Faith, hope and charity: Organisations like Kids Company have a vital role to play, but its demise shows the need for effective oversight

It is quite a testimony to the power of the personality of Camila Batmanghelidjh that her charity was able to secure so much government funding at a time when public spending is under severe pressure – and when the administration of Kids Company had attracted unwelcome, and serious, criticism. Successive prime ministers have entertained and been entertained by Ms Batmanghelidjh, and her hold on David Cameron was such that he was said to be “mesmerised” by her. Both he and Gordon Brown seemed to be such fans that they gave loud personal support to her organisation. Such faith has been poorly repaid. The charity closed on Wednesday night, a £3m government grant given to it in its dying days apparently wasted.

A shame then and, while the sums involved are not particularly significant in the context of a public spending total of about £800bn (thus 0.0000004 per cent of the total), it is still a lot of money to most people, and could have been better used elsewhere. The unusual circumstances of the grant, moreover, where ministers apparently formally overruled civil servants, means it deserves to be the subject of an inquiry, most usefully by the relevant select committee of the Commons. For her part, Ms Batmanghelidjh denies claims the charity had been mismanaged and that this had led to government pressure for a restructuring. She blamed “rumour-mongering civil servants” and “ill-spirited ministers” for her organisation’s demise.

It would, though, be wrong to conclude that the Kids Company debacle proves that charities are necessarily unworthy or unsuitable vehicles for state support. As charities, of course they have to find the bulk of their money from donations, bequests and, in the case of the larger ones, celebrity support and chains of high street shops. If they have too much public funding that, in effect, turns them into public bodies, but unaccountable ones.

Yet some public funding is appropriate for the “third sector” because many charities have the knowledge and expertise that government agencies lack. Such was the appeal of Kids Company, a charity that was dedicated to dealing with some of the most intractable social problems facing poorer families. It enjoyed some success, despite its latter shortcomings.

Charities can often be effective where governments cannot. In the development field, for example, Médecins Sans Frontières has expertise in dealing with Ebola with which our own Department of Health or the Department for Overseas Development cannot hope to compete. Similarly in conservation:the charities we have been promoting in our pages this week, including Space for Giants, Tusk and Stop Ivory, have been working very effectively with governments in the West as well as across Africa. Again, these are efforts worthy of national backing.

The collapse of Kids Company does, though, underline the perils of involving the third sector in core aspects of social care and education. Councils in Liverpool, London and Bristol will have to draw up contingency plans. The failure also brings into sharp relief the weakness of regulation. Only last year the then chair of the Public Accounts Committee, Margaret Hodge, issued a damning report on the Charity Commission in these terms: “We are dismayed by the fact that the Charity Commission is still performing poorly and failing to regulate the charity sector effectively. It is obvious that it has no coherent strategy and has been simply buffeted by external events”. Given that, Kids Company will not be the last charity to make poor use of taxpayers’ money.