The Victorian Government is threatening to deny funding to organisations that fail to join the National Redress Scheme for institutional child sexual abuse survivors by the June 30 deadline.

Key points: The Government will make it a condition of contracts that eligible organisations sign up to the scheme

The Government will make it a condition of contracts that eligible organisations sign up to the scheme About half of the 49 organisations that have failed to sign up in Victoria receive State Government funding

About half of the 49 organisations that have failed to sign up in Victoria receive State Government funding The blacklisting will only affect future arrangements

Under the scheme, eligible survivors of institutional child sexual abuse are able to seek a range of redress options including monetary payments of up to $150,000, access to counselling services and a direct personal response — such as an apology — from the institutions responsible.

Forty-nine eligible non-government organisations operating in Victoria are still yet to sign up to the scheme, about half of which receive some form of State Government funding.

They include non-government schools, community, youth and family services, religious entities and sport and recreation entities.

Nationally, there are more than 500 applications on hold because the institution named in the application is not yet participating in the scheme.

Failure of organisations to join scheme 'deeply disappointing'

Victorian Attorney-General Jill Hennessy said refusing to sign up was "just not acceptable".

"We will be making it a condition of contracts with the Victorian Government that institutions that have got a liability when it comes to institutional sexual abuse join the redress scheme," Ms Hennessy said.

Victorian Attorney-General Jill Hennessy says the State Government will not reward organisations that fail to take responsibility for their history of sexual abuse. ( ABC News: Andrew Ware )

Ms Hennessy said funding in jeopardy included grants and funding to deliver social or other services. She made it clear that the blacklisting would only affect new funding arrangements.

"This is about organisations which do have the capacity to pay but have not taken the responsibility," she said.

"We're not going to go and disrupt the way in which services are delivered, particularly to vulnerable people, but we are not going to reward those that have got the capacity to pay but fail to finally take responsibility for the tawdry and tragic history of sexual abuse in their organisations."

Me Hennessy said it was "deeply disappointing" that organisations which had the capacity to join the scheme and had ample time had not done so.

"We know people are dying waiting for fair compensation for the horrific abuse and injustice they have faced," she said.

"With these changes, we are ensuring institutions are held accountable for failing in their moral duty to support and acknowledge their victims."

The scheme was a key recommendation of the Royal Commission into Institutional Responses to Child Sexual Abuse and was established in 2018.

It is intended to provide compensation for institutional child sexual abuse survivors and be an alternative to civil litigation, requiring victims to provide less supporting information than to a court.

Under the Commonwealth legislation, joining the scheme is voluntary. Institutions can only join if they can fulfil their obligations under the legislation, including the financial capacity to pay redress.

The Federal Government earlier this year flagged measures such as stripping organisations of their charitable status for tax if they did not join the scheme.