Two major arts centres which have now closed have denied other good causes of £19m in Lottery money, say MPs.
The pop music centre closed due to a lack of visitors
A Commons watchdog's report points to the National Centre for Popular Music in Sheffield and the Dovecot Arts Centre in Stockton-on-Tees.
And it says another £78m spent by Arts Council England is tied up in five projects facing cash problems.
But the MPs say the Arts Council has made changes and overall is now taking a sensible approach.
And they call for Lottery funding to be spread among smaller, regional arts projects.
Better forecasts of visitor numbers at proposed attractions is also needed before making funding promises, they argue.
'Action still needed'
The findings come in a Commons public accounts committee report on 15 major projects funded by Arts Council England.
The MPs examined the projects in 1999 and found most of them were running late and the total cost overrun was £94m.
Five years on, they say the council has improved its handling of capital grants and taken steps to reduce the risks of similar problems on future projects.
"All in all the things that Arts Council England has done are sensible and in the spirit of the committee's previous report on these projects," says the report.
But there are still areas where the council and the Department for Culture, Media and Sport need to take action, it argues.
The closure of the two centres and the financial problems facing other schemes means the Arts Council does not have a "strong track record on project viability", it adds.
Audiences too narrow?
Conservative MP Edward Leigh, who chairs the committee, said lottery players would be unimpressed with the cash problems.
"Arts Council England must make sure the changes it has made to its approach pay off in delivering viable projects based on a proper strategy and realistic projections of visitor numbers," he said.
"I also want to see Arts Council England getting more lottery funding to small bodies and communities outside London."
The committee also said the Arts Council did not seem to collect information routinely on the backgrounds of audiences.
But information given to the MPs indicated that audiences "remain disproportionately drawn from particular sections of society".
Peter Hewitt, chief executive of Arts Council England, said: "Most of these projects date back to 1996. We have acted on all the PAC recommendations made since then.
"Almost all of the 15 projects considered by the PAC, including the Sadler's Wells Theatre, the Royal Court Theatre, the Royal Opera House, Milton Keynes Theatre and Gallery and Manchester Royal Exchange are a fantastic success with the public."