Children's Fund partnerships are still waiting to hear how much money they will be able to spend on preventive children's services in 2004-5.

Local Children's Fund managers were warned before Christmas that their budgets will be cut in 2004-5, and told not to take on any new commitments for next year. But as 0-19 went to press they still had no news on their budgets for April onwards, and were not expecting a figure before the end of January.

The uncertainty leaves thousands of local service providers unable to plan beyond the end of March. However, it is understood that extra money has now been found by the government to prevent local programmes from being forced to break contractual agreements with service providers as a result of "clawback" in the recent mid-year review.

In a letter to programme managers Tom Jeffery, director of the Children, Young People and Families Directorate at the Department for Education and Skills, admitted that the funding crisis was caused by mistakes in the Children's Fund's central financial management. But he is unable to tell programmes how much money they will receive in the coming financial year, or in 2005-6 because he says ministers are reviewing priorities.

The letter, dated 19 December, promises that the Children's Fund will survive in some form, but warns that budgets will be reduced. It suggests that money thought to be earmarked for the Children's Fund over the next two years is likely to be diverted elsewhere within the directorate by the government.

"Ministers are considering the overall budgets across the directorate and we won't be able to let you know the outcome before January. Next year's budget will enable the programme to continue to deliver preventive services.

"We will remove the current over-allocation so there will be less need to rely on underspend. This will inevitably mean some reduction from the previously announced annual allocations so you should not take on new contractual commitments."

Jeffery apologised to programme managers for recent problems. Many managers have have written to Margaret Hodge and himself complaining about the recent mid-year review when Children's Fund schemes saw their unspent annual allocation clawed back by the government.

Jeffery admitted that the Children's Fund had allocated too much money on the mistaken assumption that local programmes would underspend on their budgets.

Jeffery has had a meeting with voluntary sector organisations, social services and the Local Government Association to discuss the crisis in which some programmes can not meet their contractual commitments because money for the second half of the year had been taken back.

As a result, he says, money has been set aside by his directorate to prevent services being prematurely closed and staff being made redundant.

The meeting followed a strongly worded letter to education secretary Charles Clarke from two of the UK's biggest children's charities, warning that the government had left them open to the risk of litigation by its management of the Children's Fund.

Barnardo's director of operations Chris Hanvey and NCH director of children's services Maurice Rumbold wrote a joint letter expressing "profound disappointment and deep concern" about the way the Children's Fund is being run which they say is having a "serious, adverse impact" on the two charities.

A DfES spokesperson said:"The government is committed to continuing to provide support through the Children's Fund to children at risk.ÊWe are inviting partnerships and key bodies involved in the fund to work with us this year to ensure that the fund remains at the centre of the government's vision for children and young people".