The House of Commons Public Accounts Committee called for the measures in a highly critical report about the government's funding of the now defunct charity Kids Company, which closed abruptly in August.
The report said that despite repeated warnings from officials about the charity's finances, the government, which gave more than £42m of funding to Kids Company, ignored the charity's cash-flow problems and its funding "was never seriously questioned, let alone stopped".
'Not based on evidence'
It said that funding decisions were not based on evidence and did not follow due process.
The report recommended the government should review how it made direct and non-competitive grants and should consider factors including how the processes were made fair and how the government assessed the financial suitability of a charity.
It said that a register of grants the government makes to the voluntary sector should be developed so that it could easily identify those charities receiving large amounts of government funding from single or multiple sources and intelligence on charities' past performance could be shared. It was not made clear if the register should be publicly accessible.
Chris Wormald, permanent secretary at the Department for Education, had told the committee at an evidence session for the inquiry that Kids Company had not received special treatment.
Asked by the committee whether the decision to keep funding the charity amounted to special treatment, Wormald said the charity's treatment had been "no more special" than other charities funded on a grant basis, such as ChildLine.
But he said: "Ministers of successive governments have made clear that they thought Kids Company was doing good work and deserved support. If you want to call that special treatment, then do by all means."
The PAC document came after the National Audit Office published a report that said ministers ignored warnings from officials about the state of Kids Company's finances on six occasions.
The spending watchdog said it observed a "consistent pattern of behaviour" when Kids Company approached the end of a grant term. On each occasion, according to the NAO, the charity would lobby the government for a new funding commitment.
"If officials resisted, the charity would write to ministers expressing fears of redundancies and the impact of service closures," it said.
Kids Company would also express the same concerns to the media, according to the NAO.