🏛️ Overview: A New Annual Risk Picture for the Charity Sector
The Charity Commission for England and Wales has released its first ever Charity Sector Risk Assessment (2025) — a landmark report outlining the major risks currently facing charities.
Drawing on annual returns, charity accounts, serious incident reports, and compliance investigations, the assessment provides a high-level overview of systemic risks that could affect charities’ ability to achieve their purposes and sustain public trust.
Despite growing pressures, the findings are reassuring: public trust in charities remains very high, second only to trust in doctors.
💸 1. Financial Resilience: A Sector Under Strain
The Commission highlights financial resilience as the most pressing risk facing charities.
Main challenges include:
- Difficulty in securing long-term, sustainable funding
- Rising employment costs and employer National Insurance contributions
- Tax changes and increased cost of living pressures
- Higher demand for charity services as communities face ongoing hardship
In 2023, 42.6% of charities reported that their spending exceeded their income, compared to 38.3% in 2022 — a sign of increasing strain on financial sustainability.
Actions for trustees:
- Develop forward-looking budgets and align income forecasts with operating costs
- Ensure financial reports are regular, accurate, and informative
- Review financial forecasts frequently to identify issues early
- Explore collaborative models, such as joint bids or shared back-office services, to increase efficiency
💬 2. Risks to Public Benefit and Charity Integrity
The Commission reports a 23% rise in compliance cases involving alleged private benefit, though these still represent a small minority.
Areas of concern:
- Deliberate misuse of charitable status by bad actors or criminal enterprises
- Dominant individuals undermining trustee oversight — with around 11% of charities run by only one or two trustees
- Lack of understanding of legal duties and governance responsibilities among charity staff and trustees
Actions for trustees:
- Put robust financial controls in place — no single person should access charity funds unchecked
- Regularly review transactions and asset management for signs of misuse
- Ensure any trustee payments are lawful and fully documented
- Understand your charity’s purposes and ensure each delivers a genuine public benefit
- Report concerns or incidents promptly through the Commission’s serious incident reporting or whistleblowing channels
⚠️ Other Emerging Risks in the 2025 Assessment
Beyond finance and governance, the assessment highlights additional risks:
- Weak governance and oversight capacity
- Safeguarding failures
- Fraud, cybercrime, and data misuse
- Social and reputational tensions
- Challenges from emerging technologies and overseas operations
These risks underline the importance of resilient leadership and effective compliance frameworks across the sector.
🌟 Why This Matters for Charities and Trustees
The Charity Sector Risk Assessment 2025 is more than a report — it’s a roadmap for how trustees can strengthen governance and protect public confidence.
With the cost of living crisis, rising operational costs, and increasing scrutiny, trustees should:
- Revisit their risk management frameworks
- Invest in training on financial oversight and compliance
- Collaborate with other charities to deliver greater impact and efficiency
By addressing these challenges head-on, charities can maintain the trust and transparency that underpin the sector’s success.
📄 Read the full report: Charity Sector Risk Assessment 2025 (PDF)
📚 Source: Charity Commission for England and Wales
