The report from the influential parliamentary body said funding of the voluntary sector represents less than 1 per cent of central government expenditure and limited progress had been made in increasing charities' involvement in public services.
The report censured the Home Office for promoting good practice while 72 per cent of its own contracts with the voluntary sector were for periods shorter than one year.
Helen Goodman, Labour MP and a member of the committee, criticised "bureaucratic failings" in the administration of contracts.
She added: "What I want to see are proper systems that ensure contracts cover overhead costs, provide funding on a three-year basis and give voluntary organisations an early decision on applications."
She called for improvements to contracts to be made mandatory for all government departments.
A spokesman for the Home Office said a new action plan for increasing the sector's delivery of public services would include a "prospectus of opportunities" outlining where the sector could expect to work and "a coherent set of actions to ensure this happens".
He added that the Home Office's recent strategic funding review had resulted in multi-year contracts of three or four years for the voluntary sector.
Stephen Bubb, chief executive of Acevo, said: "The report confirms what our members are saying. Despite commitments from government to a better funding relationship, promises have not been kept."