Management at the National Youth Theatre (NYT), which helped kick-start the careers of stars including Daniel Craig and Dame Helen Mirren, is drawing up a rescue plan after mounting debts left the company facing the threat of closure.
The NYT will unveil an overhaul of its operations this week, potentially including job cuts and the closure of several productions. This comes after the Arts Council had to step in with an emergency £200,000 grant to allow the organisation to meet its financial obligations.
While the charitable body did not hit fundraising targets for the past financial year, the core issue was an accounting error that emerged internally several months ago. An independent auditor was brought in to examine the books and found that human error, rather than any wrongdoing, was the cause. One source close to the situation said the organisation "overstretched itself" but that it remained "an extraordinarily important organisation".
It is understood that the worst is over, and the future of the NYT is no longer under threat, but the group has been told to get its house in order. A spokeswoman for the Arts Council said the extraordinary grant was made "in recognition of the excellence of the work and the importance of the NYT both to young people and the theatre sector as a whole".
But it added that the grant "is conditional on changes to its operation to make it more financially sustainable".
Staff face an anxious wait to see which services and jobs come under threat. The NYT plans to release a statement on Friday updating its plans and it is understood that so far no decision has been made on jobs.
The error in the accounts led the organisation to overspend during the year, according to reports, and along with the general economic climate and the funding shortfall, left it with debts of £650,000.
A spokesman for the NYT declined to comment on the accounting error, or the specific state of the finances. He said only that the group "is operating in a challenging economic climate and is currently experiencing some financial constraints. The board and management are working closely with NYT's major funders, including Arts Council England, to resolve these issues." He added: "The board and management hope to quickly find solutions which will ensure the long-term sustainability of the organisation."
This is an early test for Dawn Airey, the former head of Channel 5 who replaced Bill Kallaway as chair of the NYT in January.
The NYT was set up in 1956 by Michael Croft and Kenneth Spring. Alumni include Orlando Bloom, Daniel Day-Lewis, Rosamund Pike and Romola Garai.
National Youth Theatre: The star pupils
The James Bond star started out at the National Youth Theatre when he was 16. He says it was a step in the right direction and "got me more serious" about acting.
The Oscar and Bafta winning Day-Lewis joined the NYT in 1973, and was cast in a production of The Children's Crusade, but left shortly after.
The Oscar-winning actress began her career playing Cleopatra in the NYT's production in 1965 when she was 20.
The most recent incarnation of Doctor Who joined the NYT after an injury curtailed a career in football. At the NYT he played Thomas Becket in Murder in the Cathedral.
While she would later become famous as a broadcaster reporting from conflict zones, Adie was at the NYT in the same season as Helen Mirren.
Labour's MP for Rhondda performed at the NYT regularly as a teenager and said it was one of the things that changed him. He remains an associate of the organisation.