The agency initially tried to blame its predecessor, Scottish Screen, for giving the money to the film Love Bite. However, after a Freedom of Information request revealed this to be untrue and showed it was Creative Scotland which awarded the funding, the arts agency admitted it had made a mistake.
Liz Lochhead, Scotland's makar, said the situation was "absolutely ludicrous". Hannah McGill, the former director of Edinburgh Film Festival, called on Creative Scotland's chief executive Andrew Dixon to do "the honourable thing" and resign.
When the Sunday Herald asked for details about its involvement in Love Bite, Creative Scotland issued a statement saying: "There is £300,000 of lottery investment in Love Bite. This investment was committed prior to the establishment of Creative Scotland."
However, details show the decision to fund the film was taken by Creative Scotland in August 2011.
Carole Sheridan, the Scottish representative of Ecosse Films, one of the companies behind the film, said there was no Scottish Screen involvement and suggested Creative Scotland must be "mixed up".
Lochhead, one of Scotland's most respected writers and dramatists, said: "It's absolutely ludicrous. Organisations are finding them impossible to work with. Nobody has a good word for them."
A spokeswoman for Creative Scotland admitted the decision had been made not by Scottish Screen, but by Creative Scotland, and said the previous statement was a "mistake".
Creative Scotland, which has an annual budget of around £75 million, is already something of a figure of hate for Scotland's artistic community. Last month, more than 100 leading figures from the arts world signed an open letter complaining about decision-making by the agency and a lack of transparency. McGill also criticsed the appointment of an entirely male panel of seven judges for the Creative Scotland Awards.
Love Bite, which had a total estimated budget of over £2m, grossed just £73,129 over three days last weekend and was showing in 180 cinemas, which works out an average of around six people per screening. However, in at least one Edinburgh cinema, it screened to an empty auditorium.
Creative Scotland said during deliberations about funding Love Bite, the agency considered Ecosse's track record, which includes Mrs Brown and Monarch Of The Glen, and a projected spend in Scotland of £1.2m. The spokeswoman said the decision was taken by "the senior management team".
Scottish Screen used to have expert panels which considered funding.
Some feel Creative Scotland should invest only in projects with artistic aspirations, but Lochhead thought the brief should include films where Scottish locations were identified as such, or where Creative Scotland anticipated a commercial return. However, she added: "It sounds like they are not going to get a penny back from this investment."
McGill said: "Funding arts projects isn't an exact science and quality is subjective. What stands out most here, as with the scandal of Creative Scotland's all-male awards jury and failure to act thus far on amending it, is the organisation's PR and communications crisis.
"This is a public body that represents, and is paid for by, everyone in Scotland. It has a clear responsibility to communicate honestly.
"Despite my personal respect for Andrew Dixon, I am increasingly convinced that he needs to at least acknowledge the scale of the problem, and at most do the honourable thing and step down."
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