Scots charities forced to draw from reserves despite funding stabilisation 

New research from SCVO outlines the state of the sector’s finances

Charities across Scotland have continued to draw on their reserves “unsustainably” despite funding from government staying relatively stable, new research shows.  

The Scottish Council for Voluntary Organisations (SCVO) has published its latest research, State of the Sector 2024, which shows the challenges which organisations across Scotland continue to face.  

The paper, which contains key figures and trends from the Scottish voluntary sector, shows funding from government has stayed relatively stable, while income from the public has to a large extent recovered after being hit hard by Covid. 

Unfortunately, for many voluntary organisations inflation and expenditure rises have matched and outpaced these hard-won gains. 

While most organisations were able to stay in the black, the margins are wafer-thin and there has been a steady rise in the numbers of organisations ending the year with a deficit. In 2023, 45% of charities spent more than they managed to generate. 

These narrow margins and rising deficits have seen charities continue to draw on their reserves unsustainably while they try to identify new sources of funding or have to consider reducing services – link to Reserves doc and Tracker. 

SCVO also published a review of Scottish voluntary organisations’ financial reserves, which found the value of the funds looked after by the sector fell by £1billion between 2021 and 2023. 

The average value of funds held by large charities fell by £5million, from £17m in 2021 to £12m in 2023. 

Half of medium and large charities now have less than six months expenditure in reserves and nearly 1 in 3 large charities has less than three months of expenditure in reserves. 

Ilse Mackinnon, SCVO Research Officer, said: “It’s been sobering looking at charities’ accounts this year and seeing just how tight finances are for many. People have been telling us via the Tracker and anecdotally that things are tough, but it’s another thing seeing the figures in black and white.   

“It’s great that many income streams have recovered but we also saw essentials like energy bills, rents and staff costs shoot up, sometimes to double what they were the previous year.  

“We can see the impact of that on reserves, with many charities struggling to meet costs and keep enough cash back for emergencies.”