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Annual returns data for 2022 shows mixed picture for charities

Melanie May | 5 April 2024 | News

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Total gross income rose in 2022 for charities submitting annual returns, but smaller charities saw spend outweigh income along with the biggest drop in income from local or national government grants, according to annual returns data for the year.

The Charity Commission’s annual return 2022 shows that total gross income for all charities that submitted an annual return reached £90.3 billion in 2022, rising by 8.48% compared to the previous year. Total gross expenditure grew 9.19% to £87.4 billion.

For approximately 12,000 charities with an annual income above £500,000 the data indicates this was largely driven by a 38% increase in fundraising income, influenced by a relaxation of COVID restrictions. However, those with an income of less than £500,000 observed a 3.24% increase in income, whilst also seeing expenditure rise by 11.6%. 

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On average larger charities saw both income and expenditure grow, while lower income charities saw expenditure outweighing their income.  

Income from government grants fell

Across all charities, income from local or national government grants fell from £8.2 billion in 2021 to £7 billion in 2022, with smaller charities reporting the biggest drop. The number of charities reporting receiving such grants also fell by 24% between 2021 and 2022 (from 35,474 to 27,001).  

More charities providing services via government contract

In contrast, the annual returns data shows that almost 6,500 charities provided services via government contracts in 2022 with a value of £9.3 billion. This is an upward trend for the fourth year running, and represents an increase of 25% from the reported value of £7.4 billion in annual returns for 2018.  

More charities than ever before reported on proxy reserve levels (a requirement when income exceeds £500,000). However, proxy reserves were broadly level with 2021 figures, at a total of £75 billion for the sector versus £73 billion in 2021.  

Volunteering numbers up – depending on the cause

Reported volunteer numbers grew overall, but with some significant variation across the sector. Education, environment, conservation and heritage charities reported large increases in volunteer figures, while religious charities, those providing front-line services and those offering support to armed forces personnel saw a decrease compared to 2021. 

Helen Stephenson, CEO of the Charity Commission, said: 

“Charities are part of the fabric of our communities, and this data from 2022 indicates a very substantial sector with a surprising degree of resilience.

 

“Since then, the cost-of-living crisis and inflation have amplified demands on charity finances, resulting in a mixed picture across the sector. Some are facing unsustainable demands.

 

“Publishing data from the annual return allows us to understand how the charity sector continues to evolve and change, and to better understand longer term trends.”

Separately, research from Sagacity suggests that charities are ‘leaking’ £6.2 billion a year – including £139mn in unclaimed Gift Aid caused by donations that cannot be matched to donors. Its Missing Billions: Charity Edition report also found that 18% of charities cannot accurately state how and where individual donations are spent with 62% of respondents agreeing they could double donations if they could better prove where money is spent.

Scott Logie, Chief Commercial Officer at Sagacity, commented:

“The amount of money being left on the table by charities is alarming – especially regarding Gift Aid. HMRC paid charities £1.6 billion last tax year, but our research indicates charities could have collected at least £139m more if they could more effectively match donors to donations. Amid the cost-of-living crisis every penny counts. Demand is soaring for charitable services like food banks, care assistance, and mental health support. Not fixing the leaky bucket is a wasted opportunity that’s preventing charities from providing more help to those in need.

 

“Almost half (47%) of  charity revenue leakage can be traced back to problems with data – presenting an opportunity for charities to close the gaps. To operate more efficiently and make the most of donations, charities must take a holistic approach. Look across the organisation at all levels to understand where issues might be occurring and how to fix them. From onboarding donors to working with partners. Long term, fixing leakage isn’t all about money either. It will also enable more accurate targeting, financial reporting and governance, improve the donor experience, and even attract more donors as they see where their valuable donations are spent.”

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