Show Racism the Red Card has warned it will have to drastically cut its activities in Scotland this year after its grant was slashed by more than two-thirds in three years.
But campaigners say anti-racism education is more vital than ever, with tensions raised as parties such as Britain First, an offshoot of the BNP, campaign ahead of the European elections. The far-right group, founded by Scot Jim Dowson, recently sent members into mosques in Scotland as part of a self-styled "Christian crusade" against Islam.
Show Racism the Red Card, the only national charity with a focus on anti-racism, received government funding of £70,000 for this work in 2012-13. Last year, it was cut to £40,000 and for 2014-15 the funding will be £20,000.
Vicki Burns, campaign manager at Show Racism the Red Card Scotland, said the cash was essential for maintaining core services, such as running the office.
She said: "This has meant we are really struggling. We have had to cut back on the pieces of work the Scottish Government funded us to do, which is educational events for young people we run in conjunction with football clubs.
"In 2011-12, we ran 20 of these events across Scotland, with around 2500 young people attending.
"Last year, we were only able to run 12 and this year I think we could be lucky if we run five or six, given the funding cut we have experienced."
She added: "We are well aware of the fact there is a finite amount of money out there, but I am not sure being complacent about the value that anti-racism work can do is really the way ahead."
Labour's social justice and equalities spokeswoman, Jackie Baillie, who last week lodged a motion in the Scottish Parliament raising concerns about the funding cut, said: "It raises fundamental questions about the SNP's commitment to tackling racism and sectarianism."
Latest available figures show a 14% fall in race-related crime in 2012-13, with 4628 cases reported to police, compared to 5389 in 2011-12.
But Mohammed Razaq, executive director of the West of Scotland Regional Equality Council, cautioned incidents were likely to be vastly under-reported.
He added: "We are now seeing complacency on behalf of government and politicians, especially if you look at the issue of far-right groups like Britain First - which although they talk about faith-based issues, is mostly racism against ethnic minorities. There is certainly a reduction in resources to tackle these things.
"The issue is getting worse and we are getting fewer resources."
Police Scotland are continuing investigations after representatives of Britain First carried out what they called a Christian crusade last Sunday, handing out leaflets and bibles to Muslim worshippers at Glasgow Central Mosque and Cumbernauld Mosque.
Lawyer and human rights campaigner Aamer Anwar warned governments and public authorities should "not be taking their eye off the ball" at this time, arguing there was a confidence to express racist ideas which had not been seen in a long time.
A spokeswoman for the Scottish Government said it was providing more than £60 million during 2012-15 to help tackle inequality and discrimination, with more than £8m directed at addressing issues of race.
She added: "Between 2011 and 2015 the Scottish Government will have provided a total of £310,000 to Show Racism the Red Card and Show Bigotry the Red Card to help fight discrimination in Scottish football.
"A year-on-year decrease in funding was agreed during their last application. This is a common practice when funding projects to encourage them to develop new partnerships and reduce their dependency on government funds over time."