A critical report into the charity which runs Perth Theatre and Perth Concert Hall has led to the resignation of the majority of its board.
Perth and Kinross Council said the external audit raised "serious concerns" about Horsecross Arts' governance and management.
The authority said these concerns had "been magnified over the last year".
It said Horsecross Arts newly-appointed chief executive Nick Williams would remain in the role.
Horsecross Arts was set up in 2005 to run Perth Concert Hall and "refresh and reposition" Perth Theatre.
About half of its income comes from ticket sales and events, with the remainder supplied by public and private funding.
The charity was criticised earlier this year for its use of zero-hour contracts.
Perth and Kinross Council leader Murray Lyle said the authority had received and accepted the resignation of the majority of the Horsecross Arts board members.
He said Mr Williams and his team "have the full support of the council and its staff."
Mr Williams said the council was currently delivering a £53m "culture-led regeneration programme".
Mr Lyle said: "It is essential that any arts body which is funded by the council makes a strong contribution to this agenda and has in place robust governance arrangements to support this."