The report, which was commissioned by a select committee of MPs as part of an inquiry into Sure Start, said 92 per cent of centres are close to breaking even or under budget, compared with 60 per cent in 2006. Some local authorities have improved finances by clustering centres under one manager.
However, there is still 'widespread concern' among centres about the long-term viability of childcare in centres.
The report found that 59 per cent of LAs said little or no childcare in their area was wholly funded by fee income and that 53 per cent of centres offering childcare report the service operates at a loss.
One third of centres making a loss attribute it to insufficient demand for childcare, with parents in areas of low employment not needing full daycare, high staff costs, and the free entitlement not covering costs per child.
The report said, 'The proportion of childcare places filled varies widely. All phase 1 centre managers interviewed said daycare is now offered in short sessions rather than in full daycare throughout the week. As a result, some sessions are filled up, sometimes with waiting lists, while others may have spare places.'
Many managers were concerned about the future of children's centres. Centres had come up with different options should the Sure Start grant be reduced, such as focusing on core services so they remain viable, while others had considered charging for some services, such as drop-in sessions, particularly in the 70 per cent least deprived areas.
Meanwhile, children's minister Dawn Primarolo told the select committee last week that by last month there were 3,381 children's centres open and that they were on course to meet the Government's target to open 3,500 centres by March.