Forensic accountants to examine Coventry Culture Trust books

Forensic accountants are being called in to examine Coventry City of Culture Trust’s books amid claims of 'financial profligacy' prior to its collapse.

In a report providing an update on the progress of winding down the trust, which also confirmed the extent of the trust’s outstanding debts, administrators said they have received a number of concerns relating to the way the charity used its public funds.

“These have included allegations regarding profligacy and the controls over spending and resultant deficit position,” the report states.

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The joint administrators say they will “investigate all matters that have been brought to their attention” alongside their statutory obligations.

“It is anticipated that the investigations will be a lengthy and time-consuming process and will require legal advice and other specialist services,” the report continues.

“The joint administrators intend to engage the service of the forensics team at Armstrong Wilson LLP to assist with their investigations.”

The report adds that investigation into the trust’s affairs will help them decide whether civil proceedings should be pursued.

News of further scrutiny into the collapse of Coventry City of Culture Trust and its finances follows separate investigations by the Charity Commission and National Audit Office, which are ongoing.
 
Anecdotal reports suggest costs spiralled under the leadership of former Chief Executive Martin Sutherland, with more than £4m spent in staff costs, adviser costs and travel and subsistence, according to the charity’s annual accounts for 2021/22.

Coventry Council, which is owed over £1.6m by the trust, has also said it is conducting an enquiry. In its report, the administrators say they are assisting both the council and Charity Commission in their investigations.

When did it go wrong?

The administrator’s report sheds light into when and why Coventry City of Culture Trust began experiencing cash flow issues.

It attributes the start of the financial difficulty to the pandemic, stating the trust “faced huge challenges with planning events, incurred huge additional expenditure throughout the period of the pandemic and suffered from the knock on effects of pressure placed on funders who were also facing the negative consequences of the pandemic”.

Coventry’s calendar events started on 1 May 2021, five months later than scheduled, because of the pandemic.

At the time, analysis from the event’s organisers said more than one million people attended events during the year-long programme of events.

According to the report, the trust’s year of delivery “did not have the expected number of people attending activities”, leading to the company “accumulating liabilities throughout the year of delivery”.

“The company’s finances were under pressure due to the combination of income being lower than envisaged and the increased costs incurred during the year of being the City of Culture,” the report continues.

“The company’s future grant funding was also due in staged payments and was restricted in its usage for specific projects.”

Discussions around insolvency began in late 2022, when directors held two board meetings in the lead up to Christmas to discuss the charity’s cash flow issues.

The trust was unable to make arrangements to bolster cash flow, despite attempting to accelerate legacy grants, discussing debt forgiveness with larger creditors and curtailing operations contracts where possible.

Directors then engaged administrators to begin insolvency proceedings, when the charity was midway through a two-year project to deliver legacy events in Coventry.