It originally asked for a $215,000 government grant to get the inaugural event off the ground, and budgeted for this amount. There is no evidence in right to information documents released to The Examiner that the budget was adjusted after only receiving a $120,000 grant.

Festival directors were contacted for comment.

Twenty plus shows were planned in its original grant request, which became more than 100 by the time the festival rolled around in March.

The festival racked up debts amounting to almost the exact shortfall, leaving comedians and other staff out of pocket, which the government has now agreed to pay to the tune of $91,784.

The additional funds will be given to the festival under the conditions that no directors, or anyone immediately related to them, will directly or indirectly receive any of the additional funds to be provided. If the event should occur again, or if the intellectual property for the event is used or sold, event organisers must begin discussions regarding options to repay the state.

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In a letter asking for more money titled "LOL Festival Overview", festival director Scott Plummer references the shortfall, addressing the Treasurer by his first name.

"Peter as we know each other well enough and understand the REAL [sic] numbers, it is of note that the dollar difference coincidentally between the actual government grant and festival shortfall is exactly what was originally requested in our government proposal," he said.

Mr Plummer thanked the Treasurer for the opportunity to "summarise the need for the original funding model".

"Peter that we needed the exact amount we originally budgeted was a huge concern for the directors and we appreciated the support we got, even though we knew we would lose money," he said.

The festival also received $20,000 from the Launceston City Council, and $10,000 from regional councils to put on shows at Deloraine, St Helens, George Town, Scottsdale, and Devonport.

Tasmanian Labor deputy leader Michelle O'Byrne questioned what due diligence was undertaken to ensure the comedy festival was sustainable and affordable.

"We raised it in estimates because we were really concerned about the failure to pay artists and the reputational damage to Tasmania by national artists not being paid," Ms O'Byrne said.

"The state government should be very careful in how grant applications are assessed and it is still unclear how this grant application was approved."

Mr Plummer said in the letter to the Treasurer that the directors didn't want to lose so much that they risked not putting it on again, and were appreciative of the chance to ask for a further support payment.

Mr Plummer referred to the event as "overwhelmingly positive," despite the fact that at the time of his writing the company was tens of thousands of dollars in debt and attracted 73 interstate and 17 international visitors according to their own records.

In an exit report supplied by directors to the state government it was revealed budgeting for the 2020 festival had begun.

City of Launceston deputy mayor Danny Gibson said the way the Laughs of Launnie funding has unfolded was disappointing for event organisers and producers, who work diligently and responsibly to stage their events and festivals, often within very tight budget constraints.

"As the chair of the City of Launceston Events Committee and as the chair of Launceston's Carols by Candlelight it does nothing to reflect the effort and vigour groups put into funding requests and acquittals," Cr Gibson said.

"Most importantly, it does nothing to reflect the amazing work that other on the ground members of the comedy scene have done to grow a wonderfully vibrant scene which is nothing to do with this mess."