Income at Voluntary Service Overseas has fallen by one-third in the past year, after what the charity called “a challenging funding situation”.
VSO’s income in the year ending in March 2022 was £33.3m, down from £49.4m in 2020/21.
It is the sixth year in a row that the charity’s income has fallen, Charity Commission data shows.
VSO’s accounts, published last week with Companies House, show the charity spent £38.8m compared with £47m in the previous 12 months, and recorded a deficit of £5.5m.
The loss of income was driven by the end of the charity’s government contract to help deliver the now shelved International Citizen Service, which was worth £5.6m in 2020/21.
The value of other government grants also fell by £1m, from £6.4m to £5.4m, while income from trusts and foundations was down from £6.5m to £1.7m.
VSO’s annual report says it has extended the time frame for dedicating resources to a £3m Income Investment Fund, which was launched in 2019 to increase the charity’s unrestricted income and diversify its sources of cash.
The charity spent £13.2m on salaries in 2021/22, down from £17.7m the year before, the accounts show. The number of staff, measured as full-time equivalent roles, fell from 646 to 504.
VSO criticised the government last year over the uncertainty to future aid funding, and warned that hundreds of jobs would be at risk if spending cuts went ahead. The government later reduced aid spending by billions of pounds a year.
The accounts show that VSO spent a total of just over £1m on termination payments in the past two financial years, and say: “ICS project closure in 2021 resulted in termination of all project roles, as was planned with reserves designated in previous years.”
Philip Goodwin, chief executive of VSO, told Third Sector: “Over the last two years, VSO has faced a challenging funding situation, with a 45 per cent decrease in income since the financial year 2019/20.
“This is largely due to UK government funding cuts as part of the wider reductions in UK overseas aid funding.
“In particular, the UK government-funded ICS programme was closed in February 2021 and the Volunteering for Development grant was also significantly reduced in 2021.
“Despite these challenges, VSO has continued to have a positive impact on the lives of millions of people around the world because of the commitment and hard work of our thousands of volunteers and staff.
“While we have had to cut some programmes and make difficult choices about who we can afford to support, through careful stewarding of our resources our overall financial position remains healthy, both in our general reserves and in cash flow.”
VSO’s general reserves were £11.9m at the end of year.
A spokesperson for the charity said it reported two serious incidents to the Charity Commission in 2021/22, one in relation to the political situation in Myanmar and one in relation to a case of fraud in Uganda.