Could we be facing a charity debacle?

Charities must not depend on the government or any of its agencies for funding. They, like the local bookseller or independent coffee shop, need to represent more than just a quaint notion of what we would like our society to look like. Without our custom - or in the case of Kids Company, our donations - they have no right to exist.

It is without doubt a stain on our society that so many vulnerable people are in need of the kind of support that should be provided by the state but is instead actioned by the charitable sector.

However, it is not good enough for the government to distribute £32 million to an organisation without proper scrutiny or process, as a way of solving the problem. In fact, it made it worse. By allowing Kids Company to become dependent on Cabinet Office handouts, the most recent of which was the now notorious £3 million grant delivered just a week before the organisation closed and allocated against the advice of senior civil servants, the government was doing nothing to encourage an appropriate charity model. That being a broad donor base and sufficient reserves to weather any storm.

As it turned out, Kids Company had neither. Instead, it had become dependent on the government and a small core of celebrity philanthropists (in 2014 Coldplay provided a £1.3 million advance to pay the organisation's bills). When those high-level sources dried up, there was nowhere left to turn.

Could this happen to a major Jewish communal organisation? It is incredible that it hasn't already.

Of course, charities close all the time - but so far not one that employs as many staff or has as many dependents as Kids Company. Yet within our own community, we are no less in the thrall of personality and, more recently, celebrity. It is often stated that the ask is less important than the asker. We are more inclined to respond favourably to a request for charity based not on our own assessment of the cause or the need, but our relationship with the person requesting the donation.

At one level this manifests in the never-ending request to sponsor friends or colleagues as they take holidays in exotic places, far away from their jobs, spouses and kids, for a cause you would otherwise never dream of supporting. At the other end of the spectrum is the ''I'll scratch your back, if you scratch mine'' approach that ensures major donors see their own pet causes thrive in return for donations to those of their peers. This model is both unsustainable and wasteful, particularly in a community that is as small in number as ours.

It is hard to put an exact figure on the size or reach of the Jewish charity industry. When the Institute for Jewish Policy Research last examined the sector, its annual income stood at just over £500 million.

That was in 1997 and, allowing for inflation and a rise in the number of organisations in the marketplace to about 2,500, it would not be surprising if the UK Jewish community today accounted for close to £1 billion worth of charitable revenues. However, as a group of donors and supporters, it is evident that we make the same mistakes and are exposed to the same risks as those that befell Kids Company. There are clear lessons that can be learnt from the events of the past fortnight for those that run charities, their trustees and the many of us who support them.

Strange as it might sound, charities need to be more cause-centric. Kids Company was well known not because of the work it did, but because of who was supporting it. A big-name speaker or international celebrity might bring a crowd to a Park Lane dinner, but in the long-term, audiences need to warm to an organisation's objectives and beneficiaries. A wide base of support gives legitimacy to the cause. Like a public company, the more people prepared to buy shares, the more it shows bigger investors that there is public confidence in the product. It also softens the blow when the inevitability of donor fatigue sets in.

As donors, we need to be far more savvy. Before giving to a charity, how much do we really know? What will your £25 or £25,000 actually be used for? While it's questionable that the Cabinet Office got a satisfactory answer to this question before relieving itself of £3 million of taxpayer money, it should be the first question asked before any donation. We also need to have a better understanding as to how the sector works. It is easy to be cynical about employee salaries and administrative expenditure but superficial scrutiny actually hampers a charity's ability to operate properly.

Decisions get made based on what donors want to see at the expense of being well-run. A great example of this is the fear of showing cash reserves in annual accounts - the concern being that if an organisation has money in the bank then it can't possibly be in real need of more funding. This might be true of smaller entities but bigger communal bodies with a large headcount and a high number of dependents must be actively encouraged to keep back money in reserve. While the temptation is to spend funds raised on those in immediate need, the short-term emotional pull should not cloud the requirement to protect against longer-term risks.

A charity, like any commercial entity, can go out of business at the point at which it cannot service its debts. Running a company that provides services to both the commercial and not-for-profit sector, it is my experience that the charities are the better payers and less likely to default.

However, on more than one occasion, we have had to deal with communal organisations trading while knowingly insolvent. Often a philanthropist will bail them out, but donors must realise that when it gets to that stage, they are backing a mismanaged horse.

A strong trustee body should prevent this from happening. It can be very difficult to stand up to a chief executive telling you that, without the immediate release of funds, high-risk children will be left even more vulnerable. But trustees are there to do just that. Ensuring the longevity of an organisation is paramount. When annual accounts carry warning notes stating that the current fundraising and expenditure model "often put a strain on the charity's cash flow", trustees need to step in and make structural changes.

Kids Company is the cause célèbre but the sad truth is that charities come and go all the time.

Perhaps the most deafening silence in the whole debacle was from within the charity sector itself.

While politicians and media commentators kicked Camila and Kids Company back and forth across the airwaves and newspaper columns, it was much harder to get a sense of what the chief executives and lay-leadership of other charities thought. Many would have been wary of the high-profile competition and probably secretly happy to see the back of it.

One person who did speak out was Sir Martin Narey, the former head of Barnardo's. His observation that there are, "too many [charities], specifically in the area of children" should set off alarm bells across the sector that undoubtedly ring loudly in the Jewish community. If we don't heed the warning signs, we'll only have ourselves to blame.

Barry Frankfurt is MD of Creative & Commercial and is a consultant for the not-for-profit sector.