The collapsed charity Kids Company was not given special treatment when it was handed £46m of public money over 15 years, according to the civil servant Chris Wormald, permanent secretary at the Department for Education.
Wormald and Richard Heaton, a former permanent secretary at the Cabinet Office, appeared in front of MPs on the Public Accounts Committee yesterday to explain why the youth charity had been given £3m in government funding only six weeks after receiving a grant of £4.3m.
The charity closed only days after the second grant was awarded in August. A National Audit Office report published last week said the government had been warned six times since 2002 about the charity’s precarious financial state.
Heaton, who is now permanent secretary at the Ministry of Justice, said he was "not totally comfortable" with the £4.3m handout and decided to pass the decision on the £3m grant to ministers.
Correspondence published by the Cabinet Office in July showed that ministers decided to award the grant despite warnings from Heaton that the charity was unlikely to meet the government’s conditions for the funding.
But both civil servants insisted at the hearing yesterday that no one in the government had put pressure on them to continue funding the charity, although it was "well-liked politically" and "favoured by ministers and the Prime Minister", according to Heaton.
Asked by the committee whether the decision to keep funding the charity amounted to special treatment, Wormald said the charity’s treatment had been "no more special" than other charities funded on a grant basis, such as ChildLine.
But he said: "Ministers of successive governments have made clear that they thought Kids Company was doing good work and deserved support. If you want to call that special treatment, then do by all means."
Heaton said he had been "startled, shocked, surprised" that Kids Company had returned to the government for extra funding so soon after the £4.3m grant had been made.
He said: "It was astonishing that the charity had spent our money and was already requiring emergency funding from the government."
Despite this, he said, ministers "quite reasonably took the view that it was a punt worth funding" and had decided to give the charity "one last chance" after it promised to restructure and replace the charity’s founder, Camila Batmanghelidjh, as chief executive.
When asked by the committee what lessons they had learned from the episode, Wormald said: "I think we did do too much one-off decision-making rather than looking at the whole story."
He said that greater focus on outcome and improved record keeping was also needed.
Heaton said: "I think we would say evidence first and decision-making second is the better way around."
Anne-Marie Trevelyan, a committee member and the Conservative MP for Berwick-upon-Tweed, said government handling of Kids Company had been "flawed, flawed and flawed throughout".