Quarter of charities 'have drawn on reserves'

Charity Finance Directors' Group poll shows charities have been forced to use reserves and cut services in the past year

Charities drawing on financial reserves
Charities drawing on financial reserves

More than a quarter of charities have drawn on their reserves and one in seven have cut services in the past year, according to a survey by the Charity Finance Directors' Group and accountancy firm PKF.

Twenty-eight per cent of the 380 UK-based organisations polled in June and July revealed they had dipped into their reserves as a result of the recession over the previous year.

Charities working internationally were the worst affected: 48 per cent said they had drawn on their reserves, even though they were the sector with the lowest reserves at the start of the recession.

In total, 77 per cent of charities that responded said they had been affected by the recession. The figures, which will be published in a PKF report called Managing Risk – Moving Towards the Vision, next week.

Seventy-one per cent of charities polled said they expected at least one major income stream to decrease. Half of charities receiving grant and contract income expected to receive less money from these sources, including 73 per cent of charities with government contracts.

As a result, 41 per cent of charities said they had had to make cost savings and 14 per cent said they had had to cut services.

Looking ahead, two-thirds of charities felt they would be able to adapt for a 10 per cent drop in income, but only one in 10 said they could cope with a 20 per cent fall in income.

"The survey shows that the recession is affecting income," the report said. "Although some have been able to continue as they were, many have had to reduce costs or services or to draw on reserves."

"Levels of reserves were strong for many at the start of the recession, but such reliance will not be sustainable for long," it warned.

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