Ministers decided to award a £3m grant to Kids Company despite warnings from the most senior civil servant in the Cabinet Office that the charity was unlikely to meet the government’s conditions for the funding, letters published by the Cabinet Office show.
A letter addressed to the Cabinet Office minister Oliver Letwin, dated 26 June and published on the Cabinet Office website yesterday, said that Richard Heaton, permanent secretary to the Cabinet Office and first parliamentary counsel, had concerns because the charity had failed to meet the conditions it had to agreed to in April.
The children’s charity, which has recently been facing questions about its management and future funding, has a long history of receiving grants from the government.
"To date, they have not met the conditions that they agreed to in April," Heaton wrote in the letter, referring to the conditions the charity was set in April when it was awarded a £4.3m grant from the government.
The conditions, which were not set out in the letter, were designed to encourage Kids Company to move to a more financially sustainable model, it said. They included a stipulation that this would be the last payment to the charity this financial year, it said.
Heaton continues: "More generally, the experience that this department has of the charity’s management and capacity gives me limited confidence that Kids Company will successfully implement the changes it describes in its new restructuring plans while meeting the stringent conditions set out in the proposed new grant."
Heaton said the £3m grant the government was considering giving to the charity – which came after a request from the charity for funding to deliver a "significant transformation and downsizing plan" – did not represent value for money.
A reply to the letter dated 29 June, from Letwin and Matthew Hancock, minister for the Cabinet Office, said that Heaton’s concerns had been noted but that they had decided to proceed with providing the additional £3m of funding because of the inspirational work the charity did with young people.
They said they took confidence from the changes Kids Company would be making to its leadership, management and governance, which they said they believed would give it a realistic prospect of long-term viability.
The letter concluded: "We have agreed between us a set of clear conditions that will be placed on this funding, which we believe will help to protect the government’s additional investment."
A spokesman for the Cabinet Office declined to comment on the terms of the grant or the conditions that the charity was set in April.
The BBC and the online news provider Buzzfeed reported earlier this month that one of the conditions of the £3m of funding had been the resignation of the charity’s chief executive, Camila Batmanghelidjh. After these reports, Batmanghelidjh, who founded the charity in 1996, said she would step down and assume an advocacy and clinical role once a a new chief executive had been appointed.
Laurence Guinness, director of communications at Kids Company, said the charity would not be commenting today but would publish a full statement on the matter on its website on Monday morning.