Voluntary groups in Liverpool face an uncertain future after the council announced three-year funding agreements would be reduced to just 12 months.
At least 80 organisations, including domestic violence and refugee charities, could be affected.
Alan Lewis, chief executive of Liverpool Charity and Voluntary Services (LCVS), said the thousands that rely on their services could also suffer.
Councillor Stephen Munby said the move was due to public funding cuts.
However, Mr Lewis said the new funding programme would lead to instability in the voluntary sector and there was a chance some organisations could be forced to fold.
"Many staff in the affected organisations will no longer feel that their job is safe and it will be especially difficult for new charities to get up and running with just a guarantee of one year's worth of funding.
"With only year contracts for staff, many may look elsewhere.
"We cannot rely on the poor economic circumstances to keep staff hanging on in hope of renewal of funding.
"If organisations are unable to continue then the community they serve will suffer the impact."
LCVS works with hundreds of organisations across the city giving them advice and support free of charge.
Mr Munby, who is overseeing the changes for the council, said they may not be "desirable" but they "made sense".
"It is best to get some money out for a year and then assess what the spending patterns are in the future - especially with unprecedented budgetary constraints from the government - and then we can see where we can go from there."