Voluntary and community organisations in London that rely on grants from the Association of London Government fear that proposed changes to the way grants are made will result in the sector having to fit in with political priorities.
The association appointed a review board last March to inquire into the grants scheme, run by London's borough councils, which last year gave more than £28m to around 400 voluntary and community sector organisations.
The board's report, Funding for the Future, was published last week.
It recommends that instead of grant decisions being made in response to bids from voluntary organisations, the association should proactively commission services from the sector based on clearly identified priorities within a framework set out by the association.
A spokesman for one charity, who wished to remain anonymous, said he is worried that this will add another layer of red tape and result in community groups having to conform to others' priorities.
Ahead, an organisation that links and supports refugee organisations with the outer London boroughs, received £35,000 from the association in 2003 and is concerned about the recommendation in the report. Paul Lam-Kilama, service and development co-ordinator at Ahead, said: "There is contention over this issue. I still think that the status quo should continue, with individual projects applying to the association. If it changes, smaller projects may be unable to get funds."
The review is in its early stages with the association consulting on the proposals.
A spokesman for the association said that the review is actually "trying to get rid of some level of bureaucracy".
Other recommendations seek to ensure that funds reach organisations throughout London and to improve efficiency by diverting savings from 'back office' to front-line services.
The closing date for consultation responses is 8 May 2005 with a final decision to be made after the association's AGM in July.