Watchdog criticises failure by former trustees to maintain effective oversight of finances of Coventry City of Culture Trust

According to the regulator, the failures included inadequate budgeting and financial planning during the COVID‑19 pandemic, failure to scrutinise the charity’s financial sustainability, and failure to make the Commission aware of financial risks and the loss of key funding in a timely manner.

Coventry City of Culture Trust was set up to oversee Coventry’s bid to be UK City of Culture in 2021 and to run subsequent City of Culture events in 2022 and 2023.

In February 2023, the Commission was informed that the charity was no longer financially viable, and the trustees were planning to put the charity into administration.

The Commission was also informed that the charity had secured a loan of £1 million from Coventry City Council in October 2022, with the intention of using it to sustain the charity in future.

Two trustees disagreed with the decision to obtain the loan and subsequently resigned.

Following examination of the charity’s bank statements, the Commission determined that the charity may have been insolvent prior to entering into the loan with Coventry City Council.

The regulator said: “This is due to the charity subsequently entering administration with a significant debt owed to Coventry City Council of just over £1.5 million.”

Meanwhile, the Commission found that the trustees had failed to demonstrate they had appropriate oversight of the charity’s finances.

It said: “Evidence of this included inadequate budgeting and financial planning during COVID‑19, overreliance on the executive team for financial decision-making, failure to properly scrutinise the charity’s financial sustainability, and failure to report material financial risks and loss of key funding to the Commission in a timely manner.

“These failures demonstrate that the trustees did not act in accordance with their duties to manage the charity’s resources responsibly. The Commission has concluded that this amounted to misconduct and / or mismanagement in the administration of a charity.”

Tracey Rollock, the Charity Commission’s Head of Regulatory Compliance, said: “Many will rightly feel frustration and disappointment about the way in which the legacy of Coventry’s time as City of Culture was managed by the charity.

“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”.

A Coventry City Council spokesperson said: “This is a report that focuses on the former trustees of the Trust, and rightly so – it is not critical of the council’s own conduct. 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.”

Lottie Winson