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Julie Menin, Community Board 1 chairwoman, will no longer serve on the panel distributing $17 million in grants.
Public schools across Manhattan were named recipients of a $2,000 city grant for school gardens and education.
The LMDC agency should develop a sunset plan immediately, Community Board 1 members said this week.
The mosque and community center is one of 265 organizations that applied for funds.
The Lower Manhattan Development Corporation hopes to fund more than a dozen projects with the federal funds.
The Lower Manhattan Development Corp. will distribute the money as soon as the end of the year.
The Lower Manhattan Development Corp. added $1 million to the program and extended it through 2015.
Federal money once allocated for utilities such as ConEdison will now be open for other uses, including arts and education.
Representatives from city agencies dreamed big for a transformation of the East River waterfront into a "Blueway".
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