The largest charities are being held back from delivering public services because of the complexity of public funding arrangements, the National Audit Office has said.

A new report from the NAO has found that charities’ funding relationships with central and local government are fragmented. Variations between the funders in the timing of payments and monitoring requirements can impose unnecessary costs on charities, reducing value for taxpayers’ money in service delivery.

Joe Cavanagh, director of business development at the NAO, said: “Large charities are important providers of some public services, but public bodies’ funding arrangements are often unnecessarily complex and costly. Public bodies need to work together to bring coherence and consistency to their funding practices, to ensure that charities’ valuable work is not hampered by bureaucracy.”

The report Public funding of large national charities examined the experiences of 12 of the UK’s largest charities, which receive a total of £742 million in public funding.

Disability charity Leonard Cheshire agreed with the findings of the study. “There is still an enormous gap between central government rhetoric and local government delivery on full cost recovery and the relationships between commissioners and providers,” said director general Bryan Dutton. “There is no doubt that more coherence and consistency will benefit everybody involved and ultimately lead to more cost effective, stronger services.”

Seb Elsworth, head of policy at Acevo, said: “The commissioning environment is undoubtedly complex and can become more so for large national charities. The good news is that improving these arrangements and our relationship with statutory funders has been identified as a priority for the government and for the sector.”