Futurebuilders England is to slow down its grant-making because it says it wants to invest more time in supporting high-risk projects.
The funder wants to help organisations it is already working with to develop their business plans.
Last year, the then Home Secretary Charles Clarke pledged £90m on top of the £125m originally set aside to enable Futurebuilders to operate until April 2008. Last week, however, the organisation said the additional money had been halved because it wouldn't be able to spend it in time.
Richard Gutch, chief executive of Futurebuilders, denied that the Government was cutting its budget.
"We are pioneering a new approach to investment, so we believe it is both sensible and prudent to take our time," he said.
"We deliberately invest in high-risk projects, which means we spend a lot of time with our applicants to ensure they will be investment-ready when funds arrive.
"Unless we assess their applications carefully and help them grow and develop, they won't win contracts."
A spokesman for the Cabinet Office supported the view that the reduction in funding did not represent a cut in the budget. He said the Government was currently in discussions with Futurebuilders about how and when to allocate the additional £90m in the future.
Since 2004, Futurebuilders has allocated £45m in grants and loans to 130 organisations hoping to enter into public sector service contracts.