Auditors are investigating where thousands of pounds raised by gay and lesbian revellers have disappeared to.

Organisers of the annual Pride festival revealed the majority of grants pledged to community groups after last year's event have not been paid.

In a letter to members, the Pride committee confirmed cheques should have been sent out in September by a paid worker.

However, only two of the 12 grants promised, totalling £1,500, have been paid.

The letter also revealed the paid worker had resigned.

More than £10,000 was promised in grants to community and voluntary organisations in the Brighton and Hove area, mostly associated with gay and lesbian issues.

They included the Rainbow Chorus, Sussex Beacon and the Older Lesbian and Gay Men's Forum.

Pride chairman David Harvey said: "Needless to say, the committee is deeply troubled by this turn of events and seeks the support of the membership as a whole to help steer the organisation through this difficult time.

"All monies raised from events for Pride in Brighton and Hove 2003 will be put into a new account.

"The committee is committed to changing the legal status of Pride in Brighton and Hove to charitable status to ensure external scrutiny occurs and to minimise the possibility of these events reoccurring."

Jaq Bayles, Pride's publicity co-ordinator, said: "We are investigating where the money has gone.

"We have called in auditors and the accounts are being looked at.

"We don't even know if the money is missing but there are discrepancies in the accounts.

"Everybody will get their grant. It's just the time scale might be different to that anticipated.

"We have pledged to honour the grants. The external auditors will determine what has happened to the money.

"There are no implications as far as we are concerned for Pride this year."

Peter Otto, social secretary of the Older Lesbian and Gay Men's Forum, said it received its grant of £1,000 in January.

He said: "I heard just a few days ago there wasn't as much money as expected. But the money went into our bank account in January. We're the lucky ones."

Steve Curry, director of the Sussex Beacon hospice, said: "We were pledged £1,000 and have not received it yet.

"We have a very good relationship with the Pride committee.

"It is committed to making good its promise and we have confidence it will do so."