Speaking in relation to the new Surer Funding report launched today by the Association of Chief Executives of Voluntary Organisations (Acevo) Commission of Inquiry, of which he was chair, Mayo said that this results in a triple loss for the sector, government and service users.

Based on the research by New Philanthropy Capital and funded by the Home Office, the report found that current contractual arrangements are placing services at risk and wasting public money. It highlights four main problem areas. They are: bad management of risk and uncertainty; unrealistic contract timescales; excessive and wasteful bureaucracy; and undervaluing of contracts resulting in subsidises by charities.

Speaking at the launch, Alan Milburn, secretary of state for health, will claim that radical changes in funding are essential if charities are to improve their public service provision. He will say: “Acevo is leading the debate about how the voluntary sector can make a bigger contribution to the reforms and improvements that are needed both in public services and wider society. I want to set out how I believe the voluntary sector can become part of the mainstream of public service delivery. I believe the voluntary sector stands on the edge of a new future.”

The report makes several recommendations of ways in which contracts can be improved, including the introduction of a kitemark scheme to act as an incentive for funders and a penalty scheme for contracts that fail to comply with the principles of surer funding.

Stephen Bubb, chief executive of Acevo, said: “Public service delivery is a great opportunity for many charities to improve people’s lives. But important services can’t be run on hand-to-mouth funding.