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Of the £830m grants and loans funding awarded to the sector via the Cultural Recovery Fund (CRF), so far only £495 million has been paid out, according to a report by the National Audit Office (NAO).

Department for Digital, Culture, Media & Sport (DCMS) launched its £1.57 billion CRF in July last year, with many festivals, venues, event organisers and suppliers having been announced as beneficiaries.

The chancellor announced that the CRF was to be increased by £300m to £1.87bn in the Budget earlier this month.

The CRF comprises a mixture of revenue grants, repayable loans and capital grants, targeted at different groups of organisations. The DCMS aimed to support the survival of 75% of the organisations in the sector at risk during 2020-21. To determine how much money would be available, the DCMS considered various scenarios. Its worst-case scenario assumed that social distancing would remain until the end of March 2021 and that demand would remain at 40% of pre-Covid-19 levels. The current situation exceeds this worst-case scenario.

From the £1.57bn of overall funding, the DCMS gave responsibility for awarding £1bn to four arm’s-length bodies (ALBs) in a first phase of funding (which invited applications up to end of November 2020): Arts Council England (ACE), Historic England (HE), the National Lottery Heritage Fund (NLHF) and the British Film Institute (BFI). The ALBs ran their own, mostly separate, competitions to award funding.

The criteria for awarding funding included that organisations were financially viable before Covid-19; had exhausted all other funding options; were ‘culturally significant’; or were essential to the cultural fabric of a place or supported the government’s wider ‘levelling-up’ agenda.

The NAO said that by 19 February 2021, the ALBs had awarded £830m of the £1bn funding, with £495m paid out to recipients. The ALBs have until the end of March 2021 to award all funding although these can mostly be distributed and used by recipients beyond March 2021. Applications for both revenue and capital grants were oversubscribed in the first funding phase. Loans funding was undersubscribed.

The ALBs awarded funding to a diverse range of organisations. By December 2020, 85% of revenue grants had been awarded to the arts and 15% to heritage organisations. London received 31% of total funding, followed by the North West and South East which each received 12%.

The DCMS has not yet paid out any funding from its second phase of funding, totalling £400m, which it announced in December 2020, with decisions scheduled to be made in March 2021. This comprises funding not awarded in the first funding phase plus £258m  that it held back as contingency.

NAO said that in common with other emergency Covid-19 funding, implementing the CRF has presented risks of fraud, error, duplication and overpayment, which the DCMS recognised from the outset. To minimise these risks the DCMS required ALBs to perform fraud risk assessments on applications and post-award checks. The DCMS also created the Culture Recovery Board in July 2020 to provide assurance to the secretary of state over funding and approve loans over £3m. By January 2021, three reports of fraud relating to two grants administered by ACE had been received through the Covid Fraud Hotline. The grants, totalling £473,000 were withheld by ACE and no funds were paid out.

In response to the findings,  Michael Kill CEO Night Time Industries Association said the organisation is working with DCMS & Arts Council England to ensure that this funding is distributed fairly throughout the arts and culture sectors, and accessibility and eligibility at the point of submission and assessment is considered for businesses that traditionally are not accustomed to applying for grants as part of a bidding process.

He said, “Many businesses are awaiting the outcome of the CRF 2, which will be fundamental to  their future, and ultimately have an impact on the cultural tapestry of this country for years to come, but it will still lead to disappointment for many.”

“Government should work alongside trade associations and local councils for CRF 3, to identify key organisations within their sectors and communities that still need support to survive”