A third of voluntary groups fear their projects or organisations will close if a funding bid fails, according to a survey just published by trade union Amicus.
The union, which polled members in non-profit organisations, said that short-term funding practices were threatening jobs and compromising services.
More than four in ten respondents said they had to re-bid annually for funding for projects and posts. A third said their project or organisation was in danger of closing if a bid failed, and that this put intense pressure on workers.
And 88 per cent said that the way funding was awarded forced charities to use short-term contracts for staff, damaging morale.
Rachael Maskell, national officer for the voluntary sector at Amicus, said: "This survey demonstrates that the voluntary sector funding regime is at crisis point, and it is having a damaging effect on the performance of organisations. The Government has increased not-for-profit funding and boosted the sector's role in public services, but these opportunities are threatened by the uncertainty inherent in the funding process."
A spokeswoman for Scope, which took part in the survey, said: "Short-term funding can endanger an organisation's longevity."
Amicus, which represents nearly 30,000 employees in the voluntary and community sector, said there was a "profound need" to move to longer funding cycles within the sector and make the bidding process less bureaucratic.
About 41 per cent of respondents wanted a five-year funding cycle, 19 per cent opted for three years and 28 per cent for 10 years.
"We want these findings to instigate a change in all those government and local agencies that are instrumental in the decision-making process," said Maskell.