The latest wave of the Scottish Third Sector Tracker has been published.

Scotland’s Third Sector is having to operate in an increasingly difficult environment as rising costs, inflation and other pressures worsen, a new report has warned. 

The latest wave of the Scottish Third Sector Tracker, has warned financial pressures and shortages of staff and volunteers are making it difficult to run a sustainable organisation whilst providing adequate support to the people and communities they serve

Those behind the tracker have said many organisations are now being forced to do more with fewer resources. 

Wave Five of the tracker, which covers Winter 2022, shows financial pressures continue to dominate the Scottish third sector landscape, with rising costs and/or inflation one of the top three biggest challenges for almost half (46%) of organisations in the sector.

More than 90% of organisations report rising costs in at least one area and almost half (46%) report that rising costs are having a negative impact on their ability to deliver their services or activities.

A further 48% of organisations have had to apply for additional funding to help with rising costs and 41% would like to see more funding made available, with around three quarters (73%) of organisations claiming that the rising cost of living in the communities they serve is getting worse.

One medium-sized organisation told the researchers: “We have had 4 members of staff leave our small team this year. Some have been replaced but now a key member is leaving, and we have to use this as a money saving opportunity… we are expecting to have to make redundancies and reduce the services we can provide.”

The situation in communities served by voluntary organisations is also concerning, with 81% of organisations reporting worsening financial hardship among the communities and groups they work in.

Further concerns focus on a marked deterioration in people’s mental health and wellbeing, with organisations reporting a drop in fundraising and/or donations as the cost-of-living crisis reduces peoples’ disposable income.

Rising costs are having an adverse impact on organisations ability to recruit and retain staff, which has a knock-on impact on the services they can provide, the tracker reports. 

A large organisation said: “Financial challenges are making it tough for people and families on low incomes and they are having to make drastic cuts to how they spend their money. This is having a significant impact on their physical and mental health.”

The authors of the report wrote: “Organisations have taken measures to mitigate the impact of rising costs by applying for additional funding, increasing staff pay or benefits, and reducing or adapting programme activities to save cost. Just over one in five respondents reported not having made any changes.

“For organisations looking for information, support, and advice on how to manage rising costs, almost a third made use of their local Third Sector Interface, their funders and/or SCVO. The other sources of information, support, and advice that organisations would like to see made available included, additional funding, one comprehensive advice, information, and support portal and specific funding to help with rising energy costs.

“The financial position for organisations also continues to be precarious. More organisations reported a decrease in their average monthly turnover. Additionally, fewer organisations reported increased turnover during this period compared with the previous three months and more organisations are using their reserves.

“For those organisations reporting a decrease in income from donations/fundraising, this was attributed to lower levels of disposable income as the cost-of-living crisis intensifies, finding the time and resources to fundraise and the belief that funding available through trusts and foundations has reduced and/or become more competitive.

“In summary, organisations are facing an increasingly difficult operating environment with rising costs/inflation, staffing and volunteers issues and shortages and financial pressures all making it difficult to run a sustainable organisation and provide adequate support to the people and communities they serve. Many organisations are doing their level best to continue to operate and support their staff through a time of reduced income and increased demand.”