Many charities only operate with one month's expenses as reserve while one in three do not have any financial reserves at all says new research released by NCVO last week.
The figures revealed by the new research confirm arguments made by the third sector that drastic cut in government support could threaten the very existance of many third sector organisations.
-The sector’s level of free reserves is estimated to be worth £46 billion in 2007/8.
-The sector’s net assets are worth a combined £96.6 billion, including tangible fixed assets such as buildings.
-Overall the sector has an average of 17 months’ expenditure in reserve, but this average is driven up by the significant unrestricted assets held by research bodies and grant-making foundations.
The research also showed wide variation in reserve levels for different types of voluntary organisation. While housing associations typically hold nearly 20 months’ (19.9) worth of expenditure in reserve, at the other end of the scale this level falls to 4.5 months for employment and training organisations and only 1.4 months for playgroups and nurseries.
Commenting on the findings, Sir Stuart Etherington, Chief Executive of NCVO, said: ‘These figures show how vulnerable many community and voluntary organisations will be in the testing and unpredictable times ahead. Without a financial safety net, vital services for local people and communities will be at risk.
‘This really demonstrates the need for public sector funders to work with voluntary and community organisations where cuts are necessary, to make sure they are properly planned and implemented. As the recession has driven up the need for many frontline services, it is critical that the sector retains its capacity for supporting some of the most vulnerable people in society.’