Creative Scotland, which last year was heavily criticised by hundreds of artists, has been told by auditors that it needs to develop a framework for the management of the performance of the organisation.
The audit, carried out by KPMG for Audit Scotland and which is due to be published later this month, also strongly suggests the body should adopt the "best value" system used in local authorities to achieve the best results of spending public money and measuring its policies and systems.
The audit is the second for Creative Scotland and shows that during 2011/12 it spent £66 million on 1270 projects and initiatives.
Because of the time frame involved in the audit, it does not refer to the dramatic events of last year, when a series of controversies eventually inspired more than 400 artists and cultural figures to sign a damning letter to the body, which eventually led to the resignation of Andrew Dixon, the chief executive, and the departure of Venu Dhupa, senior director of creative development.
KPMG says: "Overall, Creative Scotland's evaluation indicates that further work is required to develop a framework for the management of the performance of the organisation, together with the identification of appropriate performance indicators consistent with the corporate plan and Creative Scotland's long-term vision."
Last night a spokesman for Creative Scotland said: "The report recognises that arrangements to deliver 'best value' are already embedded into the organisation's policies and procedures. Consideration is being given on the use of formal best value toolkits."