Charities paid by the state to deliver public services – lines of accountability

Summary

The fallout from Kids Company has led to questions about the role of charities delivering public services

My interest in this news item is primarily around public administration rather than frontline service delivery. I’ll try & refrain from commenting on the merits or otherwise of the work that Kids Company and their former chief executive Camilla Batmanghelidjh did working directly on the front line.

It was the ministerial direction sought by Richard Heaton, Permanent Secretary at Cabinet Office, that brought the issues into the mainstream news headlines.

“What is a ministerial direction?”

This is where the civil servants in a government department have such strong reservations about ‘value for money’ or propriety of a minister’s decision that they ask for a formal, public written direction to proceed. If a minister wants to go ahead and issue such a direction, the decision is made public and Parliament is formally notified in the form of a letter to the Chair of the Public Accounts Committee. Josh Harris of the Institute of Government explains more here.

“Why did the Permanent Secretary ask for a ministerial direction?”

Mr Heaton’s letter is absolutely crystal clear on this (the first of the two in this link). The organisation has not met the terms and conditions of an existing £4m+ grant and is therefore recommending against authorising a further £3m grant.

Whenever the government issues a grant of money to an organisation outside of the state, there are terms and conditions attached to it in the form of a grant funding agreement – a contract if you like. These ensure that the money is spent on what was agreed, and allow for the money to be claimed back if it is misspent or not spent at all. The greater the amount of money awarded to organisations, the closer the organisation is likely to be monitored and/or required to report on how that money was spent (& what it achieved).

Part of that monitoring is likely to include a requirement on the grant-receiving organisation to have their accounts audited annually, with a statement from the auditor saying that the figures in the organisation’s annual financial accounts are a fair and accurate statement of accounts. Cabinet Office has clearly had their eye on Kids Company as they directed auditors to carry out an audit on the latter’s governance systems & financial controls. Click on KidsCoAuditorsReport (which I’ve downloaded from http://www.kidsco.org.uk/about-us/annual-accounts & hosting separately just incase their website shuts down). There doesn’t seem to be anything substantial raised in that audit report other than cashflow.

It turns out that civil servants in the Department for Education had similar concerns – as former minister Tim Loughton MP stated publicly recently. A ministerial decision on whether to pay a grant or not is one where a minister follows the advice of civil servants. The minister is responsible for deciding the priorities, and civil servants work on the detail on how to deliver on them. It was perfectly reasonable for civil servants in the Department for Education in receipt of information about problems with Kids Company – or any other charity – to advise a minister against making further payments until such problems had been resolved. Interestingly, the links to previously public documents are now dead – so I’ve asked DfE via Twitter to update them.

‘Why are we in a position where a high profile charity working with such vulnerable people is seemingly so dependent on central government funding? Isn’t this a local government issue?”

In part, this is where the huge cuts to local government have come back to haunt ministers. The Joseph Rowntree Foundation investigated here. Local councils have statutory duties regarding vulnerable people – children & adults alike. We are reminded of this every time there is a high profile failure of people in care being abused. Something that seems to be all-too-frequent unfortunately.

As the cuts to local government have hit, so more and more people have become dependent on charities, and thus charities have faced an environment where funding is harder to come by while demand for their services is rising. We’ve seen recently the fallout in the news over aggressive fundraisers.

With Camila Batmanghelidjh, Kids Company had a high profile, media friendly leader who was clearly successful at lobbying for grants from central government. Charities and organisations lobbying for, and receiving grants from central government is not new. During my civil service days during Labour’s time in office, I remember a number of times where people from organisations would tell me what extra they could do if the government gave them more money. I recall one senior civil servant giving me advice on how not to get trapped into verbal commitments around funding early on at the start of one of my policy areas – which served me well.

This made me appreciate the systems and processes we had in place to ensure money was being spent properly – and that competing organisations had a fair chance to apply for whatever grant funding programmes were in place. The risk otherwise was that someone would have a chat with a minister and the minister would direct the money be handed over without any scrutiny or due process. Can you imagine the temptation for a minister to get a disproportionate amount of grant funding for programs in their own constituency? Exactly. That’s why we have systems to uphold propriety.

“A disproportionate amount of civil servants and ministers time on one organisation?”

This bit is about the structure of the state, not about Kids Company. The statement on the website of the latter states they have eleven outreach centres in London & Bristol, & an outreach project in Liverpool. The fact that its closure has embroiled the Prime Minister and two government departments is a reflection of the over-centralised state we have in the UK, & England in particular.

After the 2010 general election there was a big change in the face of austerity. The days of large centrally-managed grant-funded community regeneration programs were over. My final job in the civil service involved closing down one such big-spending program – the New Deal for Communities Programme.  It was in this post that I learnt to appreciate the limitations of such centrally-managed programs – and how the real challenge was (& still is) improving local councils. The academies policy with schools at the Department for Education is one example of where successive governments have taken power away from local government to run things centrally, rather than taking on the harder challenge of overhauling local government. As with academies, when you outsource to charities or to the private sector, accountability becomes more contractual and less about citizenship & democracy.

“Should any ministers resign?”

Ministers have resigned over less, but for me the question is whether this was a failure of policy. Jill Rutter of the Institute for Government is spot on here – by the sounds of things having experienced an almost identical case during her time at DEFRA. It sounds like ministers Matt Hancock MP & Oliver Letwin MP were incredibly inspired by the work that Kids Company did – as they stated in their letter confirming the ministerial direction, or they did not want to have the battle in the media that Mr Heaton’s advice to pull funding would have led to. As it turns out, Mr Heaton’s judgement on the grounds he set out, in my opinion was the correct one – and that he’s also been proved right by events. That is not to cast a cloud on the work and achievements the frontline staff & volunteers have done in what sound like incredibly challenging circumstances.

More broadly, I concur with Jill Rutter’s conclusion in her blogpost on the not-for-profit/third sector. There needs to be greater transparency & consolidation across the sector. By the sounds of things, the revolving doors often complained about in public & corporate sectors seems to be an issue in this sector too.

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