The body which distributes lottery profits to Jersey charities says it is "disappointed" the government has chosen to award the contract to a UK charity.
The Association of Jersey Charities (AJC) will be replaced by GrantScape, a community fund administrator, that will take on the responsibility next year.
The deal which could last up to two years still needs to be approved in the States Assembly but it will mean the AJC will have no further role in administering lottery grants.
It says it submitted a tender to continue administering profits which included the total cost of providing all the services required.
However the AJC has disputed the government's claims that it will make savings as they say they "never charged for administering lottery grants."
However the government have said GrantScape's tender was £200,000 more cost effective than other bids over a three-year period.
Prior to Grantscape taking over, the AJC could be given £500k to help with the transition costs before the UK firm takes over.
The AJC says the money will be for grants for a range of charities, including those in the arts, culture, heritage and sport.