The Charity Commission’s charity sector risk assessment 2025

The Charity Commission has published its first ever annual Charity sector risk assessment 2025 (assessment), intended to provide an overview of potential risks to the sector. The survey drew on  accounts and annual returns, compliance concern investigations, serious incident reports and related casework. It aims to identify systemic risks that could impact on charities’ ability to deliver against their aims and public trust in the sector. 

While the Commission’s risk assessment goes into the risks charities face, its annual analysis of public trust in charities shows that public trust in charities remains very high,  second only to public trust in doctors.

The assessment found two key risks to the sector – (1) financial resilience and (2) risks to public benefit, as summarised below, in addition to identifying several other threats and risks:

Key risks

1. Financial resilience

• The Commission found growing evidence of a financial squeeze within the sector:
  • Challenges securing sustainable public funding
  • Increased employment costs
  • Tax changes – especially employers’ national insurance
  • Increased demand for charity services
    
    42.6% of charities reported expenditure exceeded their income in the 2023 Annual Return, up from 38.3% in 2022 (though note that Annual Return data is a ‘lagging indicator’).

• The assessment highlighted key actions trustees can take to mitigate the risk, including:
  • taking time to sufficiently plan ahead to ensure income forecasts align with operating costs
  • ensuring financial reporting is fit for purpose, regular and sufficiently detailed to inform trustee decision making
  • regularly review financial forecasting to allow for early intervention in cost or revenue variations
  • consider opportunities to deliver your charitable purpose more efficiently – eg collaborative bids, combining back office functions with other charities

2. Risks to public benefit

• Compliance cases based on alleged abuse of charities for private benefit have risen 23% over the last financial year (though they still represent only a small percentage of charities).
• The small number of charities targets or set up by bad actors for private benefit can have a significant impact on public trust and confidence in the charity sector.
• The assessment found three broad areas in which concerns about private benefit can arise:
  • Deliberate abuse of charitable status, such as by criminal enterprises to diversify and legitimise other activities
  • A dominant individual in a charity, which can affect proper oversight or challenge from the trustee board and leave the charity vulnerable to the dominant individual seeking to derive some personal benefit – around 11% of charities report having only 1 or 2 trustees, which can increase risk factors such as lack of independence
  • A lack of knowledge or understanding of the rules by charity personnel can leave them open to abuse, particularly for those operating in a complex regulatory framework
• The assessment highlighted key actions trustees can take to mitigate the risk, including:
  • ensuring financial controls are fit for purpose, and no single individual can access charity funds or assets without appropriate checks and oversight
  • regular review of financial and asset transactions and remain vigilant to protect and safeguard your charity’s assets
  • ensure any payments to trustees are lawful and that any decision has been made following Commission guidance on conflicts of interest
  • ensure you are aware of your key duties and responsibilities as a trustee and follow the Commission’s guidance on good practice
  • ensure you know your charity’s purposes and understand how each purpose is for the public benefit
  • report issues or concerns to the Commission using their serious incident reporting and whistleblowing systems

Other threats and risks

The report also examines further risks associated with poor governance, safeguarding, fraud, social tensions, emerging technologies and overseas influences.

Further resources

For help with increasing the financial resilience of your charity, we recommend Trustee Finance Toolkit - Advice and guidance for charity trustees 

Charities and risk management (CC26) - GOV.UK

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