The Charity Commission's Faith and Social Cohesion Unit, which was set up to support faith charities, will close at the end of August.
The unit was set up in October 2007 with a £1.2m grant from the Communities and Local Government department. It worked primarily with Muslim charities, encouraging them to register with the commission. The grant ran out at the end of April.
At the commission's open board meeting in London last week, Ghulam Rasool, head of the FSCU, said its staff were on fixed-term contracts and the unit would close when these expired on 31 August. The unit has four members of staff, but at its full capacity it employed eight people.
Sarah Atkinson, head of corporate affairs at the commission, said it would not be able to repeat the television advertising campaign that ran during Ramadan last year to encourage mosques to register as charities, because no more funding was available for the project.
Rosie Chapman, executive director for policy and effectiveness at the commission, said: "The FSCU was a bold, innovative piece of work but sadly we will not be able to continue with it. We will be registering mosques routinely, but we will not proactively engage with them." She warned that cutting the project could be a herald of wider cuts to come.
Andrew Hind, chief executive of the commission, praised the unit, saying it had changed attitudes within the organisation.
"In the past we have expected people to think like we do," he said. "We have realised that we are not always understood in our efforts to get our message across.
"The legacy of the FSCU will be in the minds of our staff. There has been a psychological realignment, because we have come to understand the huge contribution of faith-based charities and have tried to improve the way we communicate with them."OTHER NEWS FROM THE OPEN BOARD MEETING
- Jodi Berg, the commission's independent complaints reviewer, comes to the end of her contract in December and might not be replaced. Sarah Atkinson, head of corporate affairs at the commission, said having an ICR was not compulsory, but was good practice. She said the commission was reviewing its arrangements and had not yet made a decision. Berg was appointed, and is paid, by the commission.
- The commission was guilty of "sustained discourtesy" towards a charity it investigated and to which it made a consolatory payment, said Andrew Purkis, a commission board member. "The person concerned didn't know what was going on," he told the board meeting last week.A commission spokeswoman later said Purkis was not referring to African Aids Action, which received a consolatory payment of £100 in May as compensation for customer service failings during an investigation. She said she could not say which charity he was referring to because the information was confidential.