Trustees should have acted sooner to improve financial stability

A new report by the Charity Commission has found serious mismanagement at Kids Company including repeatedly failing to pay tax and its workers.

The charity, set up by Camila Batmanghelidjh, folded in 2015 amid financial problems.

A subsequent police investigation found no evidence of criminality or safeguarding failures.

While the report said there was no basis for regulatory action having found "no dishonesty, bad faith, or inappropriate gain in the operation of the charity" it added that trustees should have acted sooner to improve its financial stability.

The Charity Commission found the charity had repeatedly failed to pay tax it owed and had failed to pay its own workers. It owed the £850,000 to HMRC when it collapsed.

It said the charity operated a high-risk business model and the trustees had allowed spending to increase without funds to cover increased costs or a fall in fundraising. It said they should have acted sooner to improve the charity's financial stability.

Batmanghelidjh has said she intends to seek a judicial review, calling the report a "corrupted attempt" to "justify its mistaken decision to conduct an investigation in the first place".

The charity was set up in London in 1998 by psychotherapist and children’s rights advocate Batmanghelidjh to provide practical, emotional and educational support for severely traumatised children experiencing poverty, violence and neglect.

By the time it closed in 2015 it had become one of the UK’s best-known charities, boasting high-profile supporters from JK Rowling and Coldplay to David Cameron.

Helen Stephenson, chief executive of the Charity Commission, said: “We found that the charity’s operations and finances made the charity – and by extension its beneficiaries – more vulnerable to decisions of individual grant-makers and donors. The charity’s repeated failure to pay creditors, including its own workers and HMRC, on time, was mismanagement.”

A statement from the former trustees said they were concerned that by criticising them and "disregarding or dismissing" the High Court's findings, the report would discourage good people from becoming charity trustees.

Batmanghelidjh called the commission's report a "travesty", said it "ignores clear evidence" and has "invented findings".