Could good governance have saved the Kids Company charity?

The recent high-profile closure of the Kids Company charity has been well documented in the press. The charity’s charismatic founder Camila Batmanghelidjh as well as the charity’s relationship with the current Conservative Government has kept media interest high. Therefore, we are not going to retell the story here but instead will ask some questions about good governance, that all charities (and even non-charitable organisations) should ask themselves to help avoid a similar fate.

The official reason behind the closure was lack of funding: this followed rumors of financial mismanagement as well as allegations of failure to safeguard young people. This, in turn, led to the withdrawal of donations from donors and the decision by the Government not to supply further grants, and indeed claim back a £3m grant it had given just days before its closure. The question is – how did it get so bad before anyone realised?

An Effective Board of Trustees

Without speculating exactly what lead to the Kids Company closure, a charity requires good governance and leadership and an effective Board of Trustees. Charities are often set up by volunteers and individuals who are passionate about helping the most vulnerable in our society; and while these people add considerable value to the charity, the charity should also ensure that there is some independence and objectivity at Board level to help achieve effective management of charitable and in some cases, public funds. A number of independent trustees on a Board can help bring some objectivity to proceedings and ensure that the chief executive is not all-powerful. As charities increase in size, the trustees should continue to evaluate whether the right people are in the right roles. As the charity grows, different levels of experience and skills may be required. Whilst someone may be an expert in the purpose of the charity (e.g. a doctor setting up a health based charity), they may not have the high level business management skills required for good governance across a large charitable organisation. The trustees should ask themselves: Do they have the right people at board and senior management level? Is the Board receiving the right level of information to efficiently and effectively manage and direct the business?

Risk Management

The risks facing charities are many and varying hence the vital need for good governance. From potential lack of funding to the reputational risk caused by allegations of failure to safeguard children and vulnerable adults, such risks can be the very undoing of a charity’s continued existence. Does your charity/organisation have effective Risk Management Policy and Procedures in place? Are the risks identified, scored and monitored in an appropriate manner? Are the Trustees monitoring and managing risks early enough to avoid catastrophe?

Financial Procedures

In charities where funds are ring-fenced for specific purposes (apparently the government funds given to Kids Company were used to fund staff costs despite a specific condition that they not be so used), what procedures are in place to ensure the segregation of funds and appropriate use? How does the charity control its costs and ensure that running costs are not disproportionate to its charitable output? Are there effective committee structures in place to ensure that there is close scrutiny of finances? Is the reporting from management to Board adequate? Are the internal and external audit functions performing as they should?

Internal Control

Has the Trustee Board ensured that there are effective internal controls in place to mitigate risks? Is it satisfied with its level of delegation to the chef executive? Are there effective financial controls in place in terms of expenditure, with clear authority levels? Are there other controls in place, such as effective safeguarding policies; Health & Safety; Employee and Volunteer welfare policies? Has effective training been provided to staff, volunteers and higher up the command? All these things should form part of the Board’s strategic thinking on how to maintain a successful organisation.

Running a successful charity can be a daunting prospect, but with the right governance structures in place, it needn’t be overwhelming. If you are concerned about the answers to any of the questions asked above, or any element of good governance, we are here to help you navigate through. Please contact us here for further information and advice.