Regulator Raises Concerns Over Ex-Trustees of Coventry City of Culture Trust

The Charity Commission has concluded that the previous trustees of the Coventry City of Culture Trust exhibited misconduct and/or mismanagement by failing to provide effective oversight of the charity’s financial affairs. This included shortcomings in budgeting and financial planning during the COVID-19 pandemic, a lack of scrutiny regarding the charity’s financial sustainability, and a failure to promptly inform the Commission about financial risks and the loss of critical funding.

However, the investigation found no evidence of the misuse of charitable funds or inappropriate payments to connected parties. The Coventry City of Culture Trust was established to manage Coventry’s bid to become the UK City of Culture in 2021 and to oversee subsequent events in 2022 and 2023. Following its liquidation, the charity has now been removed from the register of charities.

Context of Financial Viability Concerns

In February 2023, it was reported to the Commission that the charity was no longer financially sustainable and that the trustees intended to place it into administration. This situation was compounded by the charity securing a £1 million loan from Coventry City Council in October 2022, aimed at maintaining its operations. Notably, two trustees opposed this loan decision and subsequently resigned from their positions.

The Commission initiated a regulatory compliance case to acquire further information and assess whether any regulatory actions were necessary. Subsequently, they exercised their authority under section 52(1)(b) of the Charities Act 2011 to obtain the charity’s bank statements for review.

Assessment of Financial Oversight and Action Taken

Upon evaluating the evidence, the Commission determined that the charity may have been insolvent prior to securing the loan from Coventry City Council, raising concerns about its ability to repay the borrowed funds. The charity entered administration with debts exceeding £1.5 million owed to the Council.

The Commission’s findings indicated that the trustees did not adequately supervise the charity’s financial operations. Evidence highlighted inadequate budgeting and financial planning during the pandemic, excessive reliance on the executive team for financial decisions, and a failure to properly assess the charity’s viability. Furthermore, there was a lack of timely reporting of significant financial risks and loss of funding to the Commission.

These issues underscored a breach of the trustees’ responsibilities to manage the charity’s resources effectively. Consequently, the Commission concluded that these lapses constituted misconduct and/or mismanagement in the administration of the charity.

Impact of the Pandemic and Regulatory Limitations

The Commission acknowledged that the COVID-19 pandemic had a detrimental effect on the charity, impacting footfall and ticket sales for events. While this factor did not fully account for the charity’s financial downfall, it was a significant element in the overall decline.

Despite the serious findings, the Commission found no evidence of financial misconduct regarding charitable funds. It is important to note that the Commission has limited legal recourse to take regulatory action against charities that have dissolved or been removed from the register, except in cases of severe individual wrongdoing.

Tracey Rollock, Head of Regulatory Compliance, expressed that there is understandable frustration regarding how the charity managed its legacy during Coventry’s tenure as City of Culture. She stated, “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.”

Further Guidance for Trustees

While acknowledging the adverse effects of the pandemic, Rollock emphasised that there was no evidence found of personal gain from charitable funds. Nonetheless, the seriousness of the findings serves as a vital reminder to all trustees about the fundamental importance of financial diligence and prudent management.

The Charity Commission operates as an independent, non-ministerial government department responsible for the registration and regulation of charities in England and Wales. Its aim is to be an expert regulator that fosters an environment where charities can thrive and enhance public trust while fulfilling their essential societal roles.

For further information on managing charity finances and decision-making as a trustee, please refer to the Commission’s guidance resources available online.