The appointment of former attorney general Mr Dermot Gleeson and the governor of the Bank Of Ireland, Mr Laurence Crowley, to its board yesterday has rounded off a good week for Dublin's Gate Theatre.

On Monday, it was included in a £36 million allocation from the Department of the Arts, Heritage, Gaeltacht and the Islands to improve arts infrastucture throughout the State.

The Gate's £1.7 million share will go towards a long planned new rehearsal space and improved backstage facilities, including an alternative entrance for stage sets, which currently use the same narrow door as the audience.

Gate director Mr Michael Colgan welcomed the funding as a "great morale boost after a difficult time". The time referred to was the protracted disagreement with the Arts Council over funding, which climaxed earlier this year with Mr Colgan telling the council that the theatre's closure was "inevitable".

After a £600,000 grant in 1999, the Gate's funding was slashed to £200,000 for the following year.

Although an initial £354,000 offer for 2001 was eventually increased to £532,000, the relationship between the theatre and the council had become a bitter one.

In correspondence secured by The Irish Times under the Freedom of Information Act, the council criticised the Gate's "conservative" programme and its "avowedly selfish" overseas tours. Mr Colgan riposted that the funding cuts had put the theatre "in a more precarious position than it has faced for over 40 years".

The council also questioned the low turnover in board membership. But Mr Colgan yesterday denied the reorganisation of the board - former chairman Dr Ronnie Tallon now becomes a trustee and the new directors bring the board membership to a maximum seven - was a response to the criticisms.

As he prepares for negotiations on a new multi-annual funding arrangement, however, he was anxious to draw a line under the dispute. "It's been very time consuming for both organisations. We'd all like to get on to the business at hand."

The Gate's business will be helped considerably by the refurbishment grant. Mr Colgan makes no comment on the issue, but the theatre appears to have a strong supporter in Ms de Valera.

In New York last month, where the Gate was presenting four plays, Ms de Valera praised it as a "beacon of excellence". Hailing Mr Colgan as a "dynamic" figure, she said he and his staff "managed so often to find the magical formula for success". They appear to have found it again this week. Mr Colgan insists that even with the grant, fundraising will be a necessary preoccupation for a long time to come.

The Gate's controversial surplus, gained in part from touring, was "scrimped and saved" over a long period, he says, for necessary investment.

But the effort to keep the doors open through reduced financial circumstances means the surplus is now gone, and the grant will only help the theatre to do what the board has long planned.

The development of an awkwardly shaped building - which not so long ago didn't even have a bar - is as crucial to the Gate's survival as the development of writing and acting talent, he believes. Even now, large sets have to be cut down to get through the door in Cavendish Row, before being reassembled inside. "It's totally Dickensian backstage," Mr Colgan says.

Indeed, in the midst of the row with the Arts Council, Mr Colgan suggested a revival of the 1999 hit A Christmas Carol to increase income. This may yet happen.

But Ms de Valera's unScrooge-like generosity has helped ensure a happy ending.