City councillors have voted to withhold funding to the Ancaster-based Festival of Friends until it hands over audited financial statements for 2012.

At a budget meeting Thursday, councillors were set to approve a $85,270 grant to the music event, which draws as many as 250,000 people per year. But in a surprise motion, Coun. Brad Clark of Stoney Creek moved to withhold the money until it got full financial statements. The motion passed 9-2.

Loren Lieberman, general manager of the Festival of Friends, said his organization provided the city with financial information last year, and that city staff told him it had enough information. The festival ended 2012 about $81,000 in the hole, largely because torrential rain storms dampened crowd attendance.

The festival could have provided audited financial statements, he said. But it didn't know it was necessary.

"The city of Hamilton or any government funder is entitled to ask for whatever they want, but you gotta ask," he said. "Don’t punch me in the face and tell me the reason why afterward."

It is not an official policy that events and organizations have to submit full audited financial statements in order to receive grants. But finance head Mike Zegarac said they all received letters last year asking for them.

Clark says Lieberman knew the city wanted to see the festival's audited financial statements. It provided a slender statement of operations last year, "which is not the same thing," he said.

"It was basically revenue versus expenditure and profit versus loss," said Clark, who represents Ward 9. "That's not an audited financial statement."

Other organizations who get city grants provided audited financial statements last year, Zegarac said. The festival is the only one that didn't submit complete statements. The statements are distributed to councillors at budget time so they can decide which organizations to fund.

Withholding the grant doesn't create a financial crisis for the festival, Lieberman said. But he's upset at the process used to withhold it, namely a motion he didn't know was coming. He says his accountants will talk to city finance staff and get them the information they want.

Councillors said at Thursday's meeting that they spoke to Lieberman last year about providing audited financial statements, and Lieberman said it was an onerous expense. He suggested the city include the required amount into the grant, which takes "chutzpah," Clark said.

Audited statements cost about $10,000, which is a lot of money for the festival, said Coun. Terry Whitehead of Ward 8, who voted against withholding the grant. He agrees that all organizations should submit them, but it should be in a policy so everyone knows the rules.

Asking the festival to provide them at the end of its fiscal year when it hasn't budgeted for them isn't fair, he said.

"You can't at the eleventh hour ask for a different standard from the policy in place."

Coun. Scott Duvall of Ward 7 also voted against Clark's motion.

"I think we were all surprised and shocked that there wasn’t a policy" to provide audited statements, he said.

"If you want them to abide by the rules, make the rule. That’s what we gotta do."