The Collapse of a Children's Charity Has Britain Wondering About Its 'Mother Teresa'

The London-based charity Kids Company seemed to epitomize what British Prime Minister David Cameron had in mind when he pledged five years ago to create a "Big Society" that would harness the power of the private sector to address social ills. Under a charismatic founder, Camila Batmanghelidjh, the philanthropic organization had grown from a storefront drop-in center to a £13 million ($20 million)-a-year operation fueled by donations from corporations, foundations, and celebrities such as Prince Charles, Richard Branson, and Coldplay. Kids Company's mission: help troubled kids who'd been failed by government programs.

Batmanghelidjh was at Cameron's side in 2010 when he announced that charities and companies would be invited to provide services traditionally furnished by the state. The government soon became Kids Company's biggest donor, giving the group more than £4 million each year even while trimming state spending on traditional social programs. Kids Company's budget grew to more than £23 million. A 2013 report by researchers from the London School of Economics praised Batmanghelidjh for the organization making "a substantial difference in the lives of its clients," with demand for services far outstripping its capacity. 

Then the charity shut down on Aug. 5 after running out of money.

Batmanghelidjh resigned back in July after the government's Charity Commission began investigating what it said were allegations of "inappropriate spending [and] breaches of financial controls," and donations had dried up. Among the accusations: spending £5,000 a month to rent a mansion for a Batmanghelidjh aide, handing out wads of cash to teenagers, and providing lavish benefits to staff members, including private-school tuition for their children. The person overseeing the group's finances was a dressmaker who sews the brightly colored caftans and turbans that are Batmanghelidjh's trademark. Longstanding claims that Kids Company helps 36,000 children a year also are crumbling under scrutiny, with some in the government now saying the actual number could be fewer than 1,000. The charity has acknowledged that its tally included not only children but their "carers," including family members, teachers, and others.

Attempts to reach Kids Company for comment this week were unsuccessful, and a statement on its website says the charity will make no comment. Batmanghelidjh has vigorously defended her stewardship in comments to the British media, pledged to open a new charity, and accused critics of spreading "destructive rumors that have caused havoc" for vulnerable young people. In recent interviews she has said the rented mansion was intended as a residence for mentally disturbed clients. Cash given to teenagers? It was "pocket money" similar to allowances received by children in better-off families. Tuition and other aid provided to employees' families was meant "to reduce stress at home." The dressmaker-finance director, she said, is "an extraordinarily brilliant accountant."

The Iranian-born Batmanghelidjh, who immigrated to Britain as a child, has sometimes been compared to Mother Teresa, and supporters have rallied around her. Coldplay says it may offer financing to keep some of the group's programs afloat.

Given the group's high visibility, it seems surprising that no one had raised questions about its practices before. In fact, some people had. But their concerns seem to have been brushed aside by superiors or kept private for fear of angering Batmanghelidjh and her patrons.

Back in February, the Spectator magazine published an article quoting one of the charity's biggest individual donors, Joan Woolard, demanding return of a £200,000 contribution after concluding the group was misspending funds and exaggerating demand for its services. Genevieve Maitland Hudson, a former Kids Company employee, also posted an article online earlier this year that described chaotic and scary conditions at the London center where she worked. Volatile, poorly trained staff members got into "violent altercations" with each other, Hudson says, and cash and gifts were lavished on young people considered "favorites" of Batmanghelidjh.

Tim Loughton, who was the government's Children's Minister from 2010 to 2012, told BBC radio this month that after approving an initial 2010 grant he had advised against giving more to Kids Company because of questions about its financial controls and effectiveness. That guidance was overruled by higher-ups. "We need to know that money is being spent on the purposes it is intended [for] and we're seeing real and sustainable results," he said, "and I was never convinced."

Harriet Sergeant, a fellow at the Center for Policy Studies think tank in London, first became alarmed after visiting a Kids Company center in London in 2006 while researching a book on teenage gangs. She recalled that Batmanghelidjh had described the facility as swamped with needy youngsters seeking hot meals and other assistance. But Sergeant says she saw only "one fat, sulking teenager" on the day she visited. At the suggestion of staff members, she returned a few days later and found a crowd of young people waiting to receive their weekly "pocket money," envelopes containing between £50 and £200 in cash. Sergeant says some of the teenagers told her they used the money to buy drugs.

Sergeant wrote about the incident in her book without naming Kids Company. Why not? Batmanghelidjh "was like a saint," Sergeant says now. "When the public is in a kind of frenzy about something, there's nothing you can say."

Few would argue that Britain's public welfare agencies are doing a great job taking care of kids. In a report to the United Nations this year, independent child-welfare advocates said that reduced government spending had "resulted in a failure to protect the most disadvantaged children." Still, there's no evidence that Kids Company was doing any better. What about that London School of Economics report? It was paid for by Kids Company, in what a spokesman for the university says is a commonplace arrangement by groups seeking outside review. The researchers were asked to study only the "psychological side" of the charity's programs, the spokesman said, not to evaluate its management.

Outsourcing public services to "smaller, more lean and agile" charities is an appealing idea, says Hudson, the former Kids Company staffer. Government agencies are seen as "broken, stodgy," and incapable of innovation. Some charities, she notes, have been getting public money "to provide services they're not set up to deliver," and the government has no way to monitor the job they're doing. "If private organizations are going to deliver public services," Hudson says, "they've got to come under more scrutiny."