Nottingham City Council has used the pay-out on schemes to help the most vulnerable people in its area, including projects to prevent children falling into crime, unemployment and teenage pregnancy.
The council is now aiming to salvage some of these "early intervention" schemes but admits it will be forced to axe others.
Deputy leader of Nottingham City Council Graham Chapman said: "We're going to go back into kids having nothing to do, with no training schemes. We'll end up with gangs back on the streets."
He told the Post the affect of the cuts may not be immediately seen but warned "it will kick in, in two or three years. We'll start going backwards".
The future of regeneration organisation One Nottingham is also hanging in the balance as it is currently funded by the £11m Working Neighbourhoods Fund.
The fund began regular payments in the 2008-09 financial year and the payment next April was set to be the last.
Council officials have confirmed they do not "anticipate" the fund to continue under the coalition Government in the next financial year.
A spokesman for Communities and Local Government said an announcement on the future of the Working Neighbourhoods Fund would be made in the autumn.
The money was not guaranteed by the previous Government ahead of the General Election.
Nottingham North MP Graham Allen has been made chairman of a group leading a national review into the extension and funding of early intervention.