Children Company: Ministers had report on charity’s spending – BBC News

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Image caption Protestors in Westminster in the week of Kids Company’s closure

Ministers were sent a report containing “gobsmacking” details about Kids Company only three days before paying it 3m.

The document confirmed big payments to individual clients and the family of staff and found incomplete fiscal records.

At the time, the charity told clinical want justified the spending.

Newsnight and BuzzFeed News have assured research reports, which was commissioned by Kids Company.

The document confirms that one individual client received 47,069 in tax-free support in 2014 alone and the charity expended more than 50,000 funding person described as the child of an Iranian diplomat, including their PhD study.

It notes that the two young people who have a relative working for a charity received support worth more than 130,000 and saw several examples of unusual financial practice at the now-shut charity, which was resulted until it shut by its high-profile founder Camila Batmanghelidjh.

The 13 -page report was written by PWC, the professional services company, at Kids Company’s request after former employees approached the sector regulator, the Charity Commission, with 10 allegations about Kids Company earlier this year.

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Image caption Alan Yentob has described suggestions of financial mismanagement at the charity as “complete rubbish”

Spreading problems

The document is an initial investigation into five of the 10 allegations with the remainder expected to be addressed subsequently. It exposed details described by a senior figure in the Cabinet Office as “fairly gobsmacking” and “horrifying and familiar” by one children’s services expert, who spent period trying to evaluate the charity for the governmental forces.

Their interpretation appears to differ from oral witnes to the Commons Public Administration Select Committee given by Alan Yentob, chair of the charity’s regents and also the BBC’s creative director.

He told MPs: “Because of the allegations going on, we had to go to PWC and pay them 50,000 to tell us that there was not much substance in the allegations and therefore the Cabinet Office should go ahead and devote us the money.”

The report was sent to the Cabinet Office on 27 July, three days before the 3m grant payment, signed off by ministers Matthew Hancock and Oliver Letwin, was stimulated. This pay was made against the advice of civil servants, who said that Kids Company had failed to abide by the terms of a previous award.

The charity also shut down within a week, but the fact that such a document was known to the department will make it more contentious. The Cabinet Office told MPs that the pay to Kids Company was delayed while they awaited the purposes of this report.

Senior figures in the Cabinet Office point out, however, that they dedicated money to the charity along with stringent conditions – including the replacement of Ms Batmanghelidjh – in an attempt to rectify the issues it raises. A spokesman for the charity’s leadership told: “Kids Company was fully transparent and co-operative” and that the allegations examined in the report were “unsubstantiated”.

John Podmore, a regent at the Pilgrim Trust, an organization who dedicate awards to charities and which has previously cancelled grants to Kids Company over management concerns, said: “In the illuminate of this report no-one in their right mind would sanction further fund, Rather, they would call a complete halting and demand answers as to where the previous fund ran and on what basis.”

Mr Letwin and Mr Hancock are due to appear before the House of Commons Public Administration Committee next month to explain their decisions.

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Image caption Ms Batmanghelidjh arriving to be questioned by MPs

The report

The PWC report is brief and was completed in three days. It says: “We have not carried out anything in the nature of an audit.” The document does not adjudicate on whether the complainant’s concerns were fair, assess clients’ wants nor make recommendations to the Cabinet Office. It does establish facts, based on analysis of the charity’s records.

One allegation was that the relatives of staff members had enjoyed particular assistance. PWC said that two young people who both had a close relative working for the charity were registered as clients in 2014 and were beneficiaries of 6,460 and 2,382 respectively. Dating back to 2009, PWC procured these two young person benefitted, between them, from a total of 134,293 of spending.

A total of 90,000 of the money was spent on therapy, but in reviewing 2014 spending PWC discovered a receipt for two pairs of designer shoes expensing 305 and 49.95 respectively that year.

They also noted that “some of these payments[ to these young person] were made from CB’s weekly float. Where this was the case the supporting information was miscellaneous scraps of paper with the value, date and the beneficiary’s name written on it. This way of supporting evidence alone does not offer dependable evidence”.

Ms Batmanghelidjh told PWC that this outlay was justified by her assessment of the young people’s needs and it was not related to their relatives’ run. In a statement, the charity told: “Because of the vulnerability of Kids Company’s clients we cannot comment on individual cases.”

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Image caption Kids Company’s collapse meant the closure of 11 centres in London and Bristol

High spending

A further allegation concerns big payments made to one adult client. PWC confirmed that Kids Company paid her 47,069.96 during 2014 split into 235 separate expenses. This included 4,700 for clothes and 19,800 on rent.

This was raised with the Charity Commission because of concern about “employment irregularities”. The complainants believed the client was actually an employee and should have been paying taxation. If correct, this income would be equivalent to taxed earnings of 67,500. Other former staff have told BuzzFeed News and Newsnight that she was considered an employee.

Ms Batmanghelidjh denied this, telling PWC that this person was just a client who volunteered at the charity. That, however, raises questions about the generosity afforded to some clients.

During the select committee, Ms Batmanghelidjh was asked whether it was true that people over the age of 18 were receiving more than 100 a week. She replied: “That would be very rare and only if it was a family and they had to support a family.”

This recipient has no family. But according to Ms Batmanghelidjh’s comments to PWC, the spending was justified because of the client’s traumatic background and her subsequent requires. PWC has not had time to verify this , nor Ms Batmanghelidjh’s assert that HMRC told her that this income would not affect either this client’s tax status nor her right to benefits.

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Image caption A young protestor on Whitehall in the week of the charity’s closure

The Iranian diplomat’s child

The next accusation is that Kids Company money the PhD of someone described in the report as the child of an Iranian diplomat while they were studying for a PhD at a high-ranking university. PWC identified that this support had been provided at a cost of 57,779, with 14,407 incurred during a single year. The latest support package was costed at 25,600 a year – and included course fees.

The charity’s former leader, who has Iranian family, stated that she did not know the client’s family and had not been involved in the case. But the young person discovered themselves without support and a donor was found to sponsor the spending. The issue creates a question, however, about why a youth work charity was sponsoring a foreign student.

Another allegation was that staff at the charity circumvented financial controls by splitting pays into small parts to avoid financial controls. A payment of more than 5,000 necessitated regent oversight. PWC found one example which might satisfy this description, but detected no evidence of a broader problem.

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Image caption Alan Yentob arrives to be quizzed by MPs

Management problems

In the course of analysing this allegation, PWC noted that when analysing 6,684 of pays for one recipient, they found 4,000 of spending had no receipts. They also note that spending on Christmas presents for clients was logged in January 14 and January 15.

In a statement, Kids Company told PWC’s report did not find evidence to validate allegations made against the charity.

“The findings were also shared with the Cabinet Office prior to Kids Company’s restructuring plans being agreed, ” the charity told.

“This was not a full audit but an intensive investigation looking at hundreds of documents and interviews with key personnel. Kids Company was fully transparent and cooperative.

“Alan Yentob made it clear in his submission to the Public Account Select Committee that the PWC investigation was incomplete.”

The charity said it provided a supportive family surrounding through financial and practical support, and that all the gifts referred to in the PWC report were funded by private donors.

PWC has declined to comment “on a confidential piece of client work”. The Charity Commission, which has recently opened a statutory investigation into Kids Company, says it “cannot comment while our investigation is under way”.

The Cabinet Office has a policy of not commenting on leaked documents.

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