The Rotorua Museum Te Whare Taonga o Te Arawa restoration is facing a new hurdle that could cost up to $40,000 to overcome.
Asbestos has been found in the roof around the north and west galleries, above the stories cinema, and in the basement.
Rotorua Lakes Council is now working with consultants to safely remove it.
Arts and culture manager Stewart Brown told the Rotorua Daily Post the asbestos was not substantial but was expected to cost between $25,000 and $40,000 to remove.
"In a building of this age, we expected to find some asbestos which is why we tested for it."
Brown said the project timeframes would be unaffected and the removal costs had already been accounted for in the $40m to $47m budget.
The council committed $15m to the project, the Rotorua Energy Charitable Trust $10m, and the remaining $15m to $22m is being sought from central government, and fundraising.
The council has applied to the Provincial Growth Fund.
A report presented to the Operations and Monitoring Committee today stated funding was now "critical", putting the current timeline at risk.
But operations group manager Henry Weston said he was "still pretty confident of work starting in July".
Committee chairman, councillor Charles Sturt, said there needed to be "wider community appreciation" of the work being done to reopen the museum, and the challenges the team faced.
"You can't go rushing in there with bulldozers or jackhammers and start doing things ... The reopening is still this council's top priority."
The museum is a Category 1 heritage status building and was initially built in 1908.
Architects and engineers are using 3D models to prevent restoration design conflicts, and a new vacuum design will bring geothermal heating to the whole building.
Rotorua Museum closure timeline
November 18, 2016: Rotorua Museum closed following a rapid seismic risk assessment, 20 staff affected
December 2017: Building rated at 19 per cent of standard, buildings below 34 per cent considered earthquake-prone
February 2018-December 2018: Structural design developed into detailed drawings and specifications with estimated costs
July 2019–2020: Construction
2021: Exhibition installation prior to museum re-opening