The activities of the Sport Wales board were suspended by Welsh ministers because of concerns it had become dysfunctional, the BBC understands.
It is believed the suspension, announced on Wednesday, is not directly related to a critical internal review.
The report, by new chairman Paul Thomas, has been leaked to BBC Wales.
It is understood that Welsh ministers decided to intervene after a vote of no-confidence in Mr Thomas at a Sport Wales board meeting earlier this week.
The organisation, which promotes grassroots and elite sport, received £22.4m of Welsh Government funding for 2016/17.
The report by Mr Thomas said Sport Wales was in "danger of stagnating" and accused its managers of not listening and engaging with people outside its Cardiff base.
He also said it had been spending an "unacceptable" amount on its board.
In a written statement on Wednesday, Social Services and Public Health Minister Rebecca Evans said the Welsh Government had intervened as a result of matters that had emerged in recent days.
Welsh Government officials are now investigating Sport Wales, with the probe not expected to be completed until the end of the year.
Speaking on BBC Radio Wales, Finance Secretary Mark Drakeford said: "The really important message for people who rely on the activities of Sport Wales is that its day-to-day activities absolutely continue as normal."
Welsh Conservative economy spokesman Russell George called for "greater transparency" from ministers.
"The Welsh Government has made a very serious intervention into the running of a publicly funded organisation, and this statement raises more questions than it answers," he said.