A taxpayer-backed cultural body has had its public funding cut after breaking rules by handing unauthorised pay packages to top officials.
The British Council failed to seek Treasury approval to breach a cap on senior civil servants earning more than the Prime Minister's £142,500 salary.
It had appointed a new chief executive in 2014 on £185,000 a year and a new chief financial officer on £142,000 but with an "additional one-off payment" of £11,837.
Retrospective permission for the chief executive's pay was refused by the Chief Secretary to the Treasury - who cut £200,000 from the budget of the Foreign Office - the Council's sponsoring department - as a result.
The FCO then took the sum out of the Council's public grant.
Discussions are continuing about financial penalties related to the other breach.
The unauthorised payments led the National Audit Office to issue a qualified opinion on the Council's annual accounts.
A British Council spokeswoman said it had been advised by the Cabinet Office that it could negotiate up to £192,000, with the £185,000 package approved by the Foreign Secretary.
But it has reviewed recruitment and remuneration procedures to ensure Treasury sign off is obtained in future.
It said that "no services were affected or interrupted" by the £200,000 penalty.