Groundwork Derbyshire and Derby has gone into administration after struggling to cope with payment-by-results funding.
It is the second Groundwork charity to close this year. In March, Groundwork South West entered administration, blaming cashflow difficulties. Groundwork Merseyside also closed in late 2011.
Sir Tony Hawkhead, Groundwork's national chief executive, told civilsociety.co.uk that there was heavy pressure on charities trying to survive in a payment-by-results world:
"The days of upfront grant funding are gone," he said. "Payment-by-results contracts bring very heavy pressure on cashflows and require charities to be stronger with their balance sheets."
Groundwork Derbyshire and Derby, which ran for 24 years, will make 20 of its 33 staff redundant. Thirteen staff will remain employed to continue delivering contract commitments and to support the administrators as the future of the organisation is resolved.
Sir Tony said Groundwork was working hard to ensure that most of Groundwork Derbyshire and Derby's operations continued.
"There is a huge amount of effort," he said. "Around 90 per cent of staff who lost roles with Groundwork South West were re-employed by the prime contractor on its Work Programme contract or by other Groundwork charities."
There are around 30 independent Groundwork charities across the UK. Sir Tony says he expects some to consolidate in the current climate.