An arts charity is being investigated by the Charity Commission after it sold the lease on its central London theatre.
In September, Seven Dials Playhouse completed the sale of its eponymous property, which it had bought 30 years earlier, and said that doing so would help it to “clear substantial debt”.
The commission contacted the charity last year over the sale, as well as concerns around its finances and how it was being managed.
After failing to be reassured of the charity’s long-term financial viability as part of an initial compliance case, the regulator has now opened a full statutory inquiry.
The charity said it was disappointed that the inquiry had been opened but that it intended to cooperate and support the investigation.
Concerns over charity’s funds
Following the sale, Seven Dials Playhouse provided several revised drafts of a business plan to the commission, which had opened a compliance case.
However, this has failed to reassure the commission of the charity’s long-term financial viability and the commission opened a statutory inquiry to investigate concerns about “significant risks” to the charity’s funds.
In its two most recently filed financial years, the charity has recorded an operating deficit, with an income of £431,000 in the year to September 2023 and costs of £1.18m.
The commission’s inquiry will examine if the trustees have complied with their legal duties in respect of the administration, governance and management of the charity.
In particular, it will consider the charity’s financial management, including the trustees’ plans for its future financial sustainability.
It will look at whether the charity is being managed in accordance with its governing document and is operating in furtherance of its objects and if there has been any misconduct by trustees.
Plans for diverse income streams
Seven Dials Playhouse said in a statement that it was disappointed by the decision to open the inquiry “particularly at such a pivotal time for the organisation”.
However, the charity said it welcomed the opportunity to demonstrate that “all decisions taken by the board of trustees and the leadership team have been made with the long-term future of the organisation – and the artists we serve – firmly in mind”.
The charity, formerly named the Actors Centre, said in a statement it “was carrying significant historic debt” at the time of the sale.
Two-thirds of the sale income was used to clear historic liabilities, it said, with the rest invested in “rebuilding the organisation and relaunching a new model of support that is fit for purpose, and further contributes to its charitable purpose”.
The charity, which now rents the property it sold, said it expects to break even in the third year of its business plan after a period of investment.
It said: “The long-term model is built on a diverse and balanced approach to income generation, including box office sales, fundraising, grant applications, individual giving, sponsorship, and space hire.
“This multi-strand strategy ensures the organisation is not reliant on a single income stream, but is instead able to grow flexibly and sustainably overtime.
“We are managing resources carefully and strategically, and the majority of available funds are projected to remain in reserve even after the initial investment period.
“We must also acknowledge that the existence of the inquiry itself, especially the public nature of its announcement, has the potential to cause reputational harm.
“Nonetheless, we will continue to do everything possible to provide transparency, clarity, and cooperation throughout this process.”
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