UK national museums, including the British Museum and the National Gallery, have found it difficult to access over £50m donated by philanthropists, because of Treasury regulations.
These are funds from donations and bequests which went into museums’ financial reserves and later fell under government control.
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The scale of the potential problem is enormous, since the reserves for all national museums total £285m. The museums have not publicised the difficulty, fearing that this might rock the boat during delicate discussions with government.
In last month’s spending review there was a little noticed concession. It has now been agreed that national museums can have access to half their reserves, that is £143m. The problem results from Treasury restrictions introduced a few years ago which cover all government-funded bodies.
This had an unintended consequence on museums (which raise much of their income from donors), since they found that reserves could only be spent with Department for Culture, Media and Sport (DCMS) approval.
This has only been granted if it fell within spending limits imposed by the Treasury on DCMS and its funded bodies.
Last year the British Museum wanted to use reserves to help fund its £135m World Conservation and Exhibitions Centre.
Trustees allocated £42.5m from the museum’s own resources, much of it from the sale of property. DCMS then told them that the Treasury had not agreed to allow the money to be spent, and on 18 November 2009 museum chairman Niall FitzGerald unsuccessfully lobbied the then culture minister Margaret Hodge.
The British Museum still does not have permission to use £42.5m of its own money for its major expansion project. This is putting the museum in a most difficult situation.
When the National Gallery was fundraising for Titian’s Diana and Actaeon, 1556-59, its trustees allocated £11.5m from its reserves in 2009-10 and 2010-11 towards their half of the £50m joint purchase with the National Galleries of Scotland.
The National Gallery’s financial plan says this money had been “accumulated over many years principally from generous bequests”.
Initially the Treasury responded that the National Gallery could not use its reserves. DCMS did its best to assist, and discovered that one of its bodies had underspent, allowing leeway for the National Gallery to tap its reserves. Without this, the purchase from the Duke of Sutherland might not have gone ahead.
In 2008 National Maritime Museum trustees decided to spend £3.5m from its reserves on gallery refurbishments, but this was blocked by DCMS. On 17 September 2008 the trustees recorded that “with no access to its reserves the museum will not be able to deliver the exhibitions or gallery renewal it has planned”. They viewed this with “great concern as it significantly reduces their own independence as trustees and may well deter donors”. It could even be construed that the Treasury is “acting as a shadow trustee”.
DCMS later agreed that the maritime museum could spend just £300,000 in the current financial year out of the £3.5m earmarked for gallery refurbishment.
Since the reserves issue was identified a few years ago, most national museums have avoided difficulties with new donations by drawing funds in the year in which they are required (as is happening with Sammy Ofer’s £20m donation for the National Maritime Museum extension), or encouraging gifts to be paid into separate charitable accounts.
The main problem lies with donations and bequests which were given before the new regulations.
DCMS has backed the museums, and has taken up the issue with the Treasury.
The fear is that the reserves problem will deter donors—at a time when the government wants to encourage private philanthropy and museums need extra funding because of cuts in grant in aid.
Although in theory museums should now have access to half their £285m of reserves, DCMS has not yet told them how the new system will actually work.
Michael Dixon, chairman of the National Museum Directors’ Conference and director of the Natural History Museum, welcomes the announcement in the spending review, although “the detail of how this will be managed with individual institutions has yet to be finalised.”