Staff at an under-fire loyalist project are considering suing the government over statements linking it to paramilitaries.
Social development minister Margaret Ritchie announced last month that £1.2 million funding for the Conflict Transformation Initiative (CTI) would be cut within 60 days unless the UDA began to decommission.
She said evidence that the UDA had moved "irreversibly away from criminality and violence" would also be required to keep the community project afloat.
The scheme was set up to help steer loyalist communities away from violence and is administered by Farset Community Development, a cross-community organisation based in west Belfast.
CTI staff have been put on protective notice as the 60-day deadline of October 9 edges closer.
The three-year project was signed off before the restoration of the assembly.
However, following a number of outbreaks of violence, including a stand-off between rival loyalist factions in Carrickfergus which led to a policeman being shot in the back, Ms Ritchie issued a "last chance saloon" ultimatum.
Among the 15 staff employed by the CTI project, one – Billy 'Twister' McQuiston – is an ex-UDA prisoner.
Frankie Gallagher, Colin Haliday and Sammy Duddy, members of the UPRG which gives advice to the UDA, are also on the pay-roll.
However, a number of staff are community workers with no loyalist background, with one believed to be a Catholic university graduate. Some are now taking legal advice with a view to seeking damages from the government.
By linking the project's funding to the UDA, staff claim they have been put at risk and their future careers irreparably damaged.
"This has actually caused quite a bit of stress within the CTI staff because the public perception is that they are now fully fledged, paid-up members of the UDA," Frankie Gallagher said.
"There have been jibes in the street to that effect and a number of staff, who come from a very well-educated background, say they feel the stigmatisation.
"Almost all staff are currently being advised by lawyers with regards to defamation of character and what type of legal recourse may be open to them as a result."
As the deadline reached the half-way point, Margaret Ritchie last night (Friday) reiterated her department's conditions.
"If within the 60-day deadline the UDA does not meet the conditions set out in my earlier statement, I will have no option other than to end CTI funding," Ms Ritchie said.
"But if they do meet those conditions I will be happy to work with them through the CTI to build a peaceful future for all our communities."