Care services minister Ivan Lewis revealed the department's intentions at a conference held by Acevo in London last week. "We need to make sure the money is going to the right places," he said.
A DoH spokeswoman later explained that the department would publish proposals about which organisations should continue to receive Section 64 money in the next few months. "We will be consulting on the proposals in the summer, and aim to publish the recommendations by the end of the year," she said.
"We are conducting a review because we need to ensure that grants are being used in a way that adds maximum value to the contribution made by the third sector to health and social care."
The review will not involve a decision about changes to the amount of funding available, the spokeswoman said. "The level of future funding will be determined by the outcome of the Treasury's Comprehensive Spending Review process," she added.
Charities gave a cautious response to the review. The NCVO said the department needed to ensure that it conducted a full consultation on the proposals.
Sophie Livingstone, head of policy at the Foyer Federation, a charity that runs homes for young people and is a recipient of Section 64 funds, urged the department not to exclude charities that do not have obvious health and social care aims.
"Our plea would be to keep in mind people who aren't traditional health providers, but who can make a big contribution to health and wellbeing," she said.
Many charities suffered acute financial problems last year when the department delayed Section 64 payments to charities.
The delay prompted widespread criticism of the department for breaching the Compact. It led to a meeting between Lewis and the NCVO in October to iron out the problems.
CSV has agreed a settlement of £114,000 from the Department of Health to cover the interest it lost when a grant of £3.7m was withheld for 10 months. The charity expects to receive the money this week, almost a month after it was promised by care services minister Ivan Lewis (Third Sector, 28 February). It took the matter to the Office of the Third Sector after appealing to the DoH and the Treasury.