Departments are being advised to take a light-touch approach to measuring the performance of third sector organisations.

New guidance has been published today in response to concerns that the charities and voluntary bodies who receive £12bn annual public funding were being constrained by government attempts to measure how money was spent.

Put together by the Treasury, Office of the Third Sector and the National Audit Office (NAO), the 'Intelligent Monitoring' guidance is to apply to all new funding streams.

Rob Prideaux, director of third sector value for money studies at the NAO, said that departments had a responsibility to make sure that public money is being spent properly. But, "when monitoring goes from being a safeguard to a hindrance to those delivering services, often to the most disadvantaged in our society, it no longer provides value for money."

Angela Smith, the new minister for the third sector, said the move was part of "sweeping aside the barriers" to third sector involvement in providing public services and would save charities time and money.

"Charities, voluntary groups and social enterprises have particular strengths like reaching out to the most disadvantaged people, taking risks and finding new innovative ways of doing things," she said. "This guidance is one step in a programme of reform to bring the third sector’s strengths into public services."