The Premier League is facing demands to increase its funding of referees because of a cash shortfall at Professional Game Match Officials Ltd.

The Guardian has learned that PGMOL’s cash reserves have dwindled from about £4m to almost zero in recent years as a result of the increased costs of training and operations, exacerbated by the introduction and growth of VAR.

PGMOL’s annual budget of about £25m is understood to be sufficient to get through this season, but additional funding will be required next year. The Premier League, English Football League and Football Association contribute to the refereeing budget, with the top flight giving the lion’s share.

Negotiations over increasing the funding for next season are under way and sources with knowledge of the discussions told the Guardian that they were confident the issue would be resolved.

PGMOL has been spending more than its budget in recent years as costs have risen, and has privately conceded it needs to exercise greater financial discipline. Relations between the main stakeholders are good, however, particularly since the appointment two years ago of Howard Webb as chief refereeing officer, and it is hoped that an agreement can be reached before the end of the season.

If extra money is not forthcoming PGMOL would have to cut its training programmes, which would heighten concerns about the time it is taking to develop top referees and a lack of diversity among match officials.

PGMOL officials are concerned about the lack of diversity, an issue they fear will get worse if they are unable to implement more fast‑track training programmes. All 21 Select Group 1 referees who take charge of Premier League matches are white men, although the situation is slightly better in the EFL, with Sam Allison and Rebecca Welch promoted to Select Group 2 last summer.

Select Group 2 officials are occasionally given Premier League matches and both referees made significant breakthroughs last season. Allison was the first black referee to take charge of a Premier League game for 15 years when Luton visited Sheffield United on Boxing Day, and Welch became the top flight’s first female referee when Fulham played Burnley three days earlier.

Allison and Welch are considered good enough to officiate Premier League games on a regular basis, but a lack of resources is hindering aspirations to expand the pool of elite referees. Sam Barrott was promoted to Select Group 1 this summer, but with no referees retiring there was no space for further promotions.

“We need to create more churn in the system and then greater diversity will naturally follow,” a PGMOL source told the Guardian. “We need to train referees quicker and promote them faster. At the moment Premier League referees are all middle-aged white men. There are lots of good training programmes and initiatives in place but we need to move quicker. It’s not a big drama at the moment but we need to get the funding issue resolved. The only other option is making cuts and that would make matters worse.”

The geographic concentration of Premier League referees is also a cause for concern. In Select Group 1 Tim Robinson is the only referee from south of London and the Swindon fans Simon Hooper and Graham Scott are the only other referees from south of Birmingham.

With the exception of the Australian Jarred Gillett, the vast majority of the rest of the Premier League referees are from Yorkshire and the north-west. Although this has not created problems for match appointments there are concerns at PGMOL that the increased focus on who referees support could lead to issues.

Nottingham Forest were charged with improper conduct by the FA last season after complaining that “the VAR [Stuart Attwell] is a Luton fan” after they were denied three penalties in a 2-0 defeat by Everton. Forest and Luton were battling relegation and the East Midlands club claimed Attwell’s allegiance should have been taken into account.

PGMOL is working with the other stakeholders to boost refereeing numbers and increase diversity but believes more urgency is needed. The Premier League-funded Elite Referee Development Plan was launched in 2022 to help officials from under‑represented backgrounds break into the top levels of the professional game.

PGMOL and the PFA announced a scheme this summer to fast-track 12 former players into refereeing, with more than 120 applying to be part of the first cohort. At a lower level the FA is running the CORE X programme which aims to recruit and retain 1,000 new referees from diverse backgrounds in the next three years. That scheme is aimed at referees actively officiating in the third or fourth tier of the women’s game, or the seventh and eighth divisions of men’s football.