The fiscal train wreck that is Kids Company has been explained away in the English media as one of a kind, much as its founder and leading light—the larger-than-life Camila Batmanghelidgh—belies any standard concept of a CEO. When the Cabinet Office convened in Downing Street to consider the wreckage, The Guardian reported:
“She appeared out of nowhere, said a few words that no one could hear and then slowly made her way through the photographers to a cab and vanished: a great, big, fruitily dressed fairy godmother who, when you come to think of it, bears not the slightest resemblance to any of the other seven million people on the planet.”
This sense of unreality pervades much of the story. Many people have come forward to praise what Kids Company has done and the Chairman—BBC’s Alan Yentob—is not running for cover. But, whatever good the charity did in fact do, wholesale abandonment of traditional public sector duties to the untried/unexplored world of social enterprise as is now policy both sides of the border has yet to come under adequate scrutiny.
In the case of Kids Company, despite receiving millions of pounds in government funding, it lived hand to mouth, spending almost all its income each year, meaning to never built any reserves. HM government knew they didn’t have any reserves and so bailed them out when there was grass in the undercarriage. As a result, the trustees got complacent, knowing they would always get bailed out. It received constant injections of funding, including government grants running into millions.
Between 2009 and 2013, its income increased by 77% from £13m to £23m, but in the same period, its outgoings increased by 72%. Meantime, senior management were awarding themselves pay increases. In 2009 the highest salary was under £70,000. By 2013, the top-paid was nudging £100,000, and the next close to £80,000.
This echoes arguments over appropriate executive pay in the public sector where the old saw that “you pay nuts, you get monkeys” has been used repeatedy to ratchet directors and CEOs toward what they might earn in the private sector. This whole area is murkily seedy. High streets are full of charity shops manned by volunteers that compete—often with new goods—with small retailers who have a tough enough time as it is. People are making good careers on the back of it.
No-one objects to paying for a result they value. But last year, 32 charity executives topped £200,000 in earnings. Most people think this outrageous. And who scrutinises such things? Well, in England, it’s the Cabinet Office, who seem overwhelmed by the complexity of this task, dispensing myriad grants in complexities they barely appear to comprehend. There may be a case for combining the Office for Civil Society with the universities and science functions of the business department (DBIS)—and even the Department of Culture, Media and Sport (DCMS) to form a critical mass with a dedicated Secretary of State.
Though the problem may be smaller in Scotland, because of our more ‘progressive’ politics, there is even more enthusiasm both for social conscience and social enterprise as a way to execute it. The Scottish Government supports several umbrella organisations and provides some £8m in direct funding through their Scottish Investment, Enterprise Growth and Social Entrepreneurs Funds. But that’s the tip of the iceberg. Another £200m+ is dispensed over seven years by the European ERDF and ESF. These funds are ostensibly overseen by a committee of fifteen sundry worthies. But they meet only four times a year and that to rubberstamp what Sir Humphrey places before them. Chip in lottery funding and elements of SE, Sports Scotland, HS, NTS, etc and numbers are big and growing, despite recession/recovery.
All this is not to imply that Scottish social enterprise is rife with snouts in the public trough. But, given the wide public’s good natured support here for good causes—whether it be the homeless, the vulnerable, the poor, children, pets, wildlife, nature—the social enterprise sector providing more and more of such services does demand a scrutiny beyond benight neglect that assumes everyone is doing their best and demanding least in each of the undoubtedly good causes.
But the road to hell is paved with good intentions. As much as the private or public sectors, so the social sector needs hard-nosed management if funds are to be used effectively. In 2009 Kids Company cared for 14,000 children but this rose to 36,000 in four years, which required weekly full-time employees to increase from 231 to 495. But, since costs for youth workers, therapists, practice teachers and special project workers only increased 26% over the same period. Ergo, most of the 77% increase in income did not reach where the work was done.
This is not a prediction that Scotland (or another 36,000 kids) will experience such disruption to vital services. But, unless someone with clout wakes up and gets a handle on this sector, a combination of gravy train greed and well meaning incompetence, a similar derailment may not be avoidable. OSCR now oversees (but does not scrutinise) something like £20bn in third sector business across Scotland. That’s 2/3rds of Scottish Government’s entire budget.
Who’s watching how well it is spent?