Kids Company and beyond

As 2015 draws to a close, trust and confidence in charities is at an all-time low. A consensus seems to be growing that these institutions are going to have to change the way in which they have been doing business.

Much of the debate has
been framed by the very public closure of Kids Company. The charity, along with its charismatic founder Camila Batmanghelidjh, has been the subject of intense scrutiny and discussion since
BBC Newsnight and Buzzfeed's joint investigation revealed
the extent of the Cabinet
Office's concerns about the management of the charity.

In July 2015, the investigation claimed that the charity had
been told it would not receive
any further funding unless Batmanghelidjh stepped down
as chief executive. She did so the following day, denying that there had been any mismanagement. Then, at the end of July, news leaked out that allegations involving the charity were being investigated by the police.
Within days of this news hitting the headlines, it was announced that the charity was to close, and it was subsequently placed into insolvent liquidation.

A report by the National Audit Office (NAO) revealed that over the twenty years since it was established, Kids Company had received more than £46m in public funding. According to the report, officials had repeatedly expressed concerns about Kids Company over many years, but the government continued to grant funding.

A number of investigations
into different aspects of the Kids Company closure have followed, carried out by the NAO and the Public Accounts Committee.
The Public Administration and Constitutional Affairs Committee is also due to report in 2016 on Whitehall's relationship with Kids Company, and in particular the decision of the Cabinet Office to provide a £3m emergency loan to the charity shortly before
its closure.

The closure of this high-
profile institution will be talked about for many years to come. The groundswell which has followed has, among other things, contributed to the resignation of the chairman, Alan Yentob, from his role as creative director of the BBC.

Trustees' duties

In the wake of the closure of Kids Company, charity trustees are being urged to look again at their own governance and make sure that, as an organisation, their charity is fit for purpose. Some commentators have focused on the need for charities to ensure that they have sufficient reserves, and there have been calls to make this a requirement.

But the closure of Kids Company is not about any
one thing - reserves, impact measurement, or dependency
on state funding. The real lesson of Kids Company is much more basic: charity trustees have a duty to act prudently and exercise sound judgement. They must
act responsibly, reasonably, and honestly, and with reasonable care and skill.

Despite the fact that trusteeship is generally voluntary, trustees must also ensure that they dedicate sufficient time to the role to become confident that they understand how the charity operates - from fundraising through to service delivery. Turning up to meetings is not enough. Trustees have to ensure that they have read their papers and distilled the issues, and then critically challenge their professional staff. It should be
a constructive challenge - but trustees need to be sure that they are asking the right questions. And having asked
the right questions, they need
to follow through on the answers and take action.

Just as Kids Company was falling over in July 2015, the Charity Commission revised and re-issued its CC3 'The essential trustee: what you need to know, what you need to do' guide, which is essential reading for every charity trustee.

The guide is a helpful starting point to assist all charity trustees to understand their duties to act in the best interests of their charity at all times. It sets out
six main duties:

• Ensure your charity is carrying out its purposes
  for the public benefit;

• Comply with your charity's governing document and the law;

• Act in your charity's best interests;

• Manage your charity's resources responsibly;

• Act with reasonable care
  and skill; and

• Ensure your charity is accountable.

The consequences of not doing so are devastating, not just for
the particular charity but for the sector as a whole. As William Shawcross, chair of the Charity Commission, said this month:
'We stand here at the close
of a difficult year for charities.
A few charities let themselves down in fundraising and poor governance has been exposed. They abused the trust of their donors. And worse, they failed their beneficiaries. The awful proceedings tarnished the reputation of one of the noblest parts of our national life.'

It is my sincere hope that
the sector works as one throughout 2016 to begin to restore its reputation. Doing so will not just require the efforts
of sector bodies and the Charity Commission, but of every one of the 970,000 trustees who control our charities. SJ

Jo Coleman is a partner and head of the charity team at IBB Solicitors