Two Muslim charities have lost their grants after the government claimed they had links with Islamist extremism.
A spokesman for Birmingham-based Islamic Help, said it was "surprised, dismayed and angered" by the action.
The Muslim Charities Forum (MCF), said the decision was based on "unfounded allegations".
The Department for Communities and Local Government said it would not fund any group "linked to individuals who fuel hatred, division and violence".
In a written statement the Secretary of State for the department, Eric Pickles, claimed Islamic Help had invited "an individual with extremist views" to speak at an event, and that the MCF - an umbrella organisation for Muslim charities - had "failed to reassure us that they have robust measures in place to investigate and challenge their members."
A spokesman for Islamic Help said the speaker alleged to have extremist views had not been identified to them.
The DCLG has so far refused to name him or her publicly.'Not political platforms'
The spokesman for Islamic Help, which provides emergency relief following major disasters and has worked in Gaza, the Central African Republic and Syria, has said its events are to raise money for humanitarian work and not political platforms.
He said although the amount of money they would lose [about £7,000] was a "drop in the ocean", the move "besmirches the reputation and integrity" of people who had taken part in their campaigns.
The charity had not received any notification from the Department for Communities and Local Government (DCLG), the spokesman said.
Mr Pickles said only programmes which "uphold fundamental British values" would receive aid.
Both Islamic Help and the MCF had received the money through the Faith Minorities in Action project, which was set up by the DCLG in March last year.
The scheme, established in conjunction with the Extremism Task Force, was designed to encourage integration by promoting interfaith work, the role of women in faith, tackling youth crime and to provide child protection training.'Best practice'
The Muslim Charities Forum was awarded the contract to implement the scheme, which included running workshops to "share experiences and best practice on addressing a wide variety of social and community issues".
Mr Pickles said the MCF had not been meeting objectives and was unable to reassure him that the body was sufficiently rigorous over its members' activities.
The MCF said it was unaware of any perceived failings, and that it had not been contacted by the DCLG about the decision to stop the cash.
A spokesman for the forum said: "We will continue to foster cooperation and positive relationships between Muslim charities and other faith and community groups.
"We have responded to the DCLG to reassure them of our processes, the vital importance of the work we do, and of the Faith Minorities in Action project."
The DCLG is due to launch a new call for applications from organisations able to work in collaboration with faith groups and to deliver effective support, Mr Pickles said.