The NAO report into the funding and governance of The Broken Rainbow LGBT Domestic Violence Service UK, commonly known as Broken Rainbow, uncovered the organisation had been in trouble for years while it was receiving government funding.
The failure of Broken Rainbow bore similarities to the collapse of Kids Company, although operated on a “far smaller scale”, the report stated.
The Kids Company received £42m in government grants.
Investigators found The Broken Rainbow charity, which provided a helpline for LGBT domestic violence victims, had a history of overspending.
Its reserves shrank by 97% in two years, from £80,083 in 2012-13 to £2,307 in 2014-15, despite income increasing by 52% over the same period.
It received the £1.3m in grant funding from the Home Office from its foundation in 2004 to its liquidation in June, 2016 – including an annual grant of £120,000 from 2010.
Management at the charity was deemed “ineffective”, the report said it “was chaotic and did not comply with regulatory requirements over a number of years”.
These problems could have been identified, the report states. “Many different parts of government had some information about Broken Rainbow’s difficulties, but none had the complete picture”.
One example was the publication of a notice by Companies House in March 2016 of its intention to close Broken Rainbow but the Home Office was unaware of this when it signed the final grant agreement in April 2016.
The report was critical of the government’s monitoring of its grant system, it found the Home Office did not meet its own requirements for monitoring the grant.
For example having signed a grant agreement with the charity the government required Broken Rainbow to submit an annual report and quarterly information on the performance of the helpline but no annual report was ever received and many of the quarterly returns contained no performance data and the data reported did not contain quality measures.
According to the NAO, government departments have limited resources to manually monitor government websites about grant recipients.
But the report states “they could, however, consider making better use of automated monitoring of publicly available information and use this to trigger alerts, which would help to target scrutiny.”
The NAO noted that the government had made a number of changes to the supervision of grants since the collapse of Broken Rainbow, but “more could be done to ensure that it makes the best use of the information it holds”.
It comes as Whitehall announced plans to give an additional £102m from fines from criminal activity in the banking sector (the LIBOR fines) to charities and good causes over the next four years.
