Stephen Bubb, head of chief executives body Acevo, has written to third sector minister Angela Smith amid concerns that some community groups' funding has been made dependent on providing intrusive information about Muslim beneficiaries for a government anti-terrorism programme.
A report in The Guardian on Saturday claimed that the Home Office's Prevent programme, aimed at preventing Muslims from being lured into violent extremism, is being used to gather personal information, such as sexual and political activity, about people who are not suspected of involvement in terrorism.
It claimed to have uncovered several instances where pressure was put on youth and community groups to provide information, including a Muslim mental health project in the Midlands whose funding was allegedly linked to passing on information.
"If true, such funding conditions do not just undermine the independence of sector organisations but may fatally destroy the trust that the local community and our clients have in our work, thus harming our ability to strengthen community cohesion," Bubb's letter to Smith says. It calls on the Office of the Third Sector to review the allegations.
Bubb has also written to Sir Bert Massie, the commissioner for the Compact, asking him to look into whether the alleged link between funding and information breached the Compact principle of sector independence from government.
A Home Office spokeswoman said: "Any suggestion that Prevent is about spying is simply wrong. Prevent is about working with communities to protect vulnerable individuals and address the root causes of radicalisation."