A leading charity for the elderly is claiming to have lost out on £500,000 capital funding in what appears to be the latest row over financial ring-fencing.

The Dixon Community, which has provided day care for frail older people and pensioners with dementia for 35 years and has more than 1000 senior citizens on its books, has accused Glasgow City Council of going back on its promises after funding for new premises was withdrawn.

Chairman George Paterson said he had been repeatedly assured the cash was "ring-fenced and secured" until being told last week the offer was no longer on the table.

The city council has cast doubt, however, over how concrete the offer, initially made around five years ago, was and claims it is standard procedure for such sums to pass through committee before an offer is made - a process not followed in this case.

The issue has reignited the debate on ring-fenced funding, which the Scottish Government removed as part of the concordat agreed with local authorities to keep council taxes frozen. Numerous charities and voluntary organisations have since claimed they are down on funding, with the government and councils blaming each other.

The Dixon Community, which is based in Glasgow's south side and carries out services on behalf of the city council, had intended to use the money for premises, claiming it would have been easy to gain additional finance once the £500,000 was secured.

Its premises in Cathcart Road are on a first floor and prevent elderly people in wheelchairs from using it. Alternative sites had been identified - at the former Govanhill baths and an area near Hampden being developed as sporting facilities - but both floundered.

Last night, Mr Paterson insisted that the money he believes was promised to the organisation has now been channelled into other projects. He said: "The council might want to blame the government and how the financing situation has changed. But at the end of the day this was a promise made by Glasgow City Council ... and it is they who have gone back on it.

"This is a long-term project and any time we asked about the money we were assured it was there. It's been confirmed at various stages. The council has new priorities now. I'm sure that after being ring-fenced the money is going into something to do with the Commonwealth Games.

"If we'd secured our premises two years ago there would have been no question about us not getting this money."

A city council spokesman said: "No proposals on capital funding for the Dixon Community have been put before a council committee for approval. Therefore it would be wrong to say the council has agreed to provide such funding.

"There have been discussions with the Dixon Community, but no site for development has been identified and so no formal costings have been presented to us to allow a proper decision on funding. We will continue to work with the Dixon Community as they look for alternatives to their current situation."

The Scottish Government said it "strongly values" the contribution made by the third sector in delivering services and this was reflected in increased funding to the sector of 37% over the next three years.

A spokesman added: "Through the historic concordat the Scottish Government has developed a more productive relationship with local government based on mutual respect and partnership.

"As part of that, we have delivered record funding for local government and we are giving councils greater freedom than ever before to allocate resources to reflect local demand and deliver our national priorities."