Monthly reviews for funding The Public

Council bosses are holding monthly reviews of the £1.1 million a year budget for the controversial Black Country art gallery The Public.

The gallery in West Bromwich, which cost £72 million and is £49m over budget, is run by Sandwell Arts Trust on behalf of Sandwell Council.

But a report by auditors KPMG has warned that the budget, equivalent to more than £3,000 a day, will not be enough to make it break even. The council has not been able to get any tenants for office spaces inside.

It has also had to scrap a £6.95 entry charge.

But last night the council's audit committee voted to downgrade the financial threat posed by The Public from red to amber – despite KPMG's advice that it should consider all its options, including closing and demolishing the building in New Street.

The council has received £3m from Arts Council England on top of almost £30m to keep the gallery running until 2011 but there is no guarantee of more.

Council executive director for community services John Garrett said: "The council is now solely responsible for the building but not the operating costs.

"Arts Council England is not able to commit money beyond that period.

"We have agreed to a fundamental review and will then approach the Arts Council for renewed funding."

He was asked by deputy Tory group leader Councillor Ray Nock what plans he had to cope with variances in the budget.

Mr Garrett said: "We have not set pre-determined variances. Because of the history of the project and the risks of running an iconic building we have a monthly contact meeting with Sandwell Arts Trust where we review the costings."

The council will tomorrow approve borrowing a further £1.2m to finish office spaces in the building.

But, speaking after the meeting, Councillor Nock said: "I have grave concerns. They have stated that they still do not know the running costs of the establishment, hence the regular reviews. It could go as high as £2m a year for all we know."