Almost a quarter of a million pounds loaned by a council to its own marketing firm may never be recovered, it has emerged.
Marketing Gloucester, which is being liquidated, was loaned the cash by the city council last year.
It ran some of Gloucester’s biggest events such as the Tall Ships Festival.
The authority’s Overview and Scrutiny Committee heard the council loaned the money “in good faith” but the money would never have covered its debts.
Marketing Gloucester was set up and owned by Gloucester City Council, but was not run by the authority.
‘Not factually correct’
Councillor Jennie Watkins, chairman of Marketing Gloucester’s board, told the committee meeting she was assured the £240,000 was “enough to get the company to the end of March”.
But after the loan was paid it became clear the money would never have covered debts and other costs.
A review of Marketing Gloucester found its financial position was “untenable”, the Local Democracy Reporting Service said.
Last month it ceased trading and all seven members of staff lost their jobs. Liquidator Bishop Fleming is due to start an insolvency investigation.
Marketing Gloucester’s former chief executive, Jason Smith, was sacked in December after a review into the company’s governance and operations, and his interim replacement, Steve Brown, was appointed in January.
Ms Watkins said: “I was told in good faith the loan of £240,000 that would help Marketing Gloucester get to the financial year was right, but as you now know it wasn’t.
“I was told the figure was enough to pay off the creditors, deal with any salary payments and overheads. It wasn’t factually correct.
“The way it had been ran is the reason we are here today. It is possible that the city council won’t get back the £240,000 it loaned.”