Kids Company – Reserves of Discomfort

150807_KCReserves

The Financial Times  provides a good understanding of some of the financial woes that beset Kid Company.

As the article shows, Kids Company had only £400k in reserves at the end of 2013 and its Trustees wrote in their audited accounts that this was a major risk.
The Founder says that she argued with Government that they should do more (i.e. give more) to help this situation but Kids Company received over £12 million in 2013 of voluntary unrestricted income. This means that Kids Company management (and the Board of Trustees) decided themselves how to allocate the money between active use and reserves. The Government (at least in this instance) had no burden upon it to allocate money to reserves – Kids Company had adequate funding to do this and should have made this allocation for the benefit of the future of the organisation, its mission and the kids that it supports.

It decided to fund short-term need (always pressing) against long-term viability and got away with that for a long time. Eventually, like a business that overtrades, it goes bust. That is making your organisation unsustainable and for an organisation of this size with this amount of voluntary unrestricted funding (a level that so many well-run charities would welcome) to commit this offence is maddening – it is anger inducing.
For the auditors to simply then sign off the accounts with no comment is appalling. The Trustees knew the situation and commented on it in the accounts in 2013. They were not (yet) insolvent but could read the runes. The auditors should have commented further.
For Government to keep putting money in without understanding the financial problems and not requiring Kids Company to allocate resources to reserves is unsettling. Surely someone in Government could have spoken to a charity finance person and understood the reserves issue (plainly in front of them) and made it a requirement of their funding to have Kids Company allocate more of their voluntary unrestricted income to reserves. Nothing appears to have happened.

This is not unusual in the sector – urgent needs are there to be met and Trustees not strong enough to argue for longer term needs. Trustees have a legal responsibility not just to write sentences in the accounts but to safeguard the organisation from collapse that they could have averted.

Six months’ breathing space at a lower level of operations could have allowed Kids Company to have resurfaced and kids and families still could be getting support in some of the UK’s hardest hit areas. Management and Trustees should look to themselves and no one else for the answers to problems in such a situation; auditors should be more pro-active; Government more discerning.

For the Charity sector as a whole, understanding the need for reserves and the prevention of “over-trading” is a fundamental need. Many Trustees are not up to understanding this requirement; many management staff are unsure how to balance the urgent needs of their beneficiaries in the short-term with those of organisational sustainability. Unfortunately, that is their job. The Charity Sector is not good at this – and every Charity is different. The mission of most charities are worthy enough for Trustees and senior management (and finance people) to try to learn something from this – reserves are not just for show, they have a place in sustaining charities and mitigating risk. It is not enough just to know you have a risk – a charity must take action.

Finally, it is a sad reflection on our times and our country that Kids Company had to undertake its mission in the first place. Its Founder was right in that she saw Government abstaining from its legitimate role in society – a 21st Century society not a 19th Century one. This abstinence then propelled Government (Labour and Conservative) into its Big Society mission – like a wealthy philanthropist giving money to the starving poor. This is Dickensian in the extreme and Kids Company should not have been needed. Many charities do work which are above what we would consider Government to be properly able to do – I suspect that some of the outcome of this will be that in this Dickensian, 19th Century Age of Austerity, we need to reflect more pro-actively on what we ask Charities to do and what we expect from the State.

Who Cares?

Whatever untold strife there is in Syria, Egypt, Afghanistan and Iraq, the undeniable and continuing news story at home is our national health service – the NHS itself and (in the wider community) social care services – especially care homes exacerbated by the government’s desire to cut costs and benefits as a result of government debts from the bank-induced recession.

In recent years, the intolerable conditions under which elderly and mentally challenged residents of social care homes were treated became clear. Attacks by staff on residents have been detailed and prison sentences resulted.

Then, in the last 12 months, publicity has focused on NHS hospitals – amongst them Mid-Staffs, Trafford and now University College in Wales. Poor standards appear to have led to deaths and misery and then a debate about how nurses, for example, spend too much time training and not enough caring, while week-ends are suddenly revealed to be understaffed and A&E (Accident and Emergency) services are under enormous strain.

So, Who Cares?

This is not just a sad reflection on critical institutions but appears to reflect very badly on ourselves as caring human beings and on whatever society we have created. Our demands are for low government spending and for maximum services as long as someone else pays. What has happened that makes us so uncaring? While this may not be on a scale like what has happened in recent years in Bosnia or Somalia or now in Syria, Afghanistan and Iraq, our insensitivities to other people have reached a sorry state – the governing State and its inability to provide the answer and the civil state that appears to be no better.

Quality of life has been subsumed in the message of “quantity of life” for so long – the pursuit of wealth as recorded in terms of money and goods – that we are failing to reconcile ourselves with the softer issues of existence. The pursuit of economic benefits has seems to have clouded out all else as we pursue ever higher GDP.

We blame government for this – but, government represent us, civil society, citizens and we get what, I guess, we deserve. David Cameron and his happiness index is a measure of the difficulties we are in – where we have to measure things before we do anything.

Measurement is a quantitative outcome of real activities. Hospital failures are deemed to be the outcome of rigid focus on targets and it is clear that we have, as a society, been totally brainwashed by the success of business and used its targeting approach to success in all other areas.

So, we set up targets for hospitals without understanding the qualitative targets that need to be set. This is the same as the setting up of government departments to quantify the value of natural capital (Natural Capital Committee at DEFRA) as that, seemingly, is the only way to guard against the complete destruction of our ecology. As a minor example, the only delight that most have in watching Antiques Roadshow is the valuation for each item – the genuine beauty of the item is sidelined as we wait for the valuer to tell us how much an item is “worth”.

We seem completely uncaring as human beings – sacrificed on the altar of quantity and unable any more to see the real quality of life.

Where is the Care?

Yet, not all NHS hospitals are death traps and by no means all medical professionals are uncaring – most aren’t. Indeed, it is likely to be a small minority that exhibits such immoralities. However, we have a developed a structure built on sand where managerialism and devotion to numbers and targets exist throughout and our obsession with quantity overrules quality.

This is why MRSA took such hold in British hospitals for so many years – because other obsessions took firmer hold.

So, where is the care? Will it come from the new agenda that is being pushed  – the wellbeing agenda? Will the Health and Wellbeing Boards (around 150 have been set-up throughout England) result in an infection of caring and quality? Will top-down direction result in a change in culture that is professed throughout.  Will the CQC be suddenly changed into a care organization? Will expert inspections be the savior? Or will the whole be an edifice, behind which politicians hide proclaiming that they did their job and it was the professionals that failed – or are we simply kidding ourselves that top-down, outside inspection and control can fix the problem.

The Caring Sectors? Chaos in Conformity.

The NHS and Care homes suffer from a culture problem and a procedures-driven mentality that eschews common feelings. NHS facilities are procedures-focused to the extent that it is amazing that breathing can be undertaken without supervision. Everything is policy-controlled and process. It is no wonder that care is forgotten. All who have it are in danger of losing it once they enter the profession – those that retain their care mentality are fighters and have to be for their morality to survive.

I have seen the evidence of this, not in a hospital but in the charity sector. – the so-called Third Sector. Charities are centres of care where the whole focus is on the cause. This key focus is driven by founders with vision and caring and with funders who buy into that care and cause agenda.

Sometimes, well-meaning Trustees bring in NHS or NHS-related people to run a charity – thinking that one non-profit is much like another. So wrong!

What often happens is that the charity is swarmed over by policies and procedures and directives and by new people brought in from outside (often the NHS) who “get” the new mantra. Soon, the charity is losing its way and its cause is forgotten in the chaos of conformity that ensues.

I believe that the charity sector (really the second sector in the caring sector as it was the precursor to government involvement) is where real compassion and caring still resides. Like a treasure-box of solace for humanity, the charity sector is built on causes and full of people that care – quality of caring and not quantities of statistics.

I have myself spent many years in the business sector, where care for customers is paramount but so is the quantifiable bottom line. Customer care leads to better profits and well-run companies know that their profits will be hit hard if customers suffer. However, care for customers means doing business well – good design, well priced goods and services, good after-sales, better call centres, smiles and the like. The aim is to make profits – one bottom line – but thorugh a complex array of inputs, outputs and outcomes.

In the charity sector, there are two bottom lines and two customers. The main one is the cause – the caring for the beneficiaries of the charity. The second is the funder – the provider of the funds for the cause and a way to break-even and grow the charity to satisfy the needs of the beneficiaries.

This balancing of the two bottom lines is crucial to the success of any charity and the care side is just as important as the funding. It comes first but is dependent on the other. Two sides of the bargain.

I continue to be overwhelmed by the people that work in and volunteer for and fund charities. From the largest like Macmillan Cancer Care and Cancer Research and WWF to the smaller ones like Willow (where I am CEO) to campaigning charities to health charities, the vast majority are focused, and relentlessly determined to make their charity successful. To do that, they have to positively impact their cause.

This is a learning tool for the national health sector (both public sector and private sector) in the UK. The challenge of wellbeing is to harness real caring into the morass of policies and procedures that entangle the NHS and the profit-motive that engulfs the care homes. Amongst the top-down rules and strategies that the Health and Wellbeing Boards adopt should be the adoption of the basic tenets of the charity sector.

The Third Sector Infiltration

What does this mean? Well, first, ensure that there are charity people on the Health and Wellbeing Boards. This means real, caring people that understand the challenges of the two bottom lines and have shown some success. Such people run and work in hospices across the country as well as service-type charities like MacMillan and many others.

Second, adopt the two bottom lines. Understand that the cause is as crucial as the finances. Just because in the public sector there is only one funder does not mean that that monopoly funder should run the organization. Being “funder led” is a sign of disaster in the charity sector. It should also be in the public sector. Sure, we want effective use of taxation in every public sector area but the balance should be in place and the only area where that balance is in place is in the charity sector.

Third, Government must take the role of the interested funder – not the shareholder. This is civil society money raised from taxation but to be used for a good cause. It is the wrong balance if the Treasury is the only arbiter. The Department of Health (and wellbeing?) is the funder and the CCG (Clinical Commissioning Groups) are the funders – can we trust them (the General Practitioners and members of other NHS organisations) to provide care objectives when they are the “commissioners” – the buyers? Who represents the citizens – civil society – the patients? Where are the patients represented anywhere? Who demands that care forms the agenda – the Health and Wellbeing Boards?

Yet, they are mainly formed of our representatives – local councilors and the like. Where is the care sector involved? The “caring professions” have, unfortunately, been tainted by the recent past – it is now a good time for the Third Sector to be properly represented in the world of care to a far higher extent than David Cameron’s vision of a caring Britain (his Big Society) where charities were lumbered with being low-cost alternatives to local authorities and hospitals. It is time for a reverse takeover – with caring in the lead.

Brave New World of Education II – Aspiration, aspiration, aspiration

A couple of days ago, Dr Mary Bousted, The Association of Teachers and Lecturers head, voiced the view that schools were segregated along class lines. Back in January, I wrote in:

https://jeffkaye.wordpress.com/2012/01/22/the-complexity-of-education-politics-and-economics-brave-new-world/

how education, like politics and economics, is mired in the 19th Century. The picture is of a three-tier system of private education (independent schools), middle tiers (mainly converter academies in the secondary sector) and the rest. From my blog of 22 January, 2012:

Three sectors – remnants of 19th Century decision-making and 19th Century thinking.

Yet, we operate in the 21st Century. Education has to achieve many things yet does something different in each of the three areas.

In the first (the alpha sector), it provides a broad education and the ability to move into society at the highest-level possible. This is through networks (with universities, companies, politics) and through the provision of relevant education – through learning that equips pupils to reach for higher standards to learning that enables pupils to attain the next step (e.g. university).

In the second (the beta sector), network management is usually missing entirely and virtually dispensed with because it is deemed wrong. But, we live with 19th Century norms and this required networking. Education is primarily Government dictated through the curriculum, which is all about exams. The three aspects of learning above are ill considered by most schools even in this sector. However, some break through and many achieve better exam results – although most result in the attainment of tertiary education into the beta sector of universities.

In the Third (Epsilon), many schools (not all, this can be changed) keep kids off the streets (to greater or lesser effect) and provide an entry path into the wider world or working. Networks and networking are non-existent except in the local area. Chances of reaching out and attaining higher levels are poor even though funding is substantial (and higher per head than in the Beta sector).

I am fortunate enough to be Chair of Governors of a converter academy with aspirations to be alpha and pretty close to that aspiration. It is now quite likely that pupils educated at the school will be able to step into the right universities (Russell Group or other top level) and move through society’s obstacles. It is a school where parents have high aspirations for their kids and where the school reflects that and leads that aspiration. Motivation is high and there is now a virtuous circle of expectation. This is the Big Society in practice – we all (staff, students, governors, families, local community) share in the benefits and successes of the school.

But, the stratification of society is cemented into position by the school structure. This is not quite what it used to be – there is now an aspirational middle tier that is forcing the pace of education and aspiration. It is a constant problem, though, that schools get placed in locations that they have to serve. Schools can’t (in the main) relocate to improve their intake. They are literally stuck and location means that a school has to accept its intake (whether at primary or secondary level) and do its best.

Aspirations, aspirations, aspirations

What Government is doing is to shake the education bottle – so-called competition for schools, a variety of types of school, new Ofsted leadership and criteria, an end to modular exams at GCSE, more focus on English and maths and the baccalaureate subjects.

Some of this is good, some neutral, and some harmful – but it is all focused on the schools. It is the education, education, education mantra allied with the change, change, change reality that schools are hit with by every government of every complexion.

What is it apart from this that will change the whole nature of education and also deal with the issues that Dr Bousted raises (as I raised three months ago)?

It is all about aspiration.

The aspirations of the kids are directly the result of the aspirations for them of their parents / guardians. In areas where low aspiration parents can send their kids to a high aspiration  school, then the kids can (possibly) raise their targets to compete.

But, where the whole school is in an area of low aspiration (mainly those in inner cities and low income areas), then low aspirations of the parents will transfer to low aspirations of their kids. Staff may fight this but they are limited by the level of life expectation of their “raw material”.

Attempts to change this through investment in the earlier type of Academies have been well meant, expensive and occasionally successful. Education groups (companies and organisations taking over failing schools) can bring some sort of attainment to their students and raise the bar. These are too few to be meaningful and the high funding levels have been curtailed as we enter a prolonged period of austerity. If this is not to be a pervasive system (and it won’t be), are free schools or equivalent an answer?

The contract between state, education and families

No education system will produce 100% scientists, doctors, mathematicians or similar and nor should they. We are all different and society needs a mixture. What we don’t need is the mixture that Huxley’s Brave New World’s dystopian future predicted. We need to evolve our education to meet the needs of society and individuals now – no three tier society from birth but an aspirational society where success is based on capability and merit.

Continued development of the education of our children is crucial to this but it is not sufficient. Dr Bousted’s fears are justified unless we can provide an aspiration amongst our kids and their parents / wider families.

It is no longer sufficient to take pupils into a system and try to modify their minds when, for most of their time they are facing outside pressures from families and peer groups that ridicule the aspirational notions that a good school may try to employ.

It is no longer enough for schools to be expected on their own to persuade parents that they have to inspire as much as the schools try; that kids should, from whatever their background, raise their aspirations to maximize their opportunities – just as wave after wave of immigrant families have done in the UK for generation after generation.

There is a contract signed between parents / guardians and their schools. The contract fails in a key respect (apart of its complete lack of enforceability, of course) – it fails because the focus is only on the pupil. The contract needs to be one where the family provides the environment in which a child can use the opportunities that a good school can provide. The contract needs to be able to ensure that the wider community (which is mainly the family but may be the local community especially in areas of intense peer pressure and gang cultures) ensures that the child is provided with a culture of aspiration.

Changing family aspirations – alpha-oriented

Vast numbers of changes to our education system (to our schools especially) happen every year. At the same time, society seems to be going backwards. Movement between class structures has been stymied and income differences in the UK are growing as the economy shudders to a halt (factory production is still 9% below the all-time high from 5 years ago).

Schools have to continuously improve but it is not enough. The need for every school to be a very good one, offering the best for our children is crucial but an unreal expectation as the reality of society impedes it. Dr Bousted is right in that class infects schools through their location. However, bussing kids around will not work – what may work is a focus of the local community aided by government on the families.

Changing aspirations within family groups is the key to improving education within the toughest and most deprived areas. Kids can change on their own, but only in isolated pockets – where some incredible teacher exists, for example. Anecdotes that show that it can happen are not enough. We should not see the exceptions as the rule. The rule should be extended to where families and local communities demand and work hard for aspirations to be extended; where maybe a middle class tenacity to succeed and take advantage of the opportunities presented exist everywhere.

To do this, pilot schemes should be started alongside the school programmes in areas of greatest challenge. Here funds should be provided and contracts entered into to maximise parental involvement (and local community groups, too, where this is needed) and where research should be carried out where it works so success can be shared. Where needed, this should encourage education opportunities for parents and families so that education is seen as the norm – not something to be shunned as soon as possible. Local government and local companies should be more than one week a lifetime work studies – there should be a continuous involvement.

Where it works already, this must be copied and studied again and again.

Local communities often see the school as the community hub. But, this has been in the absence of anything else and the community uses the school as a place to hold events. Now, we should see the school as a real community hub – the focus of families and our children to address themselves to the real contract – raising the aspirational levels of all our kids so that families are educated together. Education should be seen as the huge opportunity is really is.

We talk about “joined-up thinking” but society needs to be joined up, too, in the way it works. The 21st Century has provided the opportunity for us to join on-line and it is a benefit. The real benefit would be a localism that is based on the school (nursery, primary and secondary) and links those schools with the families for joint education. Schooling should genuinely be life-long so that birth should not dictate your future and a real availability of opportunity should be our aspiration.

The Big Society – Calculatingly Political

The Big Society is this government’s big idea and is yet another sign that we are not progressing, but, as a nation, de-evolving back into the 19th Century.

It is not because the Big Society is inherently evil – asking serious questions about the role of the individual and society in working together to help each other and balancing one properly against and with the other – but the language and the rationale are two hundred years-old.

Whether it evokes a Samuel Smiles self-help or Quaker bankers like the Gurney family, government Whig or even Tory rhetoric reminds us of the way it was when the state did not get involved and left it to wealthy individuals to “do good”. Ian Hislop’s recent “When Bankers Were Good” on BBC2 was a healthy reminder of how society once relied on the rich to be good. Hislop proposed that the welfare state (begun by Lloyd George and accelerated by Atlee) had changed the rules so that taxation would be used instead of the rich – releasing bankers and the like to spend their money on themselves rather than anyone else. From the USA, individuals like Bill Gates and Warren Buffett show that where Government is smaller, the rich are expected to enlist their wealth to a greater cause. That may now be international rather than just national, and it seems like the banking community has exempted itself from that enlistment, but the theory holds.

David Cameron believes that society can play a larger role in putting together the broken society and that Government should play a lesser one – instead of financing, the state should guide and help. Nick Hurd’s job as Minister for Civil Society becomes more a challenge to the “do good” society to pitch up at a time when national and local government is cutting back furiously on social spending.

But, this challenge requires a complete change in the way society works. Politics and economics in the 20th Century have directed all our attention on to economic growth that has itself been aimed at maximising how we make and buy things (or develop and use services). Economics (based on 19th Century principles around what we can count and how rational people think – a simulation which has been shown to be miserably false) measures goods and services that we (or others from outside the UK) make. As our brains are progressively wired as calculators, so we drive ourselves to buying more because that is how we now work. Now, the newly developed nations such as China, Brazil, India and the rest are rushing in the same direction.

A key question is “how can society redirect itself away from spending all our time and money on things that are measured by GDP towards societal benefits that are not” – as this is what is needed to make the Big Society work. We have to work out what counts – not spend our time buying because we have been conditioned to count.

Abraham Maslow suggested as far back as 1934 that humans operate within a “Hierarchy of Needs” and that we rise up that hierarchy as we become wealthier. At the bottom end we strive for food and shelter; we obtain the things that add to our health and the health of those closest to us; as group animals, we work within groups (first, close and then wider); we develop self-esteem requirements and then what Maslow terms “self-actualisation” – the achievement of our potential.

Maslow’s work was focused on marketing, but we have marketed ourselves into a corner and stunted the “growth” that Maslow identified. The problem is that we have translated this growth into the buying of things that has simulated the provision of self-esteem and esteem from others. The recent riots in London and many other cities in the UK aguably showed that it was not poverty that drove the rioting but a desire for some form of self-esteem derived from the urge to “acquire” things such as designer trainers and other self-esteem “goods”. We have fallen for both the marketing (the spin) which dictates to us that what we count (like shoes or cars) is all there is. Economics has conspired in this – a reliance on 19th Century simulations of the economy where food, shelter and health were still basic needs for most of the economy. Economics has not progressed since that time.

Economic measurement as we know it panders to our desire for things that are easy to count. Governments (short-term thinkers at best – “it’s the economy, stupid”) have not helped to shape thinking away from its judgement that to get elected, it has to show that we are getting richer. But, “richer” means calculatingly richer – the way GDP shows we are richer – not that which really makes us all “richer”, healthier, richer in mind and spirit as well as in monetary terms. We calculate our wealth and governments calculate how to get re-elected. It leaves the concept of a Big Society – where society and the individuals in it is / are required to work to re-shape and repair society – out of our understanding as we can’t calculate its benefits (just as we have difficulty in calculating climate change – part of the same problem) and most of us focus on what we believe are more important – buying stuff.

To respond to the new paradigm, towards a society that will be driven by more than what we can calculate today, is a massive stretch. It means that we will need to measure quality more than quantity (a massive economic problem that econometricians appear unwilling to solve – maybe because they are one of the causes of the problem) and that Governments will need to consider the risks it is willing to take with quality of life rather than something we can count (GDP growth). That willingness requires long-term thinking and changing the minds of the electorate.

Developing a society with real self-esteem and one that generates that sense of belonging and belief in a society rather than just the individual– the Big Society that also takes the burden away from a cash-strapped public sector – is a tough calculation. It requires a major political and economic transformation – throughout society. It won’t be done just by cajoling people to do more. It requires culture change on a massive scale – and a change to our politics and economics and social systems and structures.