The Charity Finance Directors' Group has written to the Cabinet Office and the Treasury proposing that charities be allowed to retain grant funding the government had previously required them to spend this year.
"Many charities have grants that must be spent in full before 31 March 2011, or the money is returned to the Treasury as an underspend," says the letter from Caron Bradshaw, the chief executive of the CFDG.
"A portion of these grants will be spent on projects that, although good, will no longer be affordable after the comprehensive spending review.
"We propose that the government relaxes the ring-fencing rules to allow bodies funded by government grants to have the discretion to set aside the remaining amount of the 2010/11 grants into an austerity reserve."
The CFDG said it had been approached by its members with the proposal and felt it had merit for all parts of the charity sector.