Cash-strapped charities 'under financial siege'

Charities are “under financial siege” with almost a third having less than three months of cash reserves, a new survey suggests.

Scott Craig, a partner with Scott Moncrieff and an expert on VAT in the charity sector, says charities are facing a triple whammy.

The snapshot of nearly 200 UK charities reveals that 55 per cent have suffered a significant drop in their reserves while nearly 60 per cent have less than six months cash in reserve to cover normal operating expenditure.

A “worrying” 30 per cent have less than three months cash reserves.

The survey was undertaken during a webinar hosted by accountancy firm Scott Moncrieff and attended by senior executives and finance management from across a wide range of UK charities.

Reserves are a key to the resilience of a charity and its ability to withstand short-term financial shocks, with general guidance suggesting those reserves should amount to between three to nine months.

Scott Craig, a partner with Scott Moncrieff and an expert on VAT in the charity sector, said: “We are very concerned at the financial pressures now affecting a great many charities.

“Charities are facing the triple whammy of falling reserves and income and the pressures of a tax relief and VAT system that is draining them of resources and compounding their financial problems.

“Despite successive governments promising to streamline, simplify and consolidate the tax system, there are currently over 1,100 different reliefs. There are about 210,000 charities in the UK, of which around 13 per cent are in Scotland.”

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