A charity that was promised money under the Office of the Third Sector's campaign research programme turned down other grant funding before the OTS did a U-turn on the pledge.
Street Talk, which helps women involved in street prostitution, expected to receive £15,000 from the campaign research programme.
The charity had been in discussions with a private donor over a grant that could have been worth up to £5,000 to help it campaign, but turned the money down because it had been promised money from the campaigning fund.
But on Friday the Government announced it would no longer put money into the project, and would instead transfer it to the Hardship Fund, a £16.7m fund announced in this year's Budget to support third sector organisations that are providing services for disadvantaged people during the recession.
Pippa Hockton, director of Street Talk, said: "Altogether, it's probably cost us another £5,000 on top of the money we've not received.
"We might still be able to access money from the original donor, but it will not be as easy now."
The charity had also wasted two weeks of staff time that could have been spent applying for other funding instead, she said.
"These figures might not seem like much, but we're a very small charity and that's a lot of resources for us.
"This process has done a lot of harm to the people it was intended to help."
A spokesman for the Office of the Third Sector said he could not comment on individual cases.
He said anyone who had incurred costs should outline them to Capacitybuilders, which was appointed to administer the campaigning fund, and any reasonable cost would be reimbursed.