Kids Company: Children's charity received £3m grant 'against the advice of civil servants'

The organisation has been accused of financial mismanagement

Ministers overruled advice from senior civil servants and handed a £3m grant to a controversial children’s charity that has been accused of financial mismanagement.

Earlier this month Camila Batmanghelidjh, the charismatic founder of the charity Kids Company, claimed David Cameron and other senior Conservatives had attempted to “silence” her in exchange for £3m of extra financial support intended to shore up the organisation’s finances.

She accused politicians of playing “ugly Westminster games”, suggesting ministers were failing in their duties to protect vulnerable children.

But it has now emerged that officials tried to block the grant. Civil servants warned that Whitehall had “limited confidence” in the charity, which has been accused of handing out cash to children and failing to provide evidence that previous Government grants were spent effectively.

Kids Company, which has a host of celebrity backers and has been held up as a beacon of good practice, has also been criticised for its high staffing costs and lack of evidence for achieving the results it claims with the children it works for.

Documents released on Friday reveal the Permanent Secretary for the Cabinet Office, Richard Heaton, sought a rare “ministerial direction” over the grant, writing to ministers Matt Hancock and Oliver Letwin to raise his concerns.

Mr Heaton said the charity had already received a government grant of £4.2m in April, which said that it would be the last payment of the financial year, to encourage Kids Company “to move to a more financially sustainable model”.

“The fact remains that, to date, they have not met the conditions that they agreed to in April,” Mr Heaton wrote.

“The experience this department has of the charity’s management and capacity gives me limited confidence that Kids Company will successfully implement the changes they describe in their new restructuring plans while meeting the stringent conditions set out in the proposed new grant.”

He added: “It is therefore my judgement that the proposed additional £3m grant does not represent value for money, in terms of delivering the outcomes for which the department is funded by Parliament.”

Permanent secretaries have a duty to ensure spending decisions in their departments meet the tests of propriety, value for money and feasibility. If a permanent secretary believes a policy decision contradicts one of these aims, they are required to write to a minister formally asking for “direction to proceed” – essentially, noting their concern and asking whether to continue.

In their reply Mr Hancock and Mr Letwin ordered Mr Heaton to proceed with the grant, citing the “inspirational work” the charity was doing.

As part of the conditions of the new grant Ms Batmanghelidjh was told to quit as chief executive of Kids Company, which she founded nearly 20 years ago, for an ambassadorial role. She said she always intended to step down as leader on her 20th anniversary.