Blackburn with Darwen Borough Council has been accused of breaching the Compact by withdrawing funding from local community associations without consultation.
Community associations were established across the borough as consultative bodies in the 1990s in return for funding. But the council, run by a Tory-dominated coalition, is this week expected to end this relationship and rely on new neighbourhood boards, consisting of residents and councillors, to provide feedback instead.
Kate Hollern, leader of the Labour group, said: "The voluntary sector has put a lot of time and effort into community associations and for it to be ignored like this is disgraceful."
David Mallaby, the council's strategic director for neighbourhoods, housing and customer services, admitted there had been no formal consultation on the withdrawal of funding, but said the idea was implied in the decision to fund neighbourhood boards instead. "Everybody knew that funding would be withdrawn when the boards were established," he said.