Regulator issues ‘critical risk’ warning to medium and large charities

Large and medium sized charities are next in line to be at “critical” risk of financial collapse in Scotland following a wave of closures among small voluntary sector groups, according to latest research.

The Scottish Charity Regulator (OSCR) has found that so far smaller charities in Scotland have been more likely than their larger counterparts to close due to the pandemic.

Among charities to close almost half (45%) have an income of less than £25,000, compared to around a fifth (19%) having an income of £100,000 or more.

But the regulator warns that over the next 12 months “the critical threat to financial viability” will be stronger among larger charities.

Among those at most risk of collapse, 28% have an income over £100,000 compared to 10% of charities within income less than £10,000.

Around one in three (31%) of those at risk over the next year are charities with more than 11 employees.

The research found that lost income from trading and other sources outside of fundraising is “significantly higher” among larger charities, affecting 61% of charities with an income above £100,000.

Sports and arts charities

Sports and the arts are among the hardest hit sectors. Around half of sports and recreation charities (56%) and those working in culture and arts (48%) had stopped running.

In terms of service delivery around two thirds of charities working in housing (63%) and mental health (65%) reported disruption to services to beneficiaries, compared to 42% of all charities.

Meanwhile, just over half (55%) of social care charities have experienced service disruption.

The findings come as the regulator reveals the full data tables from its survey on the impact of Covid-19 on Scottish charities. Early findings from the survey were released in June and found that one in five charities in Scotland reported that they were facing critical financial challenges over the next 12 months.

Almost all (95%) had taken some action, including pivoting service delivery online or over the phone. A third had stopped operating and a quarter had applied for emergency funding.

“While it is important to recognise the critical financial impact for larger charities and the disruption to their beneficiaries, it would be wrong to overlook small charities, their key role in leading community resilience and how important that will be in the coming months,” said OSCR policy and research engagement manager Louise Meikleham.

“The majority of Scotland’s charities are small to medium and we need to learn from the whole picture, including the voices less frequently heard. There are many areas such as health, food and other direct services that have been a priority over the last few months. Over the next period it is important to ensure others, including arts, culture, sports and recreation are supported to ensure our overall wellbeing.

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