The National Council for Voluntary Organisations has warned that the Work Programme could threaten the sustainability of many of the charities involved.
The umbrella body has today published research that indicates that more than half of the charities delivering the welfare-to-work programme said their prime contractor had not protected them from financial risk, as they are required to do.
The research shows that 39 of 72 charities surveyed by the NCVO said their prime contractor had not shielded them from financial risk and a further 14 said their prime has only done so to a small extent. Twelve said their prime contractor had shielded them to some extent and just two said they had been protected "extensively".
According to the Merlin Standard, the supply chain agreement between the Department for Work and Pensions and welfare-to-work providers, every prime contractor should be able to demonstrate "how its funding arrangements support and provide equitable risk transfer, including financial risk for small, specialist and third sector providers".
The NCVO’s research also shows 26 of 45 tier one providers – subcontractors high up the supply chain – and 35 of 49 tier two providers – those lower in the chain – said they were "not at all" satisfied with the number of people that had been referred to them by their prime. Some charities fall into both categories because they are delivering tier one and tier two contracts.
Just three of the tier two providers and seven of the tier one providers said they were "very much" happy with the level of referrals they had received.
Under the programme, groups delivering services must fund the work themselves and are only paid by the DWP once a person from their programme has completed six months’ employment.
The NCVO has arranged a meeting this morning to discuss these issues with Chris Grayling, the employment minister, and a group of charities.
Sir Stuart Etherington, chief executive of the NCVO, said: "The prime contractor model is supposed to safeguard small providers from financial risk, but these findings suggest it is currently falling far short of expectations.
"The government must take these concerns on board and ensure that no bad practice is allowed to slip through the net."
A statement from the NCVO said:"Members of the special interest group for Work Programme subcontractors are voicing concerns that the welfare to work initiative in its current form could threaten the sustainability of many voluntary sector providers."
The DWP issued a statement that said: "The department requires all prime contractors to treat their subcontractors fairly and meet certain behavioural standards. It is down to commercial negotiations between subcontractors and their primes to set the terms that define what is an acceptable sharing of risk.
"Once those deals have been struck, the department's minimum standards require primes to honour those promises."