Coventry City of Culture Trust received £21.3m of funding before entering administration this year, according to a new report by the National Audit Office (NAO).
NAO’s report, published this week, says that the charity first reported financial difficulties in August 2021, the year that Coventry was the UK’s City of Culture, but these exacerbated in 2022.
In Autumn 2022, pressures from the Covid-19 pandemic meant the trust’s income was lower than envisaged and it faced increased costs.
It also identified an accounting error in August 2022 which put further pressure on its finances.
The Department for Culture, Media and Sport (DCMS) and Arts Council England (ACE) provided some further funding but the charity but in January 2023, DCMS decided against providing new funding to the trust and it entered administration on 28 February.
Financial problems
Coventry’s year as the UK’s City of Culture was delayed by five months to start in May 2021 due to the Covid-19 pandemic.
In August 2021, the trust advised ACE and DCMS that it was facing acute financial difficulty, with a projected £500,000 cash deficit and that it would struggle to remain a going concern.
In autumn 2021, trustees developed a business plan that would see the trust continue to operate until March 2024.
But a year later, the trust’s finances were under pressure again due to income from tickets for events being lower than envisaged and increased costs incurred during Coventry’s year as UK City of Culture, which had ended in May 2022.
It also identified an accounting error affecting its costs for summer 2022, which it reported to Coventry City Council.
Trustees agreed to an independent financial review of the processes and events that had led to its financial difficulties.
In January this year, DCMS told the trust that it would consider bringing future payments forward if it could show it was a going concern but it decided against providing further funds for debt mitigation.
Trustees decided the charity was no longer a going concern in January and it entered administration the following month.
£21m funding
In total, the charity received £10.9m of central government funding and £10.4m of National Lottery funding, amounting to £21.3m.
It had been awarded an additional £1.5m but this was not paid.
Several other organisations are investigating the insolvency of the trust, including the administrators, who aim to understand how and why the trust became insolvent.
The Charity Commission is also conducting a compliance investigation of the trust.
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