A new Charity Sector Risk Assessment, recently published by the Charity Commission, highlights some of the serious challenges facing charities in England and Wales.

The report draws on data from annual returns, serious incident reports, and casework, and notes a number of pressures that are making it increasingly difficult for many organisations to operate effectively.

What the Risk Assessment Found

Key issues identified in the report include:

  • Rising operating deficits: In the 2023 Annual Return, 22.5% of charities reported a deficit (spending more than they receive), up from 20% in 2022.

  • Increasing demand versus rising costs: Many charities are experiencing higher demand for their services, while costs continue to rise and inflation reduces the value of funding.

  • Use of reserves: Reporting a deficit does not mean a charity is insolvent. However, a number of charities are relying on reserves to cover the shortfall between income and expenditure. Over-reliance on reserves can quickly erode a safety net.

  • Risks to public trust: Although uncommon, issues such as misuse of charity property, unauthorised payments, false Gift Aid claims, or setting up charities for private benefit were highlighted as significant because even isolated incidents can seriously damage public confidence.

  • Other concerns: Governance, safeguarding, fraud, cyber threats, and external factors such as geopolitical instability were also noted as important risks.

Guidance for Trustees

The report provides advice for trustees, emphasising the importance of careful forecasting, forward planning, and acting promptly on early warning signs.

The Charity Commission also offers a range of guidance to help trustees meet their responsibilities for financial stewardship, which will be promoted further in a new awareness campaign this autumn.

If you would like tailored support for your charity, please get in touch. We would be happy to help.

The full report can be accessed here: https://www.gov.uk/government/publications/charity-sector-risk-assessment-2025/charity-sector-risk-assessment-2025