A Birmingham community organisation which was temporarily shut down amid allegations of fraud and nepotism is to have its funding cut.
Birmingham Community Empowerment Network (b:cen), which was cleared of all the allegations after a three-week investigation, claimed it lost up to £500,000 worth of funds during the closure last November.
Last December the Government announced a ten per cent reduction in funding for all 88 national Community Empowerment Networks.
The Office of the Deputy Prime Minister ( ODPM) has also announced that networks nationwide will have a further 12 per cent cut from their budgets throughout the next year.
The ODPM issued a warning that it will not fund networks "that are not fit for their purpose".
Community Empowerment networks aim to channel public funds into grass roots organisations without interference from local authorities.
B:cen was shut down by the city's voluntary sector watchdog, Birmingham Voluntary Services Council, following allegations made by the city council's deputy leader Coun John Hemming (Lib Dem South Yardley).
The cuts represent a massive blow for b:cen, which will see its £1.6 million annual funding being reduced by about one quarter.
Naseem Akhtar, chairwoman of b:cen, said the programme would have to tighten its belt, but she was optimistic that it would still have a future serving communities in Birmingham.
She said: "It is a case where we have to look at how to best spend the money that we have got.
"We are currently trying to get all the voluntary and community organisations together to see how can we work together to ask for funding.
"We are trying to get organisations like Birmingham Association of Neighbourhood Forums and BVSC together because we should stop competing against each other and work out what we can do to get more money in the city.
"B:cen is a programme, but it will come and go. We had the unenviable task of getting the community empowered in four years and we have done that. When we were set up we were told it would be short term but who knows."
A spokesman from the ODPM said: "We expect LSP partners to supplement this core funding with mainstream funds. However, we will not support Community Empowerment Networks that are not fit for their purpose."