Kids Company collapse: What FDs can learn


Practice correspondent
Sift Media
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The Kids Company collapse had all the elements that the media loves in a story: A flamboyant founder, financial scandal and, most lamentably, vulnerable people who depended on the charity.

The youth charity was founded by Camila Batmanghelidjh [pronounced Batman-gay-litch] in 1996. The charity’s goal was to provide vulnerable kids a steady guiding force, breaking the cycle of failure that’s all too common in many communities.

Kids Co was a fabulous success in terms of fundraising, and Batmanghelidjh was feted throughout Britain’s high society for her work with the charity.

In 2015, however, Kids Co collapsed in ignominy. Amid allegations of mismanagement and the squandering of funds, Batmanghelidjh was forced to step down as the charity's chief executive, and Kids Co declared bankruptcy, despite receiving millions of pounds in government funding.

Batmanghelidjh was extraordinarily passionate about the cause, and she was clearly the dominant force in the charity. At last year’s Practice Excellence Conference, Chas Howes, the former CFO of SuperDry, spoke very eloquently about the CFO’s role when working with entrepreneurial, highly charismatic individuals.

The primary lesson that CFOs and FDs can learn from Kids Co, said Howes, is “whatever the organisation's style, the finance team and particularly the CFO has to fit in with the culture of that organisation”.

“When I was at SuperDry, Julian [Dunkerton] was incredibly good at some things and not very good at others,” Howes told AccountingWEB. “And as long as he knew that I was going to pick up the bits he wasn’t good at, it gave him freedom to go ahead, do his stuff and know that none of the balls were going to get dropped.”

Howes is also a trustee of a disabled children’s charity in Cheltenham. According to Howes, he’s had to completely pivot his style. “The charity I work with is so conservative and taking risks is so against their nature. I find myself playing a different role where I’m challenging them, saying, ‘we can do this!’

“It’s really important that you have that dynamic working at the senior part of the organisation, and it has to be appropriate to where that organisation is.”

Matching passion with principles

It has become painfully clear that Kids Co, under Batmanghelidjh, lacked the calm fiscal captaincy of an experienced financial director. As Howes explains, the finance director has to interpret what the founder or CEO lacks, and “fill the gaps that other people don’t have”.

“[Julian and I] worked incredibly well on that basis, and I changed my style and he changed his,” said Howes. “It allowed me to do what I needed to do to put in all the financial controls and structure and ways of working that entrepreneurs frankly aren’t interested in. All he was interested in was driving SuperDry forward.”

Dunkerton used Howes as a springboard for his ambition, whereas Batmanghelidjh allowed her passion to completely consume Kids Co. As Caron Bradshaw, the director of the Charity Finance Group, puts it, leaders need to be “self-aware enough to recognise when they have gaps in their skill set and bring in other people to complement their weaknesses.”

“[People like Batmanghelidjh] leave a vacuum and unless you’ve got some strong financial leadership that vacuum will just suck in everything,” said Howes.

“You have to your chief executive’s conscience. I’ve had some very difficult conversations with CEOs and entrepreneurs in my time because I felt they were doing the wrong thing. I was the guardian of good, sound financial and corporate management.”

Charities’ financial trap

“The view we would take in how organisations are run is if you don’t match the passion for the cause with passion for the financial management of the organisation, you will come a cropper at some point,” said Bradshaw.

According to Bradshaw it’s a mistake made in charity finance planning all too often. Charities allow the people who are driven by the cause, like Batmanghelidjh, think through what they want to do, what impact they want to have, and then they wheel in the finance person and ask, ‘How do we do this?’.

“Rather than, saying, right at the beginning, lets have the finance person in the room, lets have an agreed understanding of what the organisation is, what resources are available to us to deliver it, and what can we do towards our mission and vision with what we have available,” said Bradshaw.

Vulnerable victims

Ultimately, the people most affected by the collapse of a prominent charity are the vulnerable individuals the charity was meant to serve. It’s something Howes has reflected on in his time acting as a trustee for the disabled children’s charity. “I went in thinking, I can help to build and grow this charity. But then I reflect, we’re dealing with incredibly vulnerable young people. You can’t do anything that even begins to put their support and safeguarding at risk.

“I learned that no, we have to make the right decisions for the overall benefit of the young people we help. That doesn’t mean you can’t still have robust conversations, we still do.”

If anything, said Howes, the vulnerable children reliant on the charity’s success has pushed him to strive for even higher standards. “You never, ever compromise on standards from a finance perspective. Ever. You build up a deep knowledge of your organisation and you amend your behaviour according to what’s going on at the time and where the organisation hopes to go strategically.”

This will require a change in how people think about charity finance, said Bradshaw. The percentage of charities’ money being spent on charitable activities is often emphasised in the press and parliament. This metric is one of the reasons why Kids Co was popular with politicians. “It is important to look at that measurement, of course,” said Bradshaw. “But support costs are also imperative to a charity’s health. Without sustainability and resiliency in the organisation, you potentially - like Kids Co - end up letting down a broad range of people who need you.

“We have pressure on us, to use our money on the front line. People will often give you money strictly for front line services, but they won’t give you money to cover your entire costs.” It can leave charities in a position where they are incredibly successful at raising money, but don’t support core costs a la Kids Co. This is an area where charity finance directors can deliver a reality check.  

“Unless we start thinking about finance differently, unless we change the narrative to finance being an essential part of the cause, we’re never going to break these sorts of cycles.”


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12th Feb 2016 11:21

The road to hell ......
The road to hell is paved with good intentions

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12th Feb 2016 12:02

Really interesting article

Pretty insightful stuff - thanks.

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12th Feb 2016 12:16

Challenge - !

I liked this article but think the headline

"The primary lesson that CFOs and FDs can learn from Kids Co, said Howes, is “whatever the organisation's style, the finance team and particularly the CFO has to fit in with the culture of that organisation”."

is a bit wrong , while the overall meaning is definitely the right angle, the word I have problem with is "fit" surely by fitting in you go native and you just follow the CEO's lead 100% and you are just a yes man and potentially compromise the organisation .....surely you actually have to be a "complement" that supports and enhances the CEO's vision and direction, while remaining a robust independent challenger of strategy, to assist them in achieving the shared organisational vision that the CEO represents and guides.



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12th Feb 2016 13:06


I accidentally listened to part of an interview with Camila Batmanghelidjh on BBC Radio 4's Woman's Hour, earlier this morning!

In my own defence and (machismo), I say "accidentally" since I had popped downstairs into the kitchen for my mid-morning tea and snack and the radio was on.

Naturally, the BBC interviewer, Jenny Murray, was stupidly sympathetic, even sycophantic.

Batmanghelidjh IMHO I would not trust with a quid: she owns a ready mouth and a series of justifications and "explanations".

All of which evaded one seminal reality: anyone who adopts the position of company director, School Governor, charity CEO, automatically accepts the onerous realities of Fiduciary Duties and Liabilities. Batmanghelidjh seemed to seek refuge in the old tired cliche: "It was the other guy's fault, not mine! I'm blameless and look at all the good we did!"

Sadly, at present, as we know "charity" is anything but: it is all too often a thinly camouflaged masquerade which avoids and even evades legitimate taxation and mainly benefits the progenators of the supposed charity.

How this woman could be given in excess of £1.6 million to abuse is utterly beyond me...




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12th Feb 2016 13:50

Blinded by good intention....

I also heard it, so compelling that I was late leaving.

It just shows how the PC world precludes common sense be it in accountancy, accountability or just running a business. Could Cameron say, as probably suggested by his advisors that this outfit is out of control and does not merit more public funds? Run by an ethnic person with a very much larger than life persona wearing god knows what with a plausible line requires more than a suicidal bent to denounce as required. Jenni Murray was over sympathetic and sycophantic and made the interview a farce. 


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12th Feb 2016 13:06

Very True

Having spent more than a decade of my career in the Charity Sector, much of this article rings true.  All too often I have encountered charitable organisations that do not place enough value on having a sufficient finance function.  In addition, I have encountered Charity Boards who also underestimate the need for a robust financial function as they often do not appreciate the complexity of charity accounting - particularly in larger organisations with multiple income streams.  

I have had direct experience of 'rescuing' one particular organisation on the brink of collapse as it was perceived that they only needed a bookkeeper to process invoices.  In the meantime, with no financial direction or understanding of the true cost to the organisation, the good intentioned visionary's almost bankrupted the organisation!  Thankfully, that particular organisation has survived despite subsequent cuts to core funding.     


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By Hartac
12th Feb 2016 13:09

Kids Company collapse

Having worked in the charitable sector for the last 40 years or so, I endorse a lot of the comments above. It is clear that the company needed an effective CFO whose opinion Batmanghelidjh respected AND also a trustee, chair or treasurer, to whom the CFO reported indirectly.     

I have  had good working relationships with CEOs but there have been times when I have had to say , "no you can't do that " whether it relates to a project that is risky or personal expenses that are over the top. A reply to the former might be, "we will find the money, don't worry!" That is when you need to point out that the trustees might not be prepared to take the risk and should be consulted. This assumes of course that the trustees are not weak, an assumption that, unfortunately, sometimes cannot be made.

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12th Feb 2016 14:31

Along with government departments...

 Along with government departments, the days when this type of 'service' was a true vocation with little or no reward has disappeared.  Its just another job...and a number of those in them will milk the position for as much as they can under this veil.  

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By pwinter
12th Feb 2016 15:13

Balance needed

This case emphasises the need for CEO & board/trustees to be balanced.  Here was a person who knew how to play the media but was out of control. 

I found the recent TV programme very revealing.  There was little control on spending and much went on inappropriate schemes.  The charity appeared to be run wth little thought to accountability and appropriate use of charitable funds. 

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By Freddo
13th Feb 2016 11:14

Independent Examiners / Auditors

Why has no-one mentioned the Independent Examiners or Auditors. Surely a Charity of this size requires independent examination. Why did no-one raise concerns with the Board of Trustees much, much earlier?

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13th Feb 2016 14:13


Freddo wrote:

Why has no-one mentioned the Independent Examiners or Auditors. Surely a Charity of this size requires independent examination. Why did no-one raise concerns with the Board of Trustees much, much earlier?

The Charity Commission itself is a rather nasty joke.

Eerily similar, actually, to Companies House et al.

Since the income exceeded £1 Million it needed an audit, not a qualified IE.

I well remember watching one of those pointless TV "Investigative" drum banging progs a couple of years ago: all about Slumlords.

One hugely dodgy bloke was running a speculative property company as a charity...a disgruntled ex member of staff was whistle blowing.

Sums it up, for me.




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14th Feb 2016 09:08

Charities are a no no for me

I think the board of Trustees are largely a waste of space in the Charity world. If the charity has a strong leader when setting up, they will move heaven and earth to ensure that the trustees are a toothless bunch of Dame Blah de Blah or Sir Blah de Blah with very little brain power and even less interest in holding the chief exec to account. Seeing even just one of these "great and the good" as a Trustee indicates a problem to me.

I have seen all sorts of issues swept under the carpet by the big city auditors -to be fair perhaps it isn't their legal duty to comment on how bad some of the financial systems have been. On the other hand surely an audit is being relied on by outsider funders.

I think the Charities Commission needs to be given much stronger powers and a remit to investigate charity finances with just a few weeks' notice, much like HMRC's powers to launch an inspection into a tax return for no particular reason.

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14th Feb 2016 18:06

Oh Yes It Is!

Moonbeam wrote:

I have seen all sorts of issues swept under the carpet by the big city auditors -to be fair perhaps it isn't their legal duty to comment on how bad some of the financial systems have been.

Of course it is!

Auditors are required. by law, and their professional bodies to either issue a clean report, or a "dirty" report" (Qualified Report) and state precisely why and where their misgivings and doubts lie.

This goes right back to the Cadbury report and indeed, the creation of the FRC (Financial Reporting Council) and the creation of their subordinates, the ASB (Accounting Standards Board) and APB (Auditing Practices Board). All of this was the resultant of the chicanery between major accountancy firms and PLCs.

Sadly, as with so many QUANGOs and NGOs (Kids Company included!), once the media blitz and public angst has died down, then all is forgotten and base duplicity and venality contines unabated.

The Charity Commission is, even after reform, yet another Whited Sepulchre...


Worth reading this...

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