The Housing Executive has said a small plaque dedicated to two UDA members was not a part of memorial garden it funded in the Annadale area of south Belfast.
Wreaths were also laid at the garden by loyalists and bandsmen on Thursday – however, the paramilitary tribute was removed immediately afterwards.
The main plaque in the garden, which is decorated with poppies, is said to be a First World War tribute but does not specifically mention the war.
Following Thursday’s band parade and wreath-laying, it was claimed by some that the Housing Executive (NIHE) had been responsible for using public funds to honour terrorists.
Yesterday, a NIHE spokesman said: “The garden at Annadale and commemorative plaque was funded by the Housing Executive and designed to commemorate the First World War centenary.
“It was completed two months ago and we have had no complaints about the garden. There is no sectarian or paramilitary imagery in the garden.
“This was supported by the Housing Executive as it replaced a large paramilitary memorial and was seen to be a key part of re-imaging this neighbourhood,” he said.
The spokesman added: “A parade took place last night and we understand a separate plaque was brought into the garden – it is not a permanent fixture and was taken away again.
“The Housing Executive was not aware and had no involvement in the parade, and would not have sanctioned the additional imagery that was placed in the garden.”
Although the main plaque has been deemed a World War One memorial, and has a number of poppy images, it has a non-specific inscription honouring “the fallen”.
The UDA members commemorated on Thursday included Joe Bratty and Raymond Elder, who were shot dead by the IRA 20 years ago.
South Belfast Sinn Fein councillor Deirdre Hargey said she would be raising concerns over the parade with the PSNI, Parades Commission and the Housing Executive.
“I have been contacted by local residents who are shocked that this parade was given the go-ahead without restriction,” she added.