on the ground and why local authorities had found it difficult to fund the charity. The Cabinet Office had only had informal conversations with local authorities in Lambeth and Southwark about why local authorities found it difficult to fund Kids Company. But Bristol Council, for example, had terminated a contract with Kids Company as it had failed to achieve registered provider status. The Cabinet Office’s then Accounting Officer accepted that departments would have benefited from seeking out more information from local authorities.
49 ; , para 4.3
50 ; , Figure 7
52 , paras 3, 3.3
59 ; , Summary para 2, Figure 2
60 ; , para 4.13
63 , paras 2.5, 2.10, Figure 3
66 , para 2, 10 (footnote 12)
Prepared 11 November 2015