The charity the Single Homeless Project has pulled out of its Work Programme contract because it says the scheme does not provide enough funding to run the service.
Under the programme the charity was being paid between £400 and £600 up front from the prime provider Seetec for each person it worked with, according to what type of benefit the individual was receiving, with the prospect of further payments if the service users found jobs and stayed in work.
But the charity said the £600 payment did not cover the initial cost of helping people find work and it could not afford to fund the services until the later payments were made.
Liz Rutherfoord, chief executive of the charity, said: "We had high hopes that the Work Programme would enable us to help more homeless people to find work and ultimately regain their independence. However, we’ve found that the scheme is just not adequately resourced or structured to do this."
Rutherfoord said most of the jobseekers referred to SHP under the Work Programme faced more immediate issues, such as rough sleeping, poor mental health and drug use.
"While we have successfully supported people to find accommodation, access ongoing support and treatment and, in some cases, to either find work or be job-ready, the Work Programme does not adequately fund the intensive preparatory work required to achieve these results," she said. "We just do not have the resources to effectively subsidise a national government programme."
The charity has been running the scheme for nine months, as a subcontractor to Seetec, and has had 64 people referred to it in that time. A spokesman for Seetec said it respected SHP’s decision to withdraw from the programme and maintained a "good working relationship" with the charity.
SHP runs services for homeless people across London and, according to accounts filed with the Charity Commission, had an income of more than £14m in 2010/11.
Third Sector reported earlier this month that the charity Cornwall Neighbourhoods for Change had pulled out of a Work Programme contract that was worth several million pounds.
In January the National Council for Voluntary Organisations warned that the Work Programme could threaten the financial sustainability of many of the charities involved.
The Department for Work and Pensions issued a statement that said: "The government can’t negotiate deals for charities – we gave them all the cards to do the right deals, which are a commercial matter for them. If charities have done a deal they can't afford, they need to go back to the prime provider and discuss it with them."