Development charities including Christian Aid and WWF have branded new regulations on EU grants a bureaucratic nightmare.
New anti-fraud measures mean that charities have to open a separate bank account for each grant they receive.
Charities also claim they have been told they can only buy goods from EU companies.
Pesh Framjee, head of not-for-profits at accountants Deloitte & Touche, said charity finance directors were determined to wage a campaign to get the regulations removed. "It's bureaucracy gone mad," he said.
The EU's funding arm Europe Aid's revised standard contract for NGO grants was introduced in May 2003, but is only now beginning to affect charities because they are applying for a new round of funding. Around 40 UK organisations are affected including Christian Aid, WWF, Save the Children and Oxfam.
"These are very harsh regulations that particularly clobber NGOs," said Angela James, EC funding adviser with umbrella body Bond.
Aileen McLeish, director of resources at WWF UK, said the charity had been forced to open separate bank accounts for four grants so far. "We have applied for higher management costs, so it is diluting the impact of the grant. I could understand if it was adding value but it isn't."
WWF has negotiated an exemption for one grant from the condition that all supplies bought with grant money have to be produced by EU companies.
But it cannot get a blanket exemption.
Nick Kavanagh, finance director at Save the Children, urged a "joint sectoral approach" on the issue.
A spokesman for the European Commission said: "The separate bank accounts are to aid transparency so the commission can prevent fraud. If we seem over-zealous, it is merely to ensure that money goes to who it is supposed to." He also denied that the commission was insisting that grant recipients only bought goods from EU companies.
See feature page 19.