THE full extent of the turmoil surrounding a debt-ridden £9.5m flagship arts centre for the North-East finally became clear last night.

A damning report obtained exclusively by The Northern Echo slams "fatal weaknesses" of the management board at Stockton's Arc venue.

It also condemns a "lack of clear artistic vision" and a failure to recruit skilled staff.

The report, by a firm of consultants, was commissioned for the Arts Council with the aim of instigating a recovery programme for the complex.

Yesterday, it was forced to close its doors, cancel all productions, and send home its 50 full and part-time time staff after a cash rescue plan failed.

Arc Trust Ltd, which runs the Arc, had appealed to the Arts Council for about £280,000 to bail it out. But the council, which provided the bulk of the £7m funding to build the venue, could not reach a decision on the aid.

As a result, Arc Trust announced it was to go into liquidation with immediate effect, casting doubt on thousands of pounds worth of tickets sold for productions up until mid-January.

Among the axed forthcoming attractions are an audience with Jack Charlton, the music of Chas 'n Dave, a Beatles tribute and the London Community Gospel Choir.

Last night, Stockton Borough Council was rumoured to be interested in buying the building. But the authority, which provides a grant of £220,000 a year towards its running, said it was too early to speculate on its future.

Sources said it had been a disaster waiting to happen. The company running the venue faced having to triple audience figures to keep within its budget and failed to meet income for ticket sales.

It was said to have been losing £20,000 a month and £200,000 in debt overall, but the figure could be double.

High overheads were also incurred by a series of problems caused by design faults. These included expensive computer-controlled lighting and faulty air conditioning.

One source, who passed on the consultants' report to the Echo, said: "The whole thing is just an unholy mess.

"The organisation simply has just not earned enough money to pay for its costs."

The report describes a series of "disastrous" cost overruns and delays in building the Arc, which opened almost three years ago.

It said: "With demanding creditors outstripping cash flow, a great deal of time is simply spent on day-to-day firefighting."

The board failed to create and operate a system of management accounts that would have allowed the organisation to take informed decisions.

Key staff were also said not to understand budgets given to them and had not kept to the spending sums allocated.

The report concludes that the Arc's board and senior management team, currently led by managing director Bernard Lanz, should have been "radically restructured".

Annual revenue grants from Stockton Borough Council and Northern Arts are also said to need to increase by at least £250,000.

Paul Burns, a spokesman for the Arc, said: "The tragedy here is that people have lost their jobs and potentially a crucial facility. There is however a will to make sure the venue lives on."