Adur District Council is set to buy the Sussex Yacht Club site for £3.3m with funds secured from the local enterprise partnership.
Then the council would deliver a flood barrier, cycleway and footpath as a requirement of the funding.
The Environment Agency indicated they would provide up to £1.2m for the construction of the flood barrier, but after a business case was submitted the initial indications are only £661,931 would be forthcoming, or around half of the money needed.
Adur councillors expressed frustration at the situation in light of the ongoing £30m Adur Tidal Walls scheme at a meeting on Thursday (January 31).
David Simmons, cabinet member for health and wellbeing, said: “I’m rather surprised they did not recognise a weakness when they were looking at the tidal walls scheme.
“To me it seems that is fundamental to completing the scheme.”
Officers have begun to identify other sources of funding to cover the cost of the wall including the Shoreham Harbour Regeneration Partnership, West Sussex Business Rates Pool, or applications for any other grant under-spends from Coast to Capital LEP or the Environment Agency.
But if a gap remains by the time works are due to be commissioned in autumn 2020 the council could borrow money to cover any remaining funding shortfall.
Councillors agreed if Adur cannot identify alternative funding it will fund the shortfall through borrowing of £778,070.
Neil Parkin, leader of the council, said the EA were now only coughing up half the money originally promised and compared it to building a house and not paying for the front door then suggested it was more like filling a bath and leaving the plug out.
As he had been invited to the grand opening of the tidal walls scheme he would raise the issue with the chairman of the Environment Agency then.
He added: “I will ask: ‘What are you going to about the big hole you left in the middle?’”
He continued: “We do not have an option, we can’t leave the hole there and leave Shoreham to get flooded.”
Officers suggested that by approving the recommendations with the council pledging to make up the shortfall if not other funds are secured it gave them the ‘moral high ground’.
The area was described as the ‘weakest link’ in Shoreham’s flood defences.
Meanwhile certain elements of the tidal walls scheme had come in over budget.
Just before the recommendations were approved, Mr Parkin said: “I do not want to go down in history as the person who allowed Shoreham to flood.”