The National Audit Office (NAO) has today published a briefing: Funding of Coventry City of Culture Trust.
In December 2017, following a competition run by the Department for Culture, Media and Sport (DCMS), Coventry was selected to be the UK City of Culture for 2021. Coventry’s year as UK City of Culture began in May 2021 – four and a half months later than planned, owing to the COVID-19 pandemic.
Following financial difficulties that started in 2021, the Trust entered administration on 28 February 2023.
This factual briefing sets out the funding provided by DCMS and its arm’s-length bodies to the Trust and Coventry City Council for Coventry’s year as UK City of Culture, and looks at how those bodies oversaw the Trust’s use of those funds. We have published the briefing in response to correspondence we received about the financial circumstances which led to the Trust going into administration.
In total, DCMS and its arm’s-length bodies awarded £22.8 million to the Trust. Of the amount awarded, £21.3 million was paid, around 48% of the Trust’s income – £10.9 million of central government funding and £10.4 million from National Lottery funds, representing 25% and 23% of the Trust’s total income respectively. This funding was provided either through DCMS or one of its arm’s-length bodies: Arts Council England (ACE); the National Lottery Community Fund; and the National Lottery Heritage Fund.
DCMS delegated administration of most of its grants and financial monitoring of the Trust to ACE. A representative of ACE attended meetings of the Trust’s Board of Trustees.
The Trust first reported financial difficulties in August 2021 – and assessed that its financial position was at risk. In response, ACE commissioned an independent financial review of the Trust. Following the review, the Trust made budget cuts and worked with funders to bring forward grant payments. In March 2022, the Trust reported to ACE and DCMS improved financial health.
However, a few months later in Autumn 2022, the Trust’s finances were under pressure again – due to a combination of income being lower than envisaged and increased costs stemming from the COVID-19 pandemic. The Trust also identified an accounting error in August 2022 which put further pressure on its finances.
DCMS and ACE brought forward some funding to improve the Trust’s cashflow. In October 2022, the Trust requested, and received, a £1 million loan from Coventry City Council. This was intended to deliver the legacy programme of events up until March 2024. One month later, financial problems re-emerged, and the Trust forecast it would have a cash deficit of £3 million later in the year. By December 2022 this forecast had risen to £4 million.
DCMS and ACE monitored the Trust’s situation, including ACE attending all meetings of the Board of Trustees as an observer. They considered options including bringing forward more grants, providing new funding, and the transfer of the Trust’s assets and associated grants to Coventry City Council. In January 2023, DCMS decided against providing new funding to the Trust, but decided to bring forward agreed future funding subject to conditions. The Trust could not meet the conditions DCMS set for bringing forward money and the Trust entered administration on 28 February 2023.
Coventry City Council and its partners are considering how best to preserve planned legacy programmes.
Read the full report
Notes for editors
This is a factual briefing and does not aim to evaluate or report on the value for money of the Coventry UK City of Culture year or of the Trust. We did not investigate the causes of the insolvency of the Trust. Our focus has been on central government’s actions, and we did not examine the actions and decisions of Coventry City Council and Warwickshire County Council.
Several other organisations are investigating the insolvency of the Trust, including the administrators, who aim to understand how and why the Trust became insolvent, and the Charity Commission, which is conducting a compliance investigation of the Trust. This briefing is intended to complement the other reviews.