Third sector and small charities at risk following cuts

  • Small charities are spending more than they have coming in, according to the report released today by SCVO, and are disproportionately affected by the funding cuts.

    Since 2009, larger charities and housing associations have found a modest growth in income. However, for other charities it has still not improved since 2009 and a large proportion are spending more than their income.

    The main findings from the report when compared with the previous year are:

    • Annual income up to £4.5 billion in 2011 which has grown marginally from £4.4 billion in 2010, and Expenditure up to £4.3 billion. Across the board many charities saw a sharp drop in income in 2011. This also included some larger charities that lost contracts and major trusts which earned less interest on their investments, and if you exclude credit unions and housing associations, the turn over level has not yet equalled that in 2009.
    • Staff numbers increase to 138,000 however Full Time Equivalent employees has gone down to 83,350 - The third sector is employing more people, but on less hours. There is less money available to meet staff costs, but rather than shedding jobs, the sector is reducing hours for staff, more temporary contracts and fewer full-time worker
    • Assets rise to £8.6 billion but Assets of smaller charities shrink, and the majority of smaller charities spend more than their income - Major deficits for many of our sector's smaller charities is masked by modest return to income growth for larger charities and housing associations which make it look as though the sector's reserves are healthier than they are really.
    • Smaller charities have got less cash reserves in the bank to fall back on as income sources dry up, despite the sector as a whole's assets and reserves have increased slightly. Larger charities and housing associations have had a small growth in assets which hides the major drop of assets held by smaller organisations

    Martin Sime, Chief Executive, Scottish Council for Voluntary Organisations, said:

    As income falls short of expenditure, particularly for smaller charities, organisations are being forced to use what assets and reserves they have left to keep their doors open for as long as possible. With limited reserves, which many organisations already dipped into last year, charities are running out of ways to compensate for the funding drain.

    Organisations are working hard to maintain the high quality services they provide to communities across Scotland and keep their staff. With ever growing demand set to skyrocket as the UK welfare cuts kick in, third sector organisations are facing an impossible conundrum. Something will have to give to secure a sustainable future for the sector.

    Read full report from SCVO

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