The North's Social Development Minister Margaret Ritchie is to review the £1.2 million (€1.78 million) grant made towards loyalist community projects aimed at encouraging the UDA away from organised crime.
Her decision follows the serious rioting in the Kilcooley estate in Bangor, Co Down, late on Wednesday in which the PSNI came under fire and a crowd of up to 200 threw petrol and paint bombs and set cars alight.
Police officers investigating drugs offences had earlier searched a number of houses in the Co Down estate.
Ms Ritchie's review of her department's funding of community projects in areas where the UDA is strong follows critical comments by PSNI Chief Constable Sir Hugh Orde. "If that was value for money, then the people of Kilcooley got very poor value for their money," he said. "If you want my personal opinion, I wouldn't give them 50 pence."
The funding was announced last March under direct rule and before devolution was restored to local Ministers.
Ms Ritchie said: "I want to condemn outright the appalling violence in Kilcooley. The decent, law-abiding people in Kilcooley have the same right to be free of violence and crime as the rest of us. I am also deeply disturbed at the apparent use of guns against the police.
On the prospects of state funding, she added: "I am very concerned at reports of UDA involvement in these serious disturbances, and I will want to consider the PSNI's assessment at the earliest opportunity."
Northern Secretary Shaun Woodward, meanwhile, has accredited four restorative justice schemes in loyalist areas. The projects, which address local low-level crime, sometimes involve some ex-paramilitary prisoners.
Mr Woodward said the schemes had met strict criteria laid down in a government protocol including co-operation with the police.