Galway City Council rejected a call to allocate an additional €2.5 million in funding to Galway 2020 in a council meeting on Monday night.
Galway 2020 had made a request for the additional funding last month, but the council deferred any decision at that meeting.
At a contentious meeting of the city council on Monday night the request was defeated by 11 votes to five the Irish Times reports.
It was planned that the additional funding would be provided by paying €1.25 million out of the city budgets for 2021 and 2022.
The council deferred its decision last month due to a perceived lack of transparency around what specifically the money was for.
Galway 2020 had also requested that the money already pledged to the event be front loaded to deliver as quickly as possible.
If it had passed, this motion would have brought the total level of funding provided by the city council to the Capital of Culture project to €8.5 million.
Chief Executive Brendan McGrath supported the motion, saying Galway 2020 would deliver strong economic returns for the city.
However, it is reported in the Times that there was concern from councillors about transparency and how money is being spent on the project.
CEO of Galway 2020 Patricia Philbin said that some of the events planned for the year may have to be cancelled or scaled down as a result of funding issues.
However she said that all of the events included in the original bid book will proceed in some form.
The opening ceremony for Galway 2020, which was meant to take place last Saturday, was also raised at the meeting.
The ceremony had to be called off due to an Status Orange weather warning in place that day, prompting some to ask why the exposed South Park area in the Claddagh was ever chosen.
Patricia Philbin said that they are looking into recouping some of the costs of the cancelled ceremony via the event’s insurance policy.