Deputy Labor leader Michelle O'Byrne has called for an independent investigation into an $120,000 grant given to the Laughs of Launnie comedy festival.
An additional $90,000 was spent bailing the festival out of its debts, but she said the biggest issue was to ask why the state government funded the festival in the first place.
"Due diligence would normally mean that the government was quite sure that the organisation could meet its aims," she said.
"Having not paid national and international artists reflects very poorly on the city, so I'm not sure that the government had a choice [to repay the festival's debts], due to the reputational damage.
"However, I do think an investigation is warranted as to how this was funded in the first place. As I understand, Events Tasmania were approached and they said no."
The grant was funded through the Department of State Growth.
In a letter to Peter Gutwein, who was then the Minister for State Growth, asking for additional money following the festival, Laughs of Launnie director Scott Plummer expressed its gratitude.
"Our position is thankfulness, because without you personally and State Growth mentoring, the festival would not have been the 7th largest comedy festival held on the planet," he said.
But Mr Gutwein said he had followed the rules.
"The government has acted on advice from the Department of State Growth and the funding has been administered by the department in accordance with the same arrangements that apply to other events the government supports," he said.
"Michelle O'Byrne is just playing politics. [She] knows I acted on advice in terms of both the original funding as well as the actions taken recently to protect our brand and ensure Tasmanian small businesses and other creditors were paid. In fact, she was supportive of that occurring.
"The government will continue to support a range of events which benefit Tasmanians and local economies by attracting visitors, driving dispersal and promoting the state."
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