Charity Commission Highlights Key Risks Facing Charities

The Charity Commission has recently published a Charity Sector Risk Assessment, drawing on data from annual returns, serious incident reports, and casework, to highlight the main challenges currently affecting charities in England and Wales.

The report is an important reminder for trustees of the pressures charities face and the need for careful governance and financial planning.

Key risks identified

Some of the main issues highlighted include:

• Rising operating deficits: In the 2023 Annual Return, 22.5% of charities reported a deficit, meaning they spent more than they brought in, up from 20% in 2022.

• Increasing demands versus costs: Many charities are experiencing higher demand for services, while rising costs and inflation are reducing the real value of funding.

• Use of reserves: A deficit does not automatically indicate insolvency, but over-reliance on reserves to cover gaps between income and expenditure can quickly deplete a charity’s safety net.

• Risks to public trust: Although relatively rare, issues such as misuse of charity property, unauthorised payments, false Gift Aid claims, or charities set up for private benefit can cause significant reputational damage.

• Other concerns: The report also highlights governance, safeguarding, fraud, cyber threats, and external pressures such as geopolitical instability as ongoing challenges.

What trustees should do

The Charity Commission stresses the importance of:

• Careful financial forecasting and planning to anticipate shortfalls.

• Responding quickly to early warning signs to prevent small issues from becoming serious problems.

• Following guidance on financial stewardship and governance to protect the charity’s resources and reputation.
  

The Commission plans to promote this guidance further through an awareness campaign this autumn, helping trustees to navigate these risks effectively.

If you would like personalised advice for your charity, from financial planning to governance support, our team at SJC, Chartered Accountants can help ensure your charity is resilient, compliant, and well-prepared for challenges ahead.