Government grant giving is inefficient and fragmented and suffers from a lack of good practice guidance, a National Audit Office report has said today.

The NAO report also suggests that less than 1 per cent of government grant funding went to the charity sector.

The NAO found that £292bn of government spending was in the form of grants, including £61bn outside the public sector. But NCVO data suggests just £2.76bn goes to charities.

“The landscape of government’s grant funding is fragmented, reducing its efficiency,” the NAO report says. “A large number of government bodies provide grants to around 850,000 recipients, including charities, private companies and individuals.”

It says there is a lack of good practice guidance across government, little co-ordination either within or between departments, and no central training in effective grant-giving.

“Central government currently operates around 1,100 grant programmes,” the report says. “We have found these typically operate in isolation and many have overlapping elements.”

It says some bodies are receiving grants from more than ten different sources.

“The government does not know who its top grant recipients are or those organisations especially dependent on public funding,” it says. “It also places a burden on organisations that have to apply separately, often using different application or bidding methods, for multiple grants.”

It says government must consider whether alternatives to grants offer better value for money.

“Grants can be an effective method of achieving policy objectives, but should not be the default option as other alternatives may offer better value for money,” it says. There is no central good practice guidance and limited central data to support departments in implementing efficient and effective grant programmes.”

It says the National Fraud Authority estimates that grant fraud costs the taxpayer £515m, almost a fifth of what is spent on the sector.

Andrew O’Brien, a senior policy analyst at NCVO, said in response to the report that grants remained critical for voluntary organisations, but had halved in value within the last decade.

“It is important to remember that grants to charities can be an efficient and effective way for government to meet its objectives and have the advantage of simplicity,” he said. “If government wants to draw on the expertise of charities, it is important that they continue to use grants as one of their funding options.

“Grants enable a public body to identify an organisation which can deliver the work it needs and let them get on with it.”