The Jewish care charity Norwood recorded a deficit of £400,000 in its unrestricted funds, its annual report for 2004/05 reveals.
But the charity achieved an overall surplus of £6.7m because of donations towards the establishment of a new school for children with special educational needs.
Norwood's total income for 2004/05 was £35.5m, of which £20.3m came through statutory funding. Its fundraising income stood at £5.9m, and donations for capital projects, such as the relocation of its school from Ravenswood Village to London, reached £7.3m.
But the charity still recorded a deficit of £400,000 on funds for its current operations. It blames the refusal of local authorities to meet fee increases above the rate of inflation, and the cost of complying with National Minimum Care Standards.
Norma Brier, chief executive at Norwood, said: "We are continually working with local authorities in the planning and delivery of our operations.
"We are also engaged in a review process to rigorously appraise the true cost of providing our services and how we charge for them."