Lottery handouts hit by fall in tickets.
The warning came from the Community Fund as it announced its latest round of awards to 18 groups in the West Midlands, totalling more than pounds 2 million.
Birmingham's Black Environment Network, Solihull Special Needs Active Partnership and the Warwickshire Association of Youth Clubs will be among the groups to benefit.
But the fund's income may be affected if Lottery ticket sales continue to fall. Camelot reported a two per cent drop in sales in the last financial year.
Regional development officer Philip Thompson said: 'The grants we are announcing will help groups tackle deprivation and we are delighted to make them.
'But fewer people are buying Lottery tickets and our income will go down over the next few years.
'That means we will not be able to support as many projects as before, so we'll have to make some very tough decisions over who to fund.'
The Community Fund is developing a five-year plan of how it will distribute the cash made available and wants local people and community groups to get involved in the decision-making process.
'The challenge is to identify and address long-term needs and support communities which have received fewer grants than they deserve, while still assisting a wide range of voluntary groups throughout the region,' added Mr Thompson.