The Birmingham group praised by David Cameron for inspiring his Big Society vision is facing a 30 per cent funding drop.
The Prime Minister said the drive to turn around Balsall Heath, which was once a crime and prostitution hotspot, was behind his Big Society initiative.
But St Paul’s Community Development Trust, which was set up in the 70s to improve education in the area, will see its budget from Birmingham City Council cut by almost a third this year.
The charity currently employs about 150 people to work with volunteers, and has already lost 100 posts since the Future Jobs Fund ended.
Dr Anita Halliday, chief executive of the trust, said more job losses may be on the cards.
“It’s a very strange position because at the same time, the Prime Minister is recognising great work and we are worrying about who is going to be redundant,” she said.
“At the end of the day, you can’t take out 30 per cent of the money that is paying people and not lose quite a lot of jobs.”
Mr Cameron has visited Balsall Heath a number of times and spent the night with the Rehman family in 2007.
Writing in the Observer last weekend, Mr Cameron said: “Take a trip with me to Balsall Heath in Birmingham and I’ll show you a place once depressingly known as a sink estate but now a genuinely desirable place to live.
“Why the transformation? Because even in a tough neighbourhood, the seeds of a stronger society were there and residents boldly decided they’d had enough and drove out the crime.”
Dick Atkinson, co-ordinator of Balsall Heath Forum, said he backed the Prime Minister’s Big Society plans and said the neighbourhood could be a template for the rest of the country.
He said: “From our point of view, it doesn’t matter too much whether times are good or bad. You still need neighbours to look after each other, the younger generation to care for the older generation.
“We were bleak, miserable, litter-strewn and covered in graffiti and now, Balsall Heath enters the national Britain in Bloom competition and wins awards.”