Nine redundancy notices have already been issued by the organisation, leaving just two members of staff to continue until the end of the six months' grace period granted by the council.
VAM formed the Green Fish Partnership together with the Community Accountancy Service and the Community Technical Aid Centre in 2001. These last two organisations, which each have about 25 years' experience of the local area, have also been affected. Unlike VAM, however, they can call upon alternative sources of income.
The three organisations have only recently moved into a formerly derelict building. This was renovated using a £250,000 grant from Manchester City Council, awarded to provide a "one-stop-shop" to local charities.
The Green Fish Partnership has been running its support services in the city for four years, and had previously been backed by an annual council grant. But last year, the council decided to run a competitive tender process for the services.
Ian Taylor, director of the Community Technical Aid Centre, said: "We were told the council had earmarked £350,000 to run the services, which was £40,000 less than we had received the previous year. Knowing it would be a struggle to do it for that sum, we didn't try to economise any further. We were told it was more important to show what we could do for the money.
"We now believe that the Scarman Trust must have significantly undercut us. But its bid is not based on actual experience, as its main north-west office is in Liverpool, not Manchester."
VAM was only informed of the decision on 1 April, while it was already running the service.
Shirley Meri Adams, chairwoman of VAM, said: "One of the saddest things is that we are losing invaluable staff expertise, knowledge and local partnership relationships that we have built up over the past 85 years."
A council spokeswoman said: "From all the bids received, the chosen organisation was the one that would provide real value for money."
The Scarman Trust declined to comment. The contract granted to the trust is for three years instead of one and its services will be free only for groups that have incomes of less than £50,000.
Taylor added: "The decision to procure services on a commercial basis without carrying out an impact assessment flies in the face of the ChangeUp initiative."