Community Services Minister Mick Gentleman said $120,000 annual funding for Diversity ACT would be discontinued and funding for a $70,000 demountable at their offices.

He said the money had been removed after discussions with the LGBTIQ Ministerial Advisory Council about how best to spread funding around the community.

But Diversity ACT president Delia Quigley was unaware of the cuts before being contacted by the Sunday Canberra Times and said it was a shame to hear through a third party.

"We had visions about projects and areas that we wanted to work with the community and [now] we'll have to do it on a shoestring," she said.

"I would have hoped they would have contacted me themselves. I did write to the minister and the chief minister some weeks ago."

Diversity ACT was allocated the money in the 2013-14 ACT budget, under the condition they operated under the auspices of Northside Community Services, an agreement which broke down in February.

In April, the LGBTI support group was brought under the auspices of Communities@Work however the relationship similarly disintegrated in June.

"We haven't had much opportunity to be able to provide services we'd like to because we've spent so much time dealing with issues regarding the grant funding," Ms Quigley said.

"We don't want to be a political animal, we just want to get on with providing services for the community."

Ms Quigley said the organisation would continue to focus on pressing issues such as same-sex domestic violence, alcohol and drug services and looking at LGBTIQ homelessness.

Mr Gentleman said he had sought advice from the LGBTIQ Ministerial Advisory Council on the topic.

"This was not an easy decision but one I felt was in the best long-term interests of the LQBTIQ sector," he said.

"Until these broader funding issues are resolved, it would be inappropriate to continue with the construction of a demountable on the site of Diversity ACT.

"This decision in no way changes the way Diversity ACT can use their existing facility nor alters this government's commitment to LGBTI Canberrans."

Mr Gentleman said the previously allocated funding would be used to support other activities for the LGBTIQ community.

Parent and Friends of Lesbians and Gays Capital Region vice president Ivan Hinton-Teoh said it was vitally important for government agencies to develop and sustain policies which recognised the specific and unique needs of the LGBTI community.

"It should be a matter of business as usual that our local agencies consider the way in which their policies and programs relate to LGBTI Canberrans," he said.