Collapse of Kids Company 'could lead to more stringent checks on grants'

Kids Company: far-reaching implications
Kids Company: far-reaching implications

Charities that receive government grants could face more stringent financial checks after the collapse of Kids Company, according to the government’s response to a parliamentary report on the charity.

The House of Commons Public Administration and Constitutional Affairs Committee published its report on Whitehall’s relationship with Kids Company in February. It said the charity’s closure happened because of an "extraordinary catalogue of failures of governance and control at every level" and called on the government to be more transparent and accountable when it awards grants.

In its response to the report, made this week, the government says it accepts many of the recommendations it made and points out that many are similar to those made in another report on the government’s funding of Kids Company, which was published by the Public Accounts Committee in November.

The government’s response to the PAC report said it would set up a central register of grants to charities, establish a grants efficiency programme and run a review of how it makes grants.

Its response to the PACAC report says it accepts the committee’s recommendation that the government should not rely on the existence of signed-off audited accounts as an assurance that a charity is financially well-managed or well-governed, and should instead ask to see management letters and seek direct assurance from the charity’s auditor.

"We are considering a range of proportionate checks that can be undertaken, both as part of initial due diligence and on an ongoing basis," it says.

"These could include requiring sight of the charity’s management letters, seeking further assurance from the charity’s auditor, or asking the charity to provide specific financial and relevant other information as part of the grant application process. We will also move toward a requirement for comprehensive annual reviews on all grants."

The response says the government also accepts a recommendation that no department should hand money to an organisation about which serious allegations have been made but not investigated.

It says it agrees with the committee's recommendation that it should consider creating an account manager to oversee funding decisions related charities.

It says: "We will be identifying a single account manager who can ensure there is transparent information about coordination of grants given to a single charity, where the grants are individually or collectively significant."

The response says the government does not agree with the PACAC recommendation that the Charity Commission should receive more funding, pointing to its pledge to spend £20.3m a year on the commission until 2020.

A number of PACAC recommendations focused on the Charity Commission, calling on the regulator to make its guidance clearer and more accessible to trustees, revise its guidance to auditors and reinstate the title "commissioner" for commission board members.

The government response says the commission will respond directly.

A commission spokesman said the regulator’s response would be published in due course.

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