The voluntary sector has raised concerns over government proposals to merge lottery money distributors, the Community Fund and the New Opportunities Fund.

Membership bodies for the sector are opposing the move, arguing that it could lead to less cash going to smaller community groups. The Community Fund is a major funding source for small groups, while the NOF is used for projects related to government initiatives.

The merger, which is being considered as a result of the government's review of the lottery, would have implications for the future funding of the sector.

A spokesperson for the National Association of Councils for Voluntary Service, described the plan as a "bad idea".

"The Community Fund has a wealth of experience of dealing with the sector and it is also independent. A merger could mean that both of these things are lost," he said.

"The fund provides smaller groups with a real pot of money without any strings attached. It allows organisations to operate without becoming involved in the government's agenda."

Chief executive of the National Council for Voluntary Organisations, Stuart Etherington said: "NCVO will be seeking assurances from the government that lottery funds will continue to be distributed free from interference by politicians."

He added that it should not become a fund for "essential services or government-inspired programmes".