Key documents relating to the Rose Theatre’s £400,000 Arts Council funding bid were not given to the officers who turned it down.
The theatre, which agreed a £2.5m, five-year funding deal with Kingston Council this year, described the original rejection as a "slap in the face" when it was announced in March.
A subsequent review of the funding process discovered some supporting documents for 66 of the 1,333 applicants had not been uploaded with their application forms.
The Kingston-based International Youth Arts Festival, which drew to a close on Sunday, July 17, was also hit by the error.
The Arts Council England rushed to contact the organisations involved after a confidential memo from chief operating officer Althea Efunshile was leaked to the press last week.
David Fletcher, executive director of the theatre, said: "It’s disappointing to learn there were problems with what had appeared to be a fair and transparent process.
"We have raised our concerns with Arts Council officers and we have been assured the only missing material in our case were documents that were in the public domain.
"These were obtained separately by the Arts Council and taken into account in the assessment process."
The theatre, which intends to continue applying for Arts Council funding in the future, said it would not ask for its bid to be re-examined.
A spokesman for Arts Council England said: “We are absolutely confident that our funding decisions were not affected. Measures are now being put in place to ensure this problem does not happen in the next investment process.”
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