Cash-strapped Scottish charities are dipping into limited reserves
Friday, 14 September 2012
Nearly half of Scottish charities spent more money supporting people than they earned last year, new figures have revealed.
Charities are continuing to struggle with public funding cuts, reduced income from trusts and foundations and a reduction in public giving since the recession hit in 2008.
Smaller charities are particularly badly affected, with 50 per cent forced to use reserves built up before the recession to continue their work in 2011.
Charities with an income of up to £12,500 a year, which is 55 per cent of all charities in Scotland, overspent by £18.4 million last year. They had an average individual overspend of £2,000.
Medium sized organisations, with incomes between £50,000 and £100,000 experienced an average overspend of £17,000.
Larger charities as a whole are starting to show some signs of recovering from the recession, however a third of those with incomes between £500,000 and £10m were also in deficit last year.
The Engine Shed in Edinburgh is a training provider for people with learning difficulties and a social enterprise.
Its training arm is funded by the local authority and it has experienced a number of years of funding freezes leading up to a 4 per cent cut last year.
The training income covers around 40 per cent of its total income.
Marian MacDonald, chief executive of the Engine Shed, told TFN that the organisation can only afford to rely on its reserves for another year or two.
“What we’ve found is that income has gone down across the board in the last few years, including our trading income,” she explained.
“Until 2007 we were doing really well, however since the recession we’ve also struggled with the business side, people are spending less in the café and corporates are training less, so they are not using the conference facilities as much.”
The organisation has recently won funding from the Big Lottery Fund Scotland to support a five-year plan to develop its business side.
However, MacDonald said it would be unlikely to be able to provide its training services for 30 learning disabled adults if its council funding is cut further.
Fife Society for the Blind, which provides services for 2,000 people with visual impairments on behalf of Fife Council and NHS Fife, recorded an overspend of £76,000 in 2011, around 10 per cent of its total expenditure.
Chief executive Alan Suttie said its board has decided to use some of its reserves over the next five years to invest in new ways of working to ensure long-term sustainability.
“We’ve experienced a freeze in public funding, which amounts to a cut,” he explained.
“But our philosophy is not to whinge, we are investing to grow.”
“We’ve decided to use our reserves to do things better. If we invest in joint working and preventative services we can provide the right services in the long-term and generate confidence in funders.”
The organisation runs Fife Sensory Impairment Centre, which houses services for a range of groups including RNIB Scotland and Sense Scotland as well as FSB Enterprises Ltd, a social enterprise providing employment for blind and visually impaired people.
The income of the sector as a whole rose to £4.5bn from £4.4bn in 2010.
However, excluding credit unions and housing associations, charities’ turnover has not yet recovered to the 2009 level, with £3.21bn turnover in 2011 compared to £3.22bn in 2009.
Martin Sime, chief executive of Scottish Council for Voluntary Organisations (SCVO), said with a huge amount of public spending cuts still to come, many organisations will not to be able to afford to continue subsidising services.
“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.”