An independent investigation has revealed that Whitby Town Council depleted its funds and borrowed tens of thousands of pounds from a local charity's reserves without public explanation to pay its bills.
Whitby Town Council ‘physically ran out of money’ to pay its bills and borrowed tens of thousands of pounds from charity reserves without formal approval or public explanation, an independent investigation has concluded.
The report, commissioned by the town council, found long-running weaknesses in financial management, governance and budget monitoring that left the authority reliant on borrowing from the reserves of the Pannett Art Gallery Charity to maintain cash flow in 2023 and 2024.
According to the review, reserves had been declining since at least 2018 before being further depleted by the impact of the Covid-19 pandemic and increasing costs.
The independent specialist auditor stated:
“By 2024 it had physically run out of money to pay bills.”
The report added that transfers were made from the art gallery charity’s reserves “without public notice, member or trustee approval or public explanation of the true financial situation of the council”.
Investigators found the council borrowed £30,000 from the charity in 2023 and a further £40,000 in 2024 before the money was repaid after annual precept payments were received.
Whitby’s mayor Sandra Turner said it was important to remember the report had not yet been considered by councillors.
She stressed that the review had been commissioned by the council itself after concerns were raised by its new town clerk and responsible financial officer following his appointment in January.
Ms Turner, who was first elected mayor in 2025, said:
“I fully understand why the findings of this report will be of concern to residents, and I appreciate that people will want answers.
“I think it’s important to emphasise that the council has not sought to brush these matters under the carpet. Quite the opposite.
“We commissioned an independent review, we have published the report in full, and its findings will now be discussed openly.”
The review also highlighted concerns over governance arrangements involving the Pannett Art Gallery Charity and the Whitby Literary and Philosophical Society, which operates Whitby Museum.
The investigator said oversight arrangements had been “significantly lacking” and that some financial transactions and agreements had not been reported clearly to councillors.
The report found the council’s unrestricted reserves had fallen to just £9,433 by March 2024, which it said was equivalent to approximately three weeks of expenditure.
It suggested a prudent reserve level would be around £200,000.
The mayor said improvements were already under way, with the new town clerk introducing measures to strengthen financial management, governance and accountability.
She also noted that specialist legal advice had been commissioned to examine historic governance arrangements relating to the Pannett Art Gallery and Whitby Museum building.
The mayor added:
“I know that people in Whitby rightly expect their town council to look after public money properly, and the same goes for the charitable funds and assets for which we have responsibility.
“For me, the important thing now is that we learn from what has happened, put right anything that needs putting right, and make sure we have the proper arrangements in place going forward.”
The investigation makes a series of recommendations aimed at strengthening financial controls, improving budget monitoring and rebuilding reserves.
The investigator also said the review was intended to help guide future decisions rather than apportion blame for historic actions:
“This report is therefore intended to guide future decision-making rather than in any way apportion blame for past actions.”
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