The government has halved funding for Skills – Third Sector, the sector skills body set up in 2008 to improve the quality of charity workforces.
The organisation, which has created a national skills strategy and devised plans to increase the number of charity apprenticeships, has been awarded £500,000 for the current financial year only.
It received £1m a year between 2008 and 2011.
From 2008 to 2011, the BIS and the OCS provided £750,000 and £250,000 a year respectively.
The settlement has only just been agreed, almost two months into the financial year.
Jane Slowey, chair of Skills – Third Sector, said in a statement that the board would meet soon to review the organisation’s business plan.
"Like many organisations, we have taken a significant funding cut, but we are a small, flexible and resourceful team," she said.
"We have deliberately built a small virtual organisation with a good balance between fixed and variable costs."
A spokeswoman for UKCES said the late funding decision was caused by delays at the OCS and payment would be backdated.
She added: "We appreciate this is a substantial decrease in grant-in-aid funding, so we are working with Skills – Third Sector to explore how this could be mitigated, perhaps by finding additional funding streams or working in partnership with other organisations."
A spokeswoman for the BIS said its initial three-year funding was "pump-priming" that enabled Skills – Third Sector to get itself established.
"The government has always made it clear that we would look to Skills – Third Sector to develop its entrepreneurial capacity so it can diversify its income stream over time and reduce its reliance on government core funding," she added.
Nobody at the OCS was available for comment.