The activities of the board of Sport Wales were suspended because of its "dysfunctionality", Public Health Minister Rebecca Evans has told AMs.
Ministers stepped in last week, after the board passed a no-confidence vote in chairman Paul Thomas.
On Tuesday, Ms Evans said that there had been tensions over recent weeks which the board had been unable to resolve internally.
An eight-week review of the board is being carried out for the government.
Sport Wales is a publicly-funded organisation which promotes sporting activity from elite to grassroots level, and receives more than £22m a year from the Welsh Government.
"Officials had been aware of some tensions within the board over the past two to three weeks," Ms Evans told the Senedd.
"The expectation was that the normal governance processes would enable the board to manage this and arrive at an agreed solution, but this wasn't the case."
The minister added that, under its governance arrangements, Sport Wales had the option to either resolve the problems internally or raise them with the Welsh Government.
"A conclusion of dysfunctionality, which is where we are at now, was based on the fact that the board had reached a point where they had adopted the vote of no confidence without exhausting both of those avenues," Ms Evans said.
Mr Thomas had written a highly critical report of Sport Wales - leaked to BBC Wales - which concluded the body was in "danger of stagnating" and accused it of spending an "unacceptable" amount of money on its board.
The Welsh Government said the two reviews were not connected.
Conservative sport spokesman Russell George said Labour ministers "once again took their eye off the ball" and "the relationship between the board and its chair has been allowed to break down to the cost of the proper running of the organisation".