It was a £1.2m gamble.
The UDA and its political representatives have talked a lot about change in recent years - about the organisation moving away from violence and crime, and transforming into a non-paramilitary organisation.
In March this year, the government announced that it was prepared to wager £1.2m that the UDA meant what it said.
Margaret Ritchie told the assembly the project could not be justified
That was the sum it pledged to a loyalist project, the Conflict Transformation Initiative (CTI), that it hoped would effectively put the UDA out of business.
The Ulster Political Research Group, the political representatives of the UDA, insist the project was not directly linked to the organisation, but the government was clear that it believed otherwise.
Peter Hain, the then secretary of state, and David Hanson, the former criminal justice minister, both said they supported the initiative because they believed it could deliver a reduction in UDA violence and crime.
They had no doubt it was a gamble worth taking - if it failed, it would be viewed as an embarrassing mistake, but if it succeeded, £1.2m would be a small price to pay for bringing the largest loyalist paramilitary group in from the political cold.
The problem was that when the Stormont Assembly was restored, the money they had gambled came from the budget of Margaret Ritchie, the minister for social development.
From the outset, she made it clear it was a gamble she would not have taken.
Then the UDA shot itself in the foot. Rival factions clashed in Carrickfergus and Bangor during the summer, disturbances which resulted in one police officer being shot.
Margaret Ritchie reacted by throwing down the gauntlet - giving the UDA 60 days to begin decommissioning its weapons, or lose funding for the project.
Chief Constable Sir Hugh Orde reacted by saying he wouldn't give the organisation 50 pence.
The police also expressed concern that the UDA leadership lacked the necessary cohesion to deliver the kind of transformation which it talked about.
They say that while there are individuals who genuinely want to bring about change, the long-running dispute between the group's so-called ruling Inner Council and its "South East Antrim Brigade" demonstrates that they don't have the discipline or structures to carry it through.
That struck a chord with a minister who was already deeply unhappy with the allocation of more than £1m she believed could have been better spent.
By demanding decommissioning as the price for continued funding, she set the bar at what she must have known was an impossible height.
Since then, Margaret Ritchie has come under enormous pressure to lower the bar.
Publicly, the Northern Ireland Office and the Irish government stated that they would endorse whatever decision she reached.
But privately, it was a very different story.
Many officials within the NIO, who have been engaged in talks with loyalists for a number of years, are convinced that many senior figures within the UDA, like Jackie McDonald, its leader in south Belfast, and Frankie Gallagher, a senior spokesman for the UPRG, are genuine when they say they want the organisation to change.
They expressed concern that withdrawing the funding could de-rail efforts to transform the organisation.
Then two weeks ago Shaun Woodward, the secretary of state, applied some very public pressure when he issued a statement saying he had spoken to General John de Chastelain, the head of the international decommissioning body, and had been assured there had been "meaningful engagement" with the UDA.
This wasn't new - the UDA has been speaking to the commission for more than two years now, but Mr Woodward suggested the appointment of interlocutors was a dramatic new development.
There were also calls from the office of Taoiseach Bertie Ahern and his foreign affairs minister Dermot Ahern, reflecting concerns expressed by Irish government officials.
Even the US government got involved, reacting to the news of UDA engagement with General de Chastelain.
Shaun Woodward's statement put pressure on the minister
The history of the peace process would suggest that in the days of direct rule, there would almost certainly have been a fudge.
A deadline would have been set, but not met.
However, Shaun Woodward's statement would have been presented as evidence of significant progress and the deadline moved, or dropped.
Margaret Ritchie clearly wasn't prepared to budge even when she was warned there could face a legal challenge if she withdrew the funding, including claims that to do so would be a breach of contract.
The contract was between the Department of Social Development and Farset, a highly respected cross-community group that has worked with loyalists and republicans.
Its role was to account for how the money was spent, to ensure that it did not go astray and end up lining the pockets of UDA henchmen, as many critics feared.
Margaret Ritchie's threat to withdraw the money was issued just three weeks after staff were appointed to work on what was supposed to be a three-year project.
Farset and the UPRG both insist that they signed up to a process of change, not a quick fix, and say the minister did not give that process time to develop.
Their view is that she has breached her department's contract.
Not surprisingly, the minister sees it differently.
The CTI contract listed a number of desired outcomes, including "an end to all paramilitary activity in Protestant working class areas" and "a measurable reduction in levels of crime and anti-social behaviour within target communities".
It also included the following statement:
Any evidence that there is not a sustained reduction in the level of paramilitary activity or levels of crime and anti-social behaviour associated with paramilitary in the target areas may be considered as indicative that the project is not pursuing its identified outcomes and could lead to a cessation of funding.
As far as the social development minister was concerned, the violence in Carrickfergus and Bangor was a clear breach of the conditions of the contract.
But the demand for the decommissioning of weapons was not a stated objective of the contract.
In fact, the word decommissioning wasn't even mentioned.
The UPRG argues that the contract cannot be ended because of the breach of a condition that wasn't included.
Margaret Ritchie's view is that the retention of illegal weapons is itself a criminal act, and that by failing to address the issue, the UDA and its political representatives have clearly breached the spirit of the contract.
She made that clear in her address to the Assembly on Tuesday, saying the UDA was well aware of what had been expected from it when the funding was agreed.
The minister has spoken, but this is not likely to be the end of the matter.
Police are preparing for potential fallout within the UDA
While stating that he shared Margaret Ritchie's outrage towards the UDA, Peter Robinson questioned the way she had reached her decision, and went as far as accusing her of a breach of office.
The deputy DUP leader and finance minister said she had acted against the wishes of her departmental solicitors.
The courts could be asked to adjudicate and there will be a search for other funding sources.
In the meantime, the police are preparing for potential fallout within the UDA.
The problem for the UDA leadership is that if there is a violent reaction, from whatever faction, Margaret Ritchie will say it proves she was right.