The board of Kids Company has been criticised by a watchdog for failing to properly oversee the children’s charity – a year after the founder, Camila Batmanghelidjh, and her trustees were cleared of mismanagement and misconduct by the high court. The long-awaited report by the Charity Commission was forcefully rejected by Batmanghelidjh, who threatened to take legal action to overturn what she called a “travesty” and an attempt by the body to “rewrite history”. The former trustees said they were disappointed the report had ignored a judge’s clear findings. The report made a formal finding of “mismanagement in the administration of the charity” and of operating a “high-risk business model”. It raised questions about whether thousands of pounds spent by the charity on a small group of high-risk child clients was justified. However, it said there was no basis for regulatory action against Batmanghelidjh or the trustees, and confirmed there was “no dishonesty, bad faith, or inappropriate gain in the operation of the charity”. The former trustees are furious over what they regard as the report’s failure to properly acknowledge the years of media and public and political vilification unjustly experienced by the former board and staff of the charity since its closure in August 2016, and warned as a result people would be put off volunteering as trustees. In a statement it said: “After an investigation lasting over six years, the Charity Commission has not found anything that would warrant bringing regulatory action against anyone involved with Kids Company. “We are pleased with that conclusion but disappointed that the Commission, in criticising some decisions we took, has chosen to discount the clear findings of the high court that completely exonerated us.” The prospect of a further legal challenge raises the possibility that the long-running saga has further to go; it is nearly seven years since the charity closed, generating millions in legal costs, thousands of media articles and hundreds of hours of parliamentary and Whitehall time. Before its closure in 2015 amid allegations of financial mismanagement and child abuse, Kids Company was well known for its high-profile work providing practical and emotional support for children affected by trauma, violence and poverty. Its supporters included Coldplay and the then-prime minister David Cameron. In the report published on Thursday the commission highlighted shortcomings at Kids Company in a number of areas, from record-keeping to maintaining financial reserves, and failing to act quickly enough to improve the charity’s financial stability. Helen Stephenson, the chief executive of the Charity Commissionsaid: “We found that the charity’s operations and finances made the charity – and by extension its beneficiaries – more vulnerable to decisions of individual grant-makers and donors. The charity’s repeated failure to pay creditors, including its own workers, and HMRC, on time, was mismanagement.” Batmanghelidjh and the trustees said the report was based on untruths and allegations that had been comprehensively dismissed by a court ruling more than a year ago, which found no evidence of mismanagement or wrongdoing, and praised them as a “group of highly impressive and dedicated individuals”. Batmanghelidjh said: “Its report is a travesty. It ignores clear evidence that has been submitted and it amounts to nothing more than a corrupted attempt by the Charity Commission to justify its mistaken decision to conduct an investigation in the first place. Its processes lack any rigour and are riddled with unfairness.” She said the commission could not be trusted, and accused them of being “politically compliant” and lacking independence. “The report is an attempt to rewrite history. It presumptuously undermines the painstaking findings of the high court which found that neither I nor the trustees of Kids Company had committed any wrongdoing.” The former Kids Company trustees said the judge’s “findings as to the selflessness, skill, care and commitment shown by the trustees, made clear that there was no basis for concluding that there was mismanagement in the conduct of the charity’s affairs. We reject the commission’s finding to the contrary.” The trustees said that by largely discounting the court’s findings that they had acted appropriately and with dedication in “exercising honest judgment in difficult circumstances”, the commission would discourage other people from volunteering as charity trustees. The commission inquiry opened in August 2015, a fortnight after Kids Company went into voluntary liquidation after allegations of child abuse on sites owned by the charity. A six-month investigation by the Metropolitan police found no evidence of abuse, criminality or safeguarding failures. The court concluded the charity would have survived had it not been for the unfounded abuse allegations. Batmanghelidjh and the trustees became the target of relentless attacks in some sections of the media, including allegations they misspent charity funds providing clothes, healthcare and housing support for some of its child clients. A cross-party group of MPs accused the trustees of mismanaging the charity. In 2017, the official receiver launched legal proceedings to try to ban Batmanghelidjh and seven trustees from holding senior board roles in companies or charities, culminating in a 10-week court case in autumn 2020, and the judge’s ruling a year ago. The failed attempt cost the taxpayer £9.5m in legal costs. The commission inquiry – addressing the allegations of financial mismanagement and governance failure made at the time of the charity’s closure in 2015 and whether they “are found to be true” – was put on hold until after the court case was completed, and has taken a year to reach its conclusions. These include: The charity operated a high-risk business model, over-expanded its operations too rapidly, failed to strengthen its cashflow and failed to pay creditors and HMRC on time. It said the board was skilled but lacked specialist expertise in the field of psychotherapy. There was insufficient evidence to be sure that the charity’s expenditure of an average of £1,700 a month per child on a group of 25 high-needs children was justified. The trustees had the right to make these decisions, it said, but argued it could have helped more children had it reduced this spending. The charity’s reporting of the numbers of children who received its services could have been more transparent, it said. But it reported no evidence to back up allegations, made by an MPs’ committee in 2016, that Kids Company had overinflated its claim that it served 36,000 beneficiaries.