The London Councils Grants Programme is funded through contributions from councils in the capital and currently funds more than 400 voluntary groups, a spokeswoman for the umbrella body said.
London Councils announced this week that it will be reviewing the grants scheme over the next few months to make sure that the cash is being used in the most effective way.
Mayor Steve Bullock, chair of London Council’s grants committee, said that among the options to be examined by the review would be to examine "whether a pan-London grants scheme is the best way of spending the money, or whether it would be more beneficial for the money to be spent locally by one or more boroughs in a region".
He added: "Circumstances are very different now to when the programme was last reviewed five years ago. In light of these tough economic times, many boroughs feel that they are in a better place to decide how the money should be spent locally, especially as this will vary from borough to borough."