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11th August 2015

What’s the damage?

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Kids Company closed its doors on 5 August, ending all its services and leaving rumours echoing through the sector. The charity’s founder Camila Batmanghelidjh, supporters and staff, the government, the Charity Commission and plenty of people in the sector have all had something to say, but it will be some time before the post mortem is complete and we have a good understanding as to the reasons for the sudden collapse.

Meanwhile, what lessons can be learned for other charities? To answer that, we need to know who was in charge of the charity, which is the same as for any charity, and that is why Kids Company’s fate matters to the sector.

First and last and always, the trustees are in charge. They should be at the centre of the governance of any charity, large or small, simple or complex and whatever its challenges. Risk management must be a part of that, as must the relationship with the CEO and any funders. If this essential governance control is absent, only luck will continue to allow a charity to continue. We do not yet know if this was a problem at Kids Company but we can all examine our own charities.

Second, the Charity Commission is in charge of regulating the charity sector and directly regulates charities which are registered with it. The Charities Act sets out specific objectives, duties and powers in this regard with the aim of promoting and protecting charitable endeavour. It is impossible for the Commission to actively monitor all charities, so the question is whether it is applying its limited resources in the most effective way.

That means prioritising wisely, producing clear guidance, spotting risks and dealing with them, and maintaining an expert staff. It does not always get all of this right and can be forgiven for finding the task challenging. However it must continually ask itself if it is going about things in the most effective way.

There are also questions to be asked as to the independence of charities from funders and government in particular. The Commission is hot on this issue but it is also the role of government (central, local, and indeed any public body) to avoid courting trouble by jeopardising the independence of charities. Any charity with funding, contractual or other connections with a public body should be alert to the danger of threats to the charity’s independence.

The fate of Kids Company, its staff and beneficiaries, is sad but is a cautionary tale for others. All charities should take heed. For more information on our Charities service please visit our Charity Law service page. If you would like to know more please contact Chris Knight on 01604 233233 or click here to email Chris.