The National Audit Office has confirmed that it will be looking into the role of the Charity Commission and the Home Office as part of an investigation into the funding of defunct LGBT charity Broken Rainbow.
In a statement, a spokesperson from the NAO said the investigation would seek to “establish the facts around the collapse of Broken Rainbow, including the financial management of the charity, Home Office oversight and the clarity of grant agreements, and the role of the Charity Commission and other public sector bodies”.
The investigation follows on from an exposé by BuzzFeed news in the summer which revealed allegations of serious financial mismanagement at the Home Office-funded charity. In April 2016, the charity had made an announcement that it was “days from closure”, only for it to be bailed out by a £120,000 grant from the Home Office.
The charity – which was the UK’s only dedicated LGBT domestic abuse charity - subsequently went into liquidation on 3 June, and publicly announced its closure on 6 June. Its domestic abuse helpline service was transferred to Galop, another LGBT charity. According to its last set of financial accounts published with the Charity Commission, Broken Rainbow had an income of £279,000 and 3.5 full-time equivalent staff.
On 7 July, the Charity Commission said that it was “urgently assessing” the charity’s closure and that it had opened a case. A spokesman for the Charity Commission confirmed this morning that the regulator’s investigation was ongoing and that it was effectively waiting on the charity’s administrators before it could proceed further.
The Charity Commission said: "The Commission has an open case into the charity which is ongoing and we are liaising closely with the Insolvency Practitioner. We are also working with the National Audit Office and assisting them with their inquiry into the funding of the charity."
The NAO said that its investigation is scheduled to be completed in spring 2017.
Jenkin describes it as a ‘new Kids Company’
On Wednesday, the Public Administration and Constitutional Affairs Committee published a number of letters sent by Bernard Jenkin MP, the committee’s chair, to the NAO, Home Office and the Department for Culture, Media and Sport.
Jenkin wrote to both Sir Amyas Morse, comptroller and auditor general of the NAO, and to Mark Sedwill, permanent secretary of the Home Office, on 12 July flagging concerns in the press around “the governance and financial control” within Broken Rainbow, and referred to it as “a new Kids Company”.
In his letter to Morse, Jenkin asked if he “would choose to look at what arrangements the Home Office made and should have made” in relation to grants made by the Home Office to the charity in the months before its closure.
Jenkin also questioned “how far the lessons you and we identified for the public sector of the Kids Company episode have been absorbed” and whether or not the Home Office had “any contingency plans” in place; particularly in light that the Home Office had made contingency plan recommendations to departments as part of its submission on Provider Failure in 2015.
Jenkin called on Sedwill and the Home Office to provide PACAC with “a timetable of your engagement with Broken Rainbow, both noting funding decisions and any due diligence work”.
He also highlighted a number of issues PACAC would “be interested in hearing about”, including what assessment the Home Office had made of the use of government grants by the charity; why the Home Office failed to discover issues raised in the BuzzFeed article, and what assessment the Home Office made of the organisation’s solvency in 2015 and 2016 and how that affected grants made.
Jenkin subsequently wrote to the Damien Collins MP on 14 September, after the announcement had been made that the scrutiny of charities and their regulation had moved from PACAC to the DCMS. Alongside outlining the work that PACAC had done on charities in the past – including sections on the collapse of Kids Company and fundraising regulation – Jenkin mentions his letters to both the NAO, and the Home Office, and suggests that Collins “may wish to take on this work in the future”.
Home Office response
A spokesman from the Home Office said that it is “currently working with the Charity Commission to determine an appropriate course of action in relation to previous funding provided to Broken Rainbow”.
He also said that part of the Home Office’s grant agreement with Broken Rainbow required the charity to provide quarterly monitoring reports. He said that “Broken Rainbow demonstrated delivery of the helpline throughout the period of the grant, including managing an increase in calls, which was evidenced in the reports. The Home Office was satisfied that the fund was used for the purpose as set out in the grant agreement”.
The Charity Commission said: "The Commission has an open case into the charity which is ongoing and we are liaising closely with the Insolvency Practitioner. We are also working with the National Audit Office and assisting them with their inquiry into the funding of the charity."
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