A 40-year-old charity in Scotland has entered liquidation after reporting “significant” financial losses last year due to a delay in EU replacement funding.
Earlier this month, Right Track Scotland, established in 1983 and registered as a charity in 1996, was put into liquidation while all 20 staff were made redundant.
A petition to wind up the charity was presented to Airdrie Sheriff Court on 8 March, and William Duncan Accountants partner Annette Menzies was subsequently appointed as liquidator of the charity.
Right Track Scotland’s total income fell from £823,000 to £538,000 between 2021-22 and 2022-23 while its total expenditure increased from £773,000 to £786,000, according to recent accounts.
The charity, which works with disadvantaged young people and long-term economically inactive adults, said in its accounts that its “significant” financial losses were due to policy changes at Scottish government level and the loss of EU funding.
‘Shrinking of services’
In a statement published by the Herald, Right Track Scotland said: “It’s with a very heavy heart, and significant frustration, that the board of directors confirms the permanent closure of Right Track Scotland Limited.
“Since our launch in 1983, Right Track has supported young people with the most challenging of difficulties to overcome in order that they can participate positively in employment, training or further education.
“Operating in central Scotland’s most socially and economically deprived areas our ambition has always been to try to broaden horizons, raise aspiration and arm the young people we support with some tools to help them break what might otherwise be a perpetual cycle of disadvantage, depravation and hopelessness.”
The charity added that “funding disruption has meant the shrinking of services and geographical coverage in recent years (previously Edinburgh and Glasgow, most recently Glasgow only)”.
“Our staffing has had to be cut in recent years, as we sought to manage uncertainty of contract award and payment. At the time of our closure, 20 staff have been made redundant,” it said.
It continued: “Our anxiety, frustration, and our warning on what lies ahead must be directed to those who represent our society through local, national and UK government: the need we have fulfilled over the last 40 years is not going away – if anything it will worsen.”
Funding cuts
The charity said in its latest accounts that its main sources of funding remained unchanged for almost 20 years but ceased in 2022-23 following policy changes at Scottish government level and Brexit.
Funding from the Employability Fund decreased by 89% to £53,327 while the termination of the European Social Fund (ESF) resulted in a funding loss of more than £100,000.
“The UK government launched the Shared Prosperity Fund to replace lost ESF funds and to be administered via local authorities in response to local needs,” the accounts read.
“Unfortunately, delays in confirming Scottish government budgets and local authority commissioning processes meant that the funds meant to replace ESF and Employability Fund were not in place during the audit year, resulting in significant losses for the organisation.”
Right Track Scotland said 2022-23 presented “significant uncertainties following the cessation of key funding sources and delays in the introduction of replacement budgets”.
Following deficits in recent years up to 31 March 2020, the charity said it had insufficient reserves and “no funding retained within general reserves”.
As of 31 March 2023, its unrestricted reserves amounted to £449 (2022: £152) and it had negative restricted reserves of £112,000, compared with positive restricted reserves of £137,000 the previous year.
‘Our goal is to minimise the impact of the insolvency on stakeholders’
William Duncan Accountants told Civil Society that “despite efforts to continue operations under a reduced funding model, the board took the decision to close the business, make the existing staff redundant and place the company into liquidation”.
Menzies said: “Our primary goal is to minimise the impact of the insolvency on stakeholders to the greatest extent possible.
“We are proceeding as quickly as possible to get the appointment through to the interim stage to assist those employees who have been made redundant in making claims for what they are due.”
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