Museums’ £1.7m debt may never be repaid

AS Sheffield City Council resigned itself to writing off a £1.7 million debt incurred by Museums Sheffield, a review has been ordered into the finances of the trust which runs the city’s museums and art galleries.

In a report to the council’s cabinet meeting on Wednesday Eugene Walker of the council’s finance department said the culture department faced an overspend totalling £1.715 million relating to Museums Sheffield made up of outstanding loans of £787,000 and £650,000 plus £278,000 other debts from insurance recharges and a change of agent.

The debts mostly date back to the redevelopment of Weston Park Museum in 2006 when unforeseen structural problems delayed its scheduled opening and increased costs but also include a bailout given to Museums Sheffield by the council in August last year as a short-term measure to ease cash flow problems.

Mr Walker suggested that by taking £240,000 left over from funding to pay for the failed City of Culture bid the amount could be reduced to £1.475 million and further offset with a £170,000 underspend on the major sporting events budget and a £205,000 underspend in libraries. But essentially a debt in excess of a £1 million could never be recouped.

Coun Simon Clement-Jones, cabinet member for finance, accepted writing off such a large sum of money was “difficult” in the light of the £219 million cuts the council is faced with making overall.

But he said: “The Museums Sheffield money simply isn’t there and the idea is that the trust can go forward without this millstone around its neck.

“The debt goes back to the cost of revamping Weston Park Museum and we have been trying to get the trust on an even keel ever since, which is necessary to allow it to move forward.”

Nick Dodd, chief executive of Museums Sheffield, said: “An independent financial review commissioned by Sheffield City Council last year concluded that Museums Sheffield is operating efficiently but is critically under funded for the service it provides.

The review recognised that Museums Sheffield needed a significant cash injection to re-capitalise the charity and solve the cashflow problems which were limiting its business capabilities. As previously reported, Museums Sheffield is also carrying a historic debt related to the development of Weston Park Museum.

“Museums Sheffield is currently working with Sheffield City Council to agree a settlement which reconciles both the funding shortfall and the historic debt with the subsequent cash advances made by the City Council. The details outlined in the Cabinet Agenda are currently the subject of negotiation and have yet to be finalised.”

Nevertheless a report to a meeting of the council’s audit committee next Monday says: “financial and performance management issues” have been raised at Museums Sheffield and that its “financial forecasts were found to be inaccurate”.

Officers have decided full assessments of the trust and its financial position are necessary. “Following conclusion of these reviews along with the results of an internal service review, consideration is to be given to the potential recapitalisation (or future) of the trust,” the report said.