The Institute of Fundraising insists it is in good financial health despite yesterday having informed staff that up to four will be made redundant.

Less than a year after advertising for seven new posts, the Institute has opened a consultation with staff to reduce numbers from 35 to 31.

Chief executive Peter Lewis (pictured), who joined the organisation in 2011, blamed the reduction in the Office of Civil Society strategic grant to the Institute and a spike in irrecoverable VAT from its conference programme for the shortfall leading to the redundancies.

The increase in irrecoverable VAT is not yet final, but is estimated to be in the region of £60,000. The OCS grant has decreased in value from £250,000 to £126,000. The reduction in the OCS grant was not a surprise, nor was the knowledge that running a training programme would attract irrevocable VAT, but the Institute had been expecting that other sources would make up the difference.

“We were hoping for more charitable trusts and corporate supporters to come in and support the small charities training programme, which has been delivering fantastic results for small charities,” Lewis told civilsociety.co.uk. “We haven’t secured some of the income that we’d hoped to from corporate partners and trusts in relation to that.”

While he said the Institute could not publicly identify areas in which redundancies may be made, Lewis reiterated the commitment to a strong policy and campaigns contingent. Asked whether he stood by the decision to expand staff numbers last year in light of the current consultation, Lewis said “Absolutely”.

The Institute of Fundraising ran a £500,000 deficit last financial year, but then and now insisted that it is growing and financially stable. Despite cutting the jobs, Lewis said that the organisation expects to run a surplus for the current financial year and to deliver growth with a reduced team in 2013/14.

“We’ve had a really successful year. We’ve doubled the number of our corporate supporters. We’ve launched a code. We’ve had 15 conferences. We’ve grown our organisational charity members. So it’s been a good year,” said Lewis.

“As you grow as a business and become less reliant on government money, you then get the double whammy of having to absorb more irrecoverable VAT, which is just a nonsense really,” he said.

The changes will not affect the Institute in Scotland or Wales. More detail is expected in early June, as the consultation with staff comes to a close.