Many community centres have had to cope with falling local authority funding, but the Highfields Community Association in Leicester has lost all of it after a dispute with Leicester City Council.
In July, the council said it was ceasing to fund the community association, which runs the Highfields Centre, because it had "significant concerns" about the centre's ability to manage public funds and to provide a clear business plan. The centre estimates that £510,000 of council funding has been lost as a result.
The dispute arose in 2010, when ownership of the community centre, which provides a range of services to the mainly minority ethnic local community, was transferred from the council to the community association after a campaign by the group.
The council says it provided the charity with three years' funding of £293,000 a year and granted it a 25-year lease of the building for a peppercorn annual rent of 76p. It also hired space from the association to provide adult skills and children's services in the building.
But the council says it only agreed to the transfer of the building, estimated to be worth about £2m, on condition that the centre became financially independent. The "final straw", says a spokeswoman for the council in a statement, came when the centre proposed to offer it 50 per cent less space to run services, but wanted to charge an additional £40,000 a year.
Priya Thamotheram, head of Highfields Centre, says that it continues to challenge the council over the reasons given for withdrawing support, arguing that it has a sound business plan and never agreed to achieve financial independence after the initial three-year funding ended. Given that about 60 per cent of its funding in recent years came from the council, he says, it would have been irresponsible to make such a commitment in the current economic climate: "What we said was that we had to work towards financial independence, but we never set a deadline."
He blames Peter Soulsby, Labour mayor of the city, for the funding being stopped, arguing that Soulsby opposed the transfer of the centre to the community association when he was leader of the council. The spokeswoman for the council says Soulsby had in fact campaigned for the centre to become independent.
The loss of funding has led to a range of cost-cutting measures. The 28 members of staff agreed to pay cuts of between 5 and 15 per cent and accepted reduced terms and conditions. And although the centre continues to open seven days a week, it now closes earlier on some days.
Thamotheram says it has also been able to attract funding from a range of other funders, such as the Big Lottery Fund and the European Regional Development Fund, despite the council's concerns about how it operates. For example, it is currently running programmes that offer support to young people not in employment, education or training and another scheme that supports the elderly. He says the centre now increasingly works in consortia with other local charities.
Thamotheram says the situation shows the community group what it can achieve when it is imaginative and proactive in accessing other sources of funding. He says: "The staff team is confident that what we're doing feels right and proper and that there's a future for the centre, with or without the city council's support."
But he says the centre's income will fall to about £400,000 a year because of the loss of funding, which is about £326,000 a year less than its published accounts show for the financial year to March 2014. He believes the episode shows the threat the city mayoral system can pose to the community sector. "Here we have a situation where the mayor has been able to use his constitutional powers in a pretty ruthless manner," he says.
A spokeswoman for the mayor says the removal of the funding has nothing to do with the mayoral system, but is about protecting public money.