Research from restructuring and insolvency specialists FRP Advisory, shows 70 per cent of charitable organisations cut staff numbers after the amount of funding available from the government continued to fall during 2011.
Increased VAT and rising inflation meant more than a fifth of the 80 senior executives questioned said their organisation’s solvency was now at risk and 92 per cent felt the government has underestimated the full impact of public sector spending cuts.
Jason Baker, partner at FRP Advisory, said it is crucial for third sector organisations to act quickly, whether that is undergoing a turnaround to avoid insolvency or restructuring through an insolvency process.
He added: “It is encouraging that more than a third of the executives we questioned are planning to develop a restructuring plan and many others are pursuing mergers and joint working arrangements.
“Charities must act quickly if they consider they have potential solvency issues; pursuing a restructuring plan or merger can often be time critical.”
Baker said that with so many third sector organisations facing cuts beyond their control, measures such as financial planning and risk assessment are essential.