Financial pressures continue to grow

The findings from wave seven of the Scottish third sector tracker indicate that financial pressures on third sector organisations continue to grow, with financial and cash flow restraints appearing in the top three challenges for the first time. Seventy-six percent of organisations (up from 71% in Spring) report an element of organisational finance in their top three challenges, with rising costs/inflation and difficulty fundraising the top challenges. There are also more organisations in Winter 2023 with less than six months financial reserves than there were a year ago, an increase of 7%.

It’s clear that more organisations are having to take actions to mitigate financial risks, with 18% more organisations reportedly having to develop new income streams in Winter 2023 than one year prior. Sixteen percent more organisations are applying for new funds from funders they haven’t worked with before and 11% are applying for new funds from their existing funders. Worryingly, there’s also been a 10% increase in the number of organisations cancelling or deferring planned programmes, projects, and services than this time last year.

Moreover, the number of organisations reporting that rising costs are having a negative impact on their ability to deliver services continues to grow. Resource shortages (financial, paid staff and volunteers, primarily) are the key challenges organisations are facing in meeting demand for their services and programmes of work, there’s been a 6% increase, since Spring, in the number of organisations reporting that recruitment and retention of staff is a significant issue.

Over half (53%) of organisations are also concerned about energy prices, but significantly more (84%) are concerned about the impact of those prices on the people and communities they serve, with 70% of organisations believing that financial hardship has become worse.

For those organisations in receipt of institutional funding, many thought that the conditions attached to that funding had become more demanding over the past 12 months, with increased reporting and monitoring the most frequent change. There is also between a quarter and a third of organisations reporting delays to their funding over the past 12 months.

It’s also clear there is work to be done at a sectoral level to address the climate crisis, most organisations do not have policies or procedures in place to reduce carbon emissions or milestones for reaching net zero. This is predominantly down to the perceived lack of support available, both in terms of financial support and knowledge and expertise.

Having said all that, organisations remain confident of their future survival and a third of respondents hold a positive outlook for their organisation over the next 12 months. Respondents are less confident about the future direction of the sector.