Southwark Council has told voluntary organisations in the London borough to prepare for funding cuts of at least 25 per cent.
The Labour council, which currently spends £35m on the voluntary sector, expects to have to reduce its overall budget by £80m over four years.
Peter John, the leader of the council, wrote to not-for-profit organisations on 8 November saying the local authority had yet to finalise budgets for 2010/11, but would not be able to prevent the sector being affected.
"Our advice to you at this stage is that you begin early planning for reductions of at least 10 to 15 per cent in 2011/12 and a total of at least 25 per cent over the next three years."
The letter says notification of funding for 2010/11 would not happen until late February or early March, so some organisations could receive less than four weeks' notice of settlements.
Richard Livingstone, the council's cabinet member for finance and resources, told Third Sector that councillors were giving as much notice as they could to charities, but the council was unable to finalise its own budget until February.
"We're in a difficult position, and that's putting the voluntary sector in a difficult position," he said.
A spokesman for Community Action Southwark said it needed to know more about the impact of the cuts before commenting.