A £4,000 investigation into the financial failings of Horsecross Arts which led to an exodus of directors revealed “toxic” mismanagement throughout the organisation.
The report was commissioned to examine board and management controls relating to financial management and monitoring at Horsecross Arts, which manage Perth Theatre and Concert Hall.
It formed part of due diligence carried out by Perth and Kinross Council following serious financial difficulties at Horsecross Arts in summer 2019, along with previous problems.
Most board members, including chairman Magnus Linklater, walked out just before Christmas after an audit revealed concerns over financial mismanagement.
In the summer, the council was forced to bail out Horsecross to make sure the 150 staff were paid.
The latest report found that payments over £1,000 were routinely not being approved by the chief executive and that budget monitoring was being conducted on an “ad hoc” basis until September.
Investigators said: “The absence of effective budget monitoring controls, inadequate payroll management and accounts payable arrangements, and poorly controlled system access leads to a toxic mix of control failures that leaves the organisation significantly exposed to fraud and error.”
Auditors have suggested further reviews are conducted to investigate cash security, hospitality, declarations of interest and board effectiveness.
Perth and Kinross Council is the primary funder of Horsecross Arts and has statutory duties to ensure accountability for public funds, something the local authority chose to exercise after being forced to step in and pay emergency staff wages last summer.
The audit was conducted by Glasgow City Council audit team to ensure full independence and was requested by the council’s head of culture and community services Fiona Robertson in October 2019, after a probe into issued had been recommended to her.
The main findings of the report were that there has been “no defined framework for agreeing financial forecasts, setting the budget and monitoring financial performance” at Horsecross and that “roles and responsibilities are not formally defined or well understood.”
The arts firm’s chief executive Nick Williams, who joined Horsecross Arts last month, said: “It is my role as chief executive to review practices and policies to ensure that they are fully up to date.
“I have already established that we do have policies and transparent processes for staff complementary tickets and time off in lieu and I will be ensuring these are updated and that this is communicated to Audit Glasgow and Perth and Kinross Council.
“We are recruiting a head of finance who will lead on the process to secure the robust financial management of the organisation.
“We are grateful to PKC for its hands on support and advice on our financial management over the last few months.”
