Compact Voice has called for an independent investigation into the Office of the Third Sector's decision to abandon its £750,000 Campaigning Research Programme after a group of small charities had been offered funding.
The OTS announced on Friday that it was diverting funding it had already promised to 32 small campaigning charities into the Hardship Fund, a £16.7m pot to support third sector organisations providing services for disadvantaged people.
The OTS admitted that the decision breached the Compact, which outlines how the public and voluntary sectors should behave towards each other and says organisations should give 12 weeks' notice of changes to funding agreements.
Tom Elkins, manager at Compact Voice, which represents the voluntary sector on matters relating to the Compact, said: "The Office of the Third Sector should always be championing Compact principles, not least in its own operations.
"By withdrawing funding without providing reasonable notice, and without consulting affected organisations, the OTS has clearly breached the Compact.
"It's important that this matter is investigated by an independent group - such as the Commission for the Compact - to establish exactly how this happened and to ensure that such a breach is not repeated in the future."
The news comes as e-campaigning website Louder, which allows people to run their own online campaigns, set up a virtual petition to lobby third sector minister Angela Smith to reinstate the funding.
A Cabinet Office spokeswoman said:" The Government remains committed to the Compact and to championing the Compact across Government. We have been clear that this has been a tough decision in extraordinary times.
"However, the Minister feels that it is right to transfer this money to support vital recession services now.
That this decision is in breach of the Compact has been a major factor in her consideration. There is an independent Commission for the Compact and we are happy to work with them as appropriate."