BRITAIN’S top financial watchdog has investigated how an art gallery has so far failed to recoup £300,000 of public money which was paid to the sculptor Antony Gormley to create a work that he can now sell for £1.5m.

The National Audit Office (NAO) has launched a review of a series of transactions at the Baltic Arts Centre, in Gateshead, and has warned the gallery that it needs to do more to “safeguard public funds”.

Gormley, creator of the Angel of the North, was commissioned by the Baltic to create Domain Field, a series of life-size metal “skeletons” for which he encased 240 naked Geordies in body moulds.

The Baltic met the cost of producing the work in 2003 but has so far failed to recoup the money. Gormley then joined the gallery’s board as a trustee in 2005.

It is customary for galleries to bear the cost of a commission although the artist retains ownership. Galleries have contracts to claw back the commissioning costs when the exhibition is over and the artist sells the work.

The Baltic opened in 2002 with £43m of Arts Council lottery money, including an endowment of £7.5m, which will run out by April 2008.

In a letter published on the website of The Art Newspaper this weekend, the NAO told the Baltic to “ensure that any potential conflict of interest regarding transactions with Mr Gormley, who is now a trustee of the Baltic, be explicitly considered and addressed”.

Although the Baltic told the NAO that it will benefit when Domain Field is sold, it did not show any contract and this weekend was unable to say how much it will recoup.

The gallery said that the production costs of the work were £175,000, but the NAO noted that it had “not been provided with any further support for these figures”.

Insiders have told The Sunday Times that there was an overspend of £120,000, pushing the cost to the gallery to the £300,000 mark.

In 2004 the work was valued by the White Cube gallery, which represents Gormley, at £1.5m and he is at liberty to sell it whenever he wants. As a trustee of the Baltic, however, Gormley has a duty to claw back as much as possible from any sale for the gallery.

Gormley is understood to have promised that he would recompense the Baltic for part of the over-run production costs — either with money from the sale of one of the studio pieces used to produce Domain Field, or through the gift of a piece to the Baltic.

White Cube this weekend said that a studio piece was on sale at £85,000. This weekend Gormley was travelling in Australia and could not be reached for comment.

Last year the Tate gallery in London was embarrassed when it emerged that it had spent £705,000 on buying a work from Chris Ofili, one of its trustees. The Tate, which bought it below market price, said it was a rare opportunity to buy an “exceptional work”.

Baltic’s former chairman, Alan Smith, who was on the board when Gormley and other artists received significant commissions, wrote a memo in spring 2004 under the heading “No contracts in place with artists”. It stated that there is “a massive overspend on nearly all commissions”.

However, this weekend Smith said that “as far as he was concerned there were contracts”, although he also admitted that he never saw one. The director of the Baltic at the time was Sune Nordgren, a Swede, who left at the end of 2003.

Stephen Snoddy, his successor, said: “When I got there I could find no evidence of any contracts — no defining contract between Baltic and the artist being commissioned.”

Snoddy found that the Baltic had also paid £30,000 for a book produced by Gormley for Domain Field, but it arrived more than a year after the exhibition had ended.

Gormley was appointed a Baltic trustee on the recommendation of the Arts Council and Gateshead council, despite resistance from Snoddy who said that there was a potential conflict of interest. Gormley had sat on the main Arts Council until 2004.

This weekend the Arts Council said it did not think there was any conflict of interest in Gormley being a Baltic trustee.

Sir Ian Wrigglesworth, the chairman of the Baltic, stated that its systems had since been tightened up.

He said that contracts were in place with Gormley, although his statement went into no details.

“There is no conflict either between Antony Gormley in his role as a trustee and as an artist from whom we commissioned work three years ago,” said Wrigglesworth.

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