The former trustees of an in-administration cultural events charity failed to maintain effective oversight of the organisation’s finances, the Charity Commission has found.
The regulator today published the findings of its compliance case into the Coventry City of Culture Trust, which was set up in 2015 to oversee the city’s ultimately successful bid to be UK City of Culture in 2021.
The charity closed after identifying an accounting error in 2022 that negatively affected its finances.
The regulator opened a compliance case in 2023 after it was told the charity was no longer financially viable and its trustees were planning to put it into administration.
The commission was also told that the charity had secured a £1m loan 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 regulator said.
The charity, which left most of its £4.1m in debts unpaid when it closed, has been removed from the register of charities following its liquidation.
The regulator found the trustees’ failure amounted to misconduct and/or mismanagement, which included inadequate budgeting and financial planning during the Covid-19 pandemic, a failure to scrutinise the charity’s financial sustainability and failure to make the commission aware of financial risks and the loss of funding in a timely manner.
The commission said it found no evidence of misuse of charitable funds or payments to connected parties.
“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,” the regulator said.
“This is due to the charity subsequently entering administration with a significant debt owed to Coventry City Council of just over £1.5m.”
The commission accepted that the charity was adversely affected by the Covid-19 pandemic, which reduced footfall and ticket sales.
“While this does not fully explain the financial collapse of the charity, it was a significant contributing factor,” the regulator said.
“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 at the Charity Commission, said the charity’s trustees fell short in their roles as stewards of the CCCT’s money.
“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,” she said.
“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.”