Charity Commission Highlights Key Risks Facing the Sector — What Trustees Need to Know

The Charity Commission has released its latest Charity Sector Risk Assessment, outlining the growing challenges faced by charities across England and Wales. Drawing on data from annual returns, serious incident reports and casework, the report shows an increasingly pressured environment — one that trustees must actively navigate.

Below is an overview of the key risks identified and what trustees should be doing in response.

Key Risks Identified

1. Rising Operating Deficits

The financial strain on charities continues to increase. In the 2023 Annual Return, 22.5% of charities reported a deficit, up from 20% in 2022. While running a deficit does not automatically mean a charity is insolvent, persistent shortfalls place long-term sustainability at risk.

2. Growing Demand vs Rising Costs

Many charities are experiencing higher demand for support at the same time as inflation drives up operating costs. This squeeze is making it harder for organisations to maintain services without additional funding or efficiencies.

3. Heavy Reliance on Reserves

Reserves can provide essential flexibility during difficult periods — but the report warns that over-reliance on reserves is leaving some charities with an increasingly thin safety net. This makes charities more vulnerable to sudden financial shocks.

4. Risks to Public Trust

Incidents of misuse of charity property, unauthorised payments, fraudulent Gift Aid claims or creating charities for private benefit remain relatively rare — but the Commission stresses that even isolated cases can significantly damage public confidence in the sector.

5. Wider Governance & Operational Risks

The report also highlights recurring themes such as governance weaknesses, safeguarding failures, fraud, cyber threats, and the impact of global uncertainty on charity operations.

What Trustees Should Do Now

The Commission emphasises that trustees must take a proactive, forward-looking approach to risk management. Their recommendations include:

Strengthen financial planning and forecasting

Robust budgeting, cash-flow forecasting and scenario planning help trustees respond early to financial warning signs.

Review reserves policies

Trustees should ensure reserves are being maintained at appropriate levels — and used in a controlled, sustainable way.

Stay alert to governance and compliance risks

Regular board reviews, updated policies and ongoing training help reduce the risk of governance failures.

Engage with the Charity Commission’s guidance

The Commission will be promoting additional resources this autumn to support trustees in their stewardship responsibilities.

How SJC, Chartered Accountants, Can Support

If your charity is concerned about financial resilience, regulation, or risk management, we can help you review your current position and strengthen your compliance and reporting processes.

Please get in touch — our specialist team is here to support your organisation’s long-term sustainability and governance.