The Government must ensure its attempts to introduce payment by results for rehabilitation services do not squeeze out charities and community groups, the Charities Aid Foundation has said.
Ministers plan to let security firms and voluntary groups take on probation services on a payment by results basis.
But the Charities Aid Foundation (CAF), which promotes charitable giving and provides financial services and social finance to not-for-profit organisations, warned that current payment by results contracts run the risk of excluding charity and social enterprise expertise.
A CAF report published earlier this year says that charities often face difficulties bidding for Government payment by results contracts because of the risks inherent in the payment by results model, they have too little time to assess contracts, and lack up-front funding to pay for their work.
John Low, chief executive of the Charities Aid Foundation, said: “Charities and other not-for-profit organisations work closely with beneficiaries and have a huge amount of expertise in tackling sometimes intractable social problems. Payment by results contracts can represent real opportunities to tap into the depth of charities' experience and make a real difference.
“But most charities simply cannot afford to take on contracts to tackle social problems without up-front funding because they are not allowed to carry large financial reserves and have limited access to capital compared to for-profit businesses.
“We need to ensure the payment by results revolution does not exclude charities so that voluntary sector organisations can play their full part in the heavy lifting needed to transform our public services.”
Ben Kernighan, deputy chief executive of the National Council for Voluntary Organisations, also commented: "The government recognises the benefits that could come from involving charities in rehabilitation services.
"Specialist charities, many involving dedicated volunteers, can make all the difference to the lives of people leaving prison and help reduce reoffending. However, under its most significant public service reform so far, the Work Programme, many charities have found themselves squeezed out by large commercial providers.
"In the interests of helping ex-offenders who could benefit from charities’ expertise, the government must ensure the mistakes of the Work Programme are not repeated. Contracts must be accessible to smaller, local charities, most of which have been shut out by the very large scale of contracts and unrealistic requirements for the amount of capital providers must hold in the Work Programme."