Money being donated by Birmingham City Council to tornado victims comes from rent it earned from scaffolding put up around affected homes, it emerged yesterday.
Earlier this week, the local authority revealed plans to put #100,000 into a hardship fund, almost one year after last July's tornado devastated parts of the city.
Community leaders said the money was too late and should have been supplied in the immediate aftermath of the disaster.
Last night there was fresh fury after the source of the council's donation was revealed.
City MP Roger Godsiff described the situation as "unsavoury" while a local councillor in one of the affected areas branded it an "insult".
The council put up scaffolding to secure properties hit by the tornado in Kings Heath, Moseley, Sparkbrook and Balsall Heath.
Small businesses, including a number of shops in Sparkbrook's Ladypool Road, protested after being sent bills for the work. The city council has agreed to write off the cost for smaller commercial properties, but has demanded the funds from housing associations operating in the area.
A spokeswoman said: "The city council was duty-bound to retrieve some of these costs, but we always said from the outset that rather than put it into city council coffers we would put it back into the area.
"We have recently received the payments we were requesting from housing associations in the area for the retention of scaffolding for repair works and a contingency fund has been set up using these payments.
"It is from this fund that the donation is being made to the tornado hardship fund."
The donation will go towards a fund managed by the Birmingham Foundation, a charity focused on inner city regeneration.
The fund has received no donation from the authority, though council bosses claim more than #1 million was spent on the clear-up operation after the storm.
Mr Godsiff, Labour MP for Sparkbrook and Small Heath, criticised the council for not coming up with its own money sooner.
"It's all a bit unsavoury," he said.
"This was an act of God. It was a freak accident that happened. The city council has hardly done anything to support those affected in their self-help effort.
"This is typical of the way the people are treated. They have been left to their own devices. They should have had that quantity of money a lot sooner."
Coun Talib Hussain (Independent Sparkbrook) said he was disappointed to learn where the authority's donation had come from.