Public spending watchdog reveals Arts Council England knew of serious financial problems at Coventry City of Culture Trust 18 months before its collapse.
Dylan Parrin photography
Arts Council England (ACE) conducted an independent review into the finances of Coventry City of Culture Trust amid fears about its solvency in 2021, it has emerged.
A report by the National Audit Office, published today, reveals the trust first identified it had financial issues in May 2021, just before Coventry’s year as UK City of Culture was about to start.
It then notified both ACE and the Department for Culture, Media & Sport (DCMS) that it was experiencing "acute financial difficulty" in August that year.
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It was not until October 2022 that details of financial difficulties were eventually made public, with the trust blaming a combination of lower than expected income and increased costs stemming from the Covid pandemic.
The trust went on to enter administration in February 2023.
The NAO investigation, which was announced last month, was commissioned solely to examine public bodies' oversight of money provided to Coventry City of Culture Trust prior to its collapse, with separate reviews being conducted into precisely what went wrong.
It found the trust had a total income of £44.5m during its existence - with 25% of that funded by central government and 23% coming from the National Lottery, much of which was distributed by ACE.
First problems
The trust first recognised it had financial problems in May 2021, with minutes of its Audit and Risk Committee highlighting a projected cash deficit of £900,000 by March 2022.
It was on 24 August 2021 that the trust told ACE and DCMS it was facing "acute financial difficulty", with a projected £0.5m cash deficit by November 2021, warning that it would "struggle to remain a going concern", meaning it was at risk of insolvency.
At this point in time ACE assigned the trust a 'risk rating' of 11 - the maximum score possible. The trust went on to be given the same maximum risk rating of 11 in February 2023, the month of its collapse.
A financial evaluation of the trust, ordered by ACE and completed by an independent consultant in September 2021, concluded financial management and governance at the trust were "good", and a revised budget, including £1.6m savings, was achievable.
Major worries
No further significant financial concerns were raised until June 2022 when the trust's Audit and Risk Committee informed the Board of Trustees, and an observer from ACE, that there were now "major worries" about the trust’s financial position.
It was in October 2022, when the trust's financial difficulties became public knowledge, that ACE requested details on the elements of the trust’s current financial issues, including an "accounting error", as well of details of how a proposed £1m loan from Coventry Council would be repaid.
It also reported the situation to DCMS and paused further payments from grants.
Responding to the NAO's report Labour MP Meg Hillier, chair of the Public Accounts Committee, said greater scrutiny of the City of Culture programme is necessary.
"It is now for the Department for Culture, Media and Sport and Arts Council England to step up their support and monitoring regimes to ensure Bradford 2025 retains its legacy," she said.
In a statement ACE said: "We recognise that the Trust’s insolvency during the legacy period has been difficult for many people, particularly staff and creditors.
"The UK City of Culture year brought many great creative and cultural experiences to Coventry, showing us all how creativity can transform places and provide opportunities for communities to come together."
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