Risk Analysis: THE ERISORT TRUST (SC218660)

1. Risk Rating: LOW

Justification: The Erisort Trust demonstrates a strong and improving financial position with consistently positive net assets that have grown from £76,396 (2018) to £92,547 (2025). Liabilities are minimal at £1,072, representing just 1.1% of total assets. The charity has maintained full regulatory compliance with no overdue filings and received a clean independent examination report. The primary risk factor is dependency on external funding sources, which introduces revenue uncertainty, but this is typical for community organizations of this nature.

2. Key Concerns

a) Funding Dependency and Income Volatility The charity is explicitly "dependent on grants, donations and fundraising to fund its operational costs" and "partially dependent upon the continuing support of public funding agencies." Net income has declined significantly from £1,452 (2024) to £416 (2025), a 71% reduction. Any withdrawal or reduction of public funding could materially impact operational capacity.

b) Historical Cash Flow Vulnerability The cash position dropped dramatically to £118 (2021) and £287 (2020), demonstrating that the organization is capable of near-cash depletion. While cash has since recovered to £10,411 (2025), this historical volatility suggests the charity may not maintain adequate cash reserves during periods of reduced grant income or unexpected expenditure.

c) Subsidiary Company Exposure The wholly owned subsidiary, Erisort Trading (Aline) Limited, manages the Aline Community Woodland. The financial health and contingent liabilities of this subsidiary are not detailed in these accounts, and any losses or obligations from this entity could flow back to the trust.

3. Positive Indicators

a) Strong and Growing Net Asset Base Net assets have grown steadily over 8 years from £76,396 to £92,547, representing approximately 21% growth. This indicates prudent financial management and consistent operational surpluses over the long term.

b) Minimal Liabilities Total liabilities of £1,072 against total assets of £93,619 gives a debt-to-asset ratio of approximately 1.1%. The charity has virtually no financial obligations that could threaten its solvency.

c) Excellent Regulatory Compliance Accounts and confirmation statements are current with no overdue filings. The independent examiner's report contains no qualifications or matters requiring attention. The charity has been operating since 2001, demonstrating over two decades of sustained operation.

d) Asset-Backed Operations The charity owns the Aline Forest (630 hectares), purchased in 2006, providing a tangible asset base that underpins the organization's balance sheet and community purpose.

4. Due Diligence Notes

a) Subsidiary Investigation Request and review the separate financial statements of Erisort Trading (Aline) Limited to assess its financial health, any intercompany transactions, and contingent liabilities that may affect the trust.

b) Funding Source Analysis Obtain details of specific grant funding sources, their terms, renewal dates, and any conditions attached. Assess the concentration risk if a significant proportion of income derives from one or two public funding bodies.

c) Cash Management Review Investigate the circumstances leading to the near-zero cash positions in 2020-2021. Determine whether this was due to capital expenditure, timing of grant receipts, or operational difficulties. Assess whether current cash reserves of £10,411 are adequate given historical volatility.

d) Restricted vs. Unrestricted Funds The accounts indicate both restricted and unrestricted funds. Clarify the composition of the £92,547 net assets between restricted and unrestricted categories, as only unrestricted funds (£16,846 per the trustees' report) are available for general operational use.

e) Woodland Valuation and Income Generation Assess whether the Aline Community Woodland generates commercial income and the sustainability of any such revenue streams. Determine if the fixed asset values on the balance sheet reflect current market valuations.