Teach na Failte has offices at Lenamore Business Park in Derry, one in Strabane and a third in Belfast.
A number of Teach na Failte backers are now considering pulling funds from the registered charity after pictures showed masked and armed men fire a volley of shots outside the McElkerney’s home.
Co-operation Ireland, which oversees a £400,000 Open Doors grant given to the group in February, confirmed it has started a review into money awarded to ex-INLA prisoners.
McElkerney (57) died on May 17 – a day after a shooting incident at Milltown Cemetery.
He had been convicted of a republican bomb attack that killed two children and a soldier during the Troubles.
His funeral took place last Thursday with masked men leading the procession to the church.
Referring to the gun salute, Co-operation Ireland: “Co-operation Ireland is aware the PSNI has launched an investigation into the events of Monday and we will monitor the outcome.
“Any activity that directly impacts on the capacity or reputation of Co-operation Ireland, or the capacity or reputation of our partners to implement the programme, is a matter of serious concern.
“Following Monday’s incident, we have advised the funder of the project, the Special EU Programmes Body (SEUPB), of our concerns and instigated an investigation.”
The £400,000 handed to Teach na Failte, which has offices in Belfast, Strabane and Londonderry, comes from the European Union’s Peace IV scheme.
Since its inception a decade ago, Teach na Failte (Irish for Welcome House) has raked in more than £1m in public funding despite the INLA continuing to be heavily involved in violence. However, funders are now beginning to act.
The SEUPB, which is responsible for the allocation of Peace IV grants, said: “All projects and project partners involved in the delivery of EU Peace IV funding must adhere to strict principles of implementation which prohibits them from exhibiting any behaviour that could be considered threatening or abusive.
“The SEUPB has asked the lead partner for this project, Co-operation Ireland, to conduct a detailed investigation into this issue.”
Ulster Unionist Party MLA Doug Beattie has welecomed the review.
“If members of groups in receipt of public money are clearly carrying out criminal activity then that funding must stop.”
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