Mr Isaacs, who has a five-year contract, will have it renewed by two years when it runs out in 1993.
Both reports, one by an Arts Council team headed by Baroness Warnock, the other commissioned by the Royal Opera House from Price Waterhouse, the management consultants, say that management policy needs to be strengthened and that resources are not being used effectively.
The conclusion is an awkward one for the Covent Garden management which has an accumulated deficit of nearly pounds 4m and says it is underfunded by government.
The Warnock report says that while there are encouraging signs in the artistic performance of the opera and ballet companies, the ROH 'faced an unprecedented crisis' because of the disrepair of the buildings, the accumulated deficit and 'the performance of the ROH management'.
Lady Warnock says: 'It was the team's view that the financial crisis could have been avoided. The tendency had been to decide what was artistically right first and count the cost later; a heavy programme of new productions had increased costs; too little attention had been given to changes to improve productivity and reduce costs.'
The report concludes that: 'Future Arts Council funding should be conditional on a break-even strategy and on a number of manifest changes to management practice to give confidence that this strategy would be pursued vigorously.'
The Price Waterhouse report has a similar emphasis, saying: 'Though we find the ROH highly effective, the efficiency with which it works is mixed and its sense of economy is poor.' The report identifies scope for improving costs by more than pounds 1m.
It says there must be an increased focus on customers with initiatives for wider access. It also calls for value-for-money criteria in management decisions. For example, planning the repertory should include full technical costs and box office projections. It adds that cash payments of wages and expenses should cease. The board, which met on Tuesday, has decided to ignore the Warnock report recommendation that it should shelve a pounds 250m development scheme because of the difficulties of raising funds.
A Covent Garden spokesman said: 'The board does not share the team's views on postponing the development. In their view, better value for money will be achieved by proceeding with the full development scheme.'
Angus Stirling, chairman of the ROH, added: 'We are committed to good, economic management. We see no contradiction between aiming for artistic excellence and using resources economically . . . The Royal Opera House is very fortunate in having Jeremy Isaacs as its general director . . . He has the total confidence and support of myself and my colleagues on the board in the arduous and difficult task to which he is committed.'Reuse content