Regulator critical of former trustees at Coventry City of Culture Trust
The Charity Commission has concluded its case into Coventry City of Culture Trust.
The Charity Commission found that the former trustees’ failure to maintain effective oversight of the charity’s finances amounted to misconduct and / or mismanagement.
This 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.
The Commission found no evidence of misuse of charitable funds or of payments to connected parties.
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. The charity has now been removed from the register of charities following liquidation.
Background
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 this decision to obtain the loan and subsequently resigned.
The Commission opened a regulatory compliance case to gather more information and determine what, if any, regulatory action may be required.
Findings and action taken
The Commission then used powers available to it, under section 52(1)(b) of the Charities Act 2011, to obtain the charity’s bank statements.
Following its examination of the evidence, the Commission has determined that the charity may have been insolvent prior to entering into the loan with Coventry City Council, and there were doubts about the charity’s ability to repay the funds in full. This is due to the charity subsequently entering administration with a significant debt owed to Coventry City Council of just over £1.5 million.
The Commission has found that the trustees failed to demonstrate they had appropriate oversight of the charity’s finances. 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.
The Commission also accepted that the charity was adversely affected by the COVID-19 pandemic, which for example negatively impacted on footfall and event ticket sales. While this does not fully explain the financial collapse of the charity, it was a significant contributing factor.
The Commission found no evidence of misuse of charitable funds or of payments to connected parties. The Charity Commission has limited ability in law to take regulatory action against charities that wind up and have been removed from the register, or their former trustees, except in the most serious cases of individual wrongdoing.
Tracey Rollock, 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”.
ENDS
Notes to editors:
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The Charity Commission is the independent, non-ministerial government department that registers and regulates charities in England and Wales. Its ambition is to be an expert regulator that is fair, balanced, and independent so that charity can thrive. This ambition will help to create and sustain an environment where charities further build public trust and ultimately fulfil their essential role in enhancing lives and strengthening society. Find out more.
- In February 2023, the Commission opened a regulatory compliance case into The Coventry City of Culture Trust (1165639).
- The Trust entered administration on 28 February 2023. The administration process was complex and extended for almost two years while administrators reviewed the circumstances surrounding the charity’s closure, assessed financial records, engaged with creditors, and considered whether any further legal action was appropriate. When concluding their work, the administrators announced that legal action against former directors would not be pursued due to the associated costs and risks.
- The Commission’s guidance for trustees on charity finances can be found here: Managing charity money, assets and property - GOV.UK, including a five-minute, introductory guide Managing charity finances - GOV.UK.
- The Commission’s guidance on trustee decision making can be found here: Decision-making for charity trustees - GOV.UK
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