"No further funds" will be given by a council to a youth regeneration project after serious concerns were raised about leaders' financial management.
Somerset Council froze funds to Glastonbury's Life Factory in January 2024, after bosses said they were not "able to adequately reconcile invoices" in grant claims with actual spend and progress on site.
The new leadership team at Red Brick Building Centre, which runs the site, said its "deeply disappointed" with an independent audit's findings that highlighted a lack of accountability.
A council spokesperson said the authority accepts that its level of oversight and monitoring "could have been strengthened".
The report also warned the government could request its £2.89m back if officials decide the "terms of the grant have not been met".
After the grant was halted in January, construction work stopped on site and several contractors were left unpaid.
Some workers told the BBC that they are owed tens of thousands of pounds.
