The Ulster-Scots Agency's rent has quadrupled in the past two years
The BBC understands that the Ulster-Scots Agency is facing "root and branch" reform because of government unhappiness with its performance.
It is understood the Culture Minister, Nelson McCausland, is "livid" at some of the agency's spending at a time when public money is scarce.
The agency has recently moved offices and is spending four times as much on rent as it did two years ago.
The Ulster-Scots Agency said it did not wish to comment.
A north-south body set up following the Good Friday Agreement, the Ulster-Scots Agency is responsible for promoting Ulster-Scots history, language and culture.
On Tuesday, the Minister criticised the agency for spending £2,500 on Santa hats for spectators at an Ulster rugby game at Ravenhill on Friday.
However, the BBC understands that the minister has wider concerns about how the agency is delivering value-for-money for the community it purports to serve.
Figures released last week show that the agency now pays four times as much rent as it did two years ago after moving offices.
In 2007, its rent for an office in Brunswick Street was £28,101. When it moved to Great Victoria Street, the rent increased to £119,798.
A source said it was difficult for the agency to justify the increase in spending at a time of cutbacks in the public sector generally.
It is understood that there is particular anger about some of the money being spent at the same time as community groups with whom the agency engaged were waiting for months for cheques they were owed.
Fresh problems at the Agency first became apparent in reports produced by the Northern Ireland Audit Office.
The audits highlighted problems which had been missed by external auditors and by staff.
Insiders at the Department of Culture, Arts and Leisure (DCAL) say that in the light of that there is doubt about whether the agency in its current form has the capability of delivering the level of corporate governance needed.
After the audits emerged, DCAL moved to transfer one of its own civil servants on to the staff of the agency in an attempt to make its operation more professional and provide better value for money for taxpayers.
Fit for purpose?
Two weeks ago in the Assembly, Nelson McCausland was pointedly asked by his party colleague Nigel Dodds whether he believed the agency was "fit for purpose".
Mr McCausland admitted that he did have concerns, guardedly referring to the issues raised by the audit office.
Sources have also indicated that there is considerable conflict between elements of the staff working for the agency and the board which oversees its governance.
DCAL is understood to believe that the current culture is so entrenched that only "root and branch" reform will suffice.
Recently it moved another senior civil servant to the post of interim chief executive in place of the previous chief executive who is on sick leave.
Nelson McCausland is a long-term supporter of Ulster-Scots culture and language but is understood to be very worried that the north-south agency it is not providing value-for-money at a time when the public expect exceptional prudence with taxpayers' money.
The agency has faced criticism on a number of occasions since its inception.
In 2003, its chairman Lord Laird, was criticised after spending hundreds of pounds taking taxis to Dublin and Londonderry.
Two years previously, its hospitality bill for official functions was criticised in an internal Government audit.