A £46 MILLION arts centre hailed as the North’s answer to Tate Modern when it opened six months ago has fallen into financial chaos.

A critical Arts Council report leaked to The Times about the Baltic centre, at Gateshead Quays on the Tyne, expresses alarm over management and staffing, the absence of “any ongoing business planning work”, the lack of accounting and the “considerable uncertainty” over this year’s budget.

The Baltic is one of Europe’s biggest arts complexes. It promised to create its own exhibitions, rather than rely on loans and handouts from the capital, in five giant art galleries, each the size of an aircraft hangar.

Like Tate Modern, the centre has been created by transforming an abandoned industrial building, in this case a 1950s flour mill. It also has excellent river views as well as exhibitions by international artists, and its construction has revived a rundown industrial riverfront. But its financial problems have prompted one insider to draw parallels with the Millennium Dome, saying: “The northern Tate Modern can now be called the northern Dome.”

A spokeswoman for the Baltic acknowledged that the report was damning, but insisted that they had been addressing its criticisms. She said that the gallery’s success in drawing some 500,000 visitors, more than double the original estimate, had caused problems. Resources had been diverted into coping with the crowds and the management had failed to keep its eye on the finances.

The report found that there was little evidence of financial accountability and a substantial accounting backlog. “This backlog could be indicative of gradual loss of financial control,” it says. “The programme budget could too be at risk of spiralling out of control . . . There appears to be no control or integration over the entire budgeting process.”

The Arts Council report, a monitoring which ensures that the conditions of the Council’s grant are met, was produced for the National Audit Office in October.

In a confidential letter to Alan Smith, chairman of the Baltic, Peter Hewitt, chief executive of the Arts Council, said that the report highlighted “insufficient financial control, serious inadequacies in financial procedures, inadequate staffing in the finance function and some problems with top level management and board supervision”.

He praised the Baltic for establishing a new arts complex of international significance, but requested a business plan by March.

An Arts Council spokesman said: “We’ve fired a shot to them, and they are taking it as that. The Baltic has been a victim of its own success.”

Its opening on July 13, after a year’s delay, by Tessa Jowell, the Culture Secretary, was ruined when a fire alarm went off and almost 400 people had to leave. Faulty fire alarms led to two further evacuations in the first week.

During that time the Baltic was also struggling with a leaking roof. Councillors ridiculed its inability to cope with such a fundamental problem.

As the Baltic does not have its own collection, it is planning a series of ambitious commissions. Its next one involves the former Turner Prize winner Antony Gormley, who sculpted The Angel of the North. Some 240 volunteers will be cast naked for a sculpture. The estimated cost is £500,000. One insider said: “Despite their problems, they’re still spending money as if it’s going out of fashion.”

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