by Martin Sime, Chief Executive of the SCVO
SCVO this week released its latest round up of statistics on the shape and profile of the third sector in Scotland. It paints a stark picture, particularly for smaller and medium-sized charities which are really feeling the brunt of funding cuts, low interest rates and a tougher fundraising climate. The majority of them are spending more than they have coming in, leaving them with little option but to delve deeper into precious reserves.
While it’s no surprise that in harder economic times many groups dip into the reserves they have set aside, if overspend at this level continues there will be serious implications for the sustainability of Scotland’s third sector.
Major deficits of smaller charities are being masked by a modest return to income growth of larger charities and housing associations, but turnover still hasn’t climbed back up to the 2009 level. Small organisations with a turnover of £12.5k or less are facing a deficit of £18m. Even among larger charities, there are cases of lost contracts and big trusts earning less interest on their investments. Cuts are taking their toll on the sector right across the board.
Rather than cutting jobs, charities are being forced to reduce staff hours, so although the sector has posted a slight increase in staff numbers to 138,000, with only 83,350 fulltime equivalent employees, there has been a significant drop in staff hours, more temporary contracts and fewer full-time workers.
The sector’s assets and reserves have increased slightly to £9bn, which on the face of it is encouraging. However, the growth of assets held by some larger charities and housing associations is masking major erosion of smaller organisations’ assets.
Organisations are working hard to maintain the high quality services they provide to communities across Scotland and keep their staff, but they are running out of ways to compensate for the funding drain.
With ever growing demand set to skyrocket as the UK welfare cuts kick in (80% of the cuts are still to come) the third sector is facing an impossible conundrum. Something will have to change to ensure that charities across Scotland can continue to support the most vulnerable members of our communities.