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Forensic analysis illustrates poor fund management

Member: Nifa

A forensic analysis of the accounts of beleaguered charity Kids Company shows that it was the Trustees’ failure to build up a reserve that contributed to its downfall. In fact, two Finance Directors left in less than three years because no one heeded their warnings that there had to be a financial cushion in place to protect the charity from catastrophe.

According to a source who worked in a senior role at the charity for several years and who spoke to The Guardian, the ethos there was that all the money it received had to be spent on the children it helped, so it was impossible to build a reserve. 

The analysis of accounts from 2009 to 2013 shows the organisation was receiving huge injections of funding, which included millions of pounds in government grants. Between 2009 and 2013, its income increased by 77 per cent from £13m to £23m, but the charity was spending almost every penny it brought in. In the same period, its outgoings increased by 72 per cent and senior managers were also receiving pay rises.

An audit was carried out on behalf of the Cabinet Office in 2014, which noted that Kids Company was facing a serious cashflow issue and notes on the audit said that ‘without improving the cash position of the charity it is not possible to build reserves’. However, even this warning was not heeded and it took other allegations to lead the charity to finally close its doors earlier this month.

Author: Roger Isaacs, 18 July 2015

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