Arts chiefs have frozen a £223,000 grant to a defunct Birmingham nightclub amid growing scrutiny of ministers' £1.6bn bailout for Britain's embattled cultural hotspots.
The lifeline payment to Sundissential was halted after several complaints were made to the Arts Council of England about its decision to award the former music venue taxpayer funding.
It comes as arts organisations and industry groups raise concerns about how money is being awarded from the Culture Recovery Fund, which offers grants of between £50,000 and £3m to cultural organisations that were financially stable before Covid-19 but are now at imminent risk of failure.
Sundissential Limited was dormant between 2017 and 2019, Companies House filings show. However, the business filed micro company accounts on Sep 1 2020 - just three days before the deadline for applications for the second round of recovery fund grants.
The company also changed its designated principal business activity shortly before the deadline to include educational support services, performing arts, artistic creation and the operation of arts facilities.
Asked about the award to Sundissential, an Arts Council spokesman said: “Arts Council England has received a number of concerns about the Culture Recovery Fund grant awarded to this applicant, which we are actively investigating. While we investigate no payments have been made.”
It is understood that concerns have been raised about a small number of grants awarded. Applications go through computer checks before any cash is handed out, and organisations which are given funding are then monitored. This includes audits of how the money is used.
Sundissential, which was a popular clubbing destination in Birmingham in the 1990s and also released mix albums, could not be reached for comment. A Facebook page believed to belong to the company appears to have been deleted.
Many organisations that have been denied funding or were told they were ineligible are angry at how the scheme has been run.
Dan Stratford of S A Events in Maidstone, Kent demanded a public enquiry into the programme, which has awarded more than 2,000 grants.
Mr Stratford provides lighting and sound equipment for theatres, companies and events. He said that S A's sales are likely to fall from about £500,000 last year to about £70,000 in 2020 because of the pandemic.
The firm’s funding application was rejected but a local competitor was given support, he said.
Mr Stratford said: "We work in exactly the same industry. We even tender for the same jobs.
“I personally don't think that Arts Council England have handled this very well at all. The whole application seems to depend on how well you can word a begging letter or a plea to them.”
Michael Kill, chief executive of the Night Time Industries Association, welcomed the support of the Government and the arts council but warned of problems with individual bailout decisions.
He said the trade body had raised concerns with ministers about “some culturally significant venues, events and supply chain businesses being missed off the awards, bringing into question the current criteria and assessment process”.
The arts council has been criticised for ordering those given a grant to promote the award on social media.
It is understood that the council’s standard practice was to ask funding recipients to mention grants online so the public could see “the tangible positive impact of public investment in culture”.