The Charity Commission has criticised the former trustees of the charity that ran Coventry’s “city of culture” celebrations in 2021 for their oversight of its finances.
It found inadequate budgeting and financial planning during the Covid-19 pandemic, an overreliance on the executive team for financial decision-making and a failure to properly scrutinise the charity’s financial sustainability.
Its report published today into the Coventry City of Culture Trust concludes a compliance case which was opened after the charity entered administration in 2023.
When opening the case, the commission was also informed that the charity had secured a loan of £1m from Coventry City Council in October 2022, with the intention of using it to sustain the charity in future. Two trustees disagreed with this decision to obtain the loan and subsequently resigned.
Following its examination, the commission determined that the charity may have been insolvent prior to agreeing to the loan with the council, with doubts about its ability to repay the funds.
The charity subsequently entered administration with just over £1.5m owed to the authority and was dissolved as a company last year.
While no evidence of misuse of funds or payments to connected parties was found, the report says the charity failed to report material financial risks and loss of key funding to the commission in a timely manner.
When concluding their work, the charity’s administrators announced that legal action against former directors would not be pursued due to the associated costs and risks.
‘Reminder to other trustees’
Tracey Rollock, head of regulatory compliance at the commission, said: “We are critical of the trustees for their failure to effectively oversee the charity’s finances, notably the decision, late in the day, to secure a loan which the charity was unable to repay.
“Trustees are stewards of their charity’s money – in this case public money – and in this case, the trustees’ stewardship fell short.
“We accept that the Covid-19 pandemic had a detrimental impact on the charity, and it is important to be clear that we found no evidence of misuse of charitable funds for personal gain.
“But our findings in this case are serious, and should serve as a reminder to other trustees of the vital importance of financial diligence and care.”
Coventry’s year as the UK’s City of Culture was delayed by five months to start in May 2021 due to the pandemic.
The trust received £21.3m of public funding including from the Department for Culture, Media and Sport and Arts Council England before entering administration.
A spokesperson for Coventry City Council said: “We welcome the Charity Commission’s findings and the confirmation of no evidence of misuse of charitable funds.
“As part of our due diligence, the loan was assessed against the financial information provided to us by the Trust at the time, which did not indicate it was trading insolvently.
“The trust was operating in extremely difficult circumstances – the Covid-19 pandemic had delayed and severely affected its income and delivery throughout the City of Culture year. Without the benefit of hindsight, its business case anticipated further funding that it was ultimately unable to secure.
“The decision to provide the loan has also been examined in detail by the cross-party finance scrutiny board, which questioned officers on the due diligence undertaken and the risks involved.
“We know from the administrator’s report that the loan was spent on maintaining cultural activity in the city, including payments to suppliers and to cultural bodies who had delivered content and events during the City of Culture year.”
