National Black Police Association funding has been frozen while accounts are studied for evidence of "improper activities", the Home Office has said.
The NBPA represents the interests of more than 10,000 members
Improper financial actions could lead to a fraud investigation, it added.
The NBPA's legal adviser, Ch Supt Ali Dizaei, said there were failures in the handling of finances but there had been no criminality or misconduct.
The association, which was told of the decision at the start of the month, received £180,000 funding last year.
The NBPA, a registered charity, has not produced properly audited accounts since 2002/2003.
The Home Office requires all organisations receiving grants of more than £100,000 to provide annual statements.
A Home Office spokeswoman said: "The [NBPA] cabinet were informed on 2 April that, due to inadequate financial controls and a lack of other financial management procedures being in place, their grant and grant in aid funding for administration was frozen with effect from 1 April."
In December, the association, which has more than 10,000 members, announced that it had launched an internal inquiry to "improve the way financial transactions are decided, recorded and scrutinised".
Accountants had been brought in to advise on financial matters, the association said.
That followed Home Office concerns about whether the NBPA had ever produced properly audited accounts.
According to a letter sent to the NBPA on 4 April - obtained by the Police Review magazine - the Home Office has set out of a number of conditions to meet before funding will resume.
Ch Supt Ali Dizaei said the freezing of funds, which prevents any money leaving accounts, was an inconvenience that would "blow away".
The association had invited a review of its own finances and had then reported the results to the Home Office which was now conducting its own review, he said.
The Independent Police Complaints Commission (IPCC) said it had been told in January about concerns over the management of NBPA funds.
Chairman Nick Hardwick said: "We are maintaining contact with the audit team and, should they identify any prima facie evidence of criminality or misconduct, we will then consider our response and take the necessary action."
The NBPA, formed in 1999, acts a support network and also aims to drive the recruitment and retention of black police officers.