Data gathered using the Freedom of Information Act revealed that 48.2 per cent of English local authorities will not send all of the funding to the frontline and some plan to hold back more than £1m.
Many said the withheld money would be spent on activities relating to the two-year-olds programme. But some said the funding would be redirected towards services for older children.
When the Department for Education announced the funding allocations in November, it urged councils to “pass all available funding to providers and not retain any centrally”.
The full details of the research are published in the latest issue of CYP Now. They show that only 34.9 per cent of councils plan to pass all the money to frontline early years providers.
A DfE spokeswoman said: “These findings show the need for funding reform, to ensure the maximum amount of funding reaches providers and that councils’ spending decisions are transparent."
The funding is intended to provide England’s 20 per cent most disadvantaged two-year-olds with 15 hours of free childcare a week from September.
The findings were based on figures provided by 83 councils.
