The National Council for Voluntary Youth Services (NCVYS) has said many faith-based groups have been denied funding from the Department for Children, Schools and Families (DCSF)'s children, young people and families grant, which will allocate about £11m in 2008/09.
And a leading religious youth group has now said the government does not appear to be valuing the faith sector.
Susanne Rauprich, chief executive of NCVYS, said: "We know there are a number of organisations which applied and didn't get through. Of those that did apply there was an issue with groups with a faith-based factor.
"I don't think it's by design, it's by accident and at the moment it's difficult to speculate, but we're interested in following this process through to the end and we will follow it up."
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