How do voluntary organisations spend their money?

Overview

  • In 2017/18, voluntary organisations spent a total of £51.3bn, representing 96% of their total income.
  • More than two-thirds (70%) is spent on charitable activities which includes things that are directly linked to an organisation’s purpose like running a food bank or providing a mentoring service. A further 15% goes towards grant making which can be seen as indirect spending on charitable activities.
  • Voluntary organisations also spend money on activities for raising funds, such as fundraising and trading, which makes up 14% of the sector’s spending.

Voluntary organisations spend over 85% of their income on delivering their mission

Over time

  • In 2017/18, the level of spending has grown by £863m to £51.3bn, comparable to years preceding 2015/16.
  • Spending on charitable activities has been relatively stable since 2005/06 with a jump in 2008/09 and 2015/16, while spending on grants has grown fairly steadily over the last five years but fell by 1% in 2017/18.
  • The amount that voluntary organisations spent on raising funds grew slightly by £25m. This type of spending has grown the most since the recording of this data set.
  • Spending on governance has dropped by a mere 3% and stood at £403m in 2017/18, after sharp decreases in 2015/16 (-40%) and 2016/17 (-26%). These reductions are linked to the new reporting standard (FRS102) whereby governance costs are included in other types of spending such as charitable activities or grant making. With the 2017/18 financial accounts we may have seen the last effects of charities changing over to this standard.

Costs on activities for raising funds have grown faster than spending on charitable activities and grant making

Raising funds

  • Voluntary organisations spent £7.1bn on activities for raising funds in 2017/18 which represents 14% of their total spending, the same proportion since 2014/15. However, the total amount has risen again after dropping in 2016/17.
  • The subsectors with the highest proportion of the sector’s spending going towards raising funds are social services (18%), health (16%) and culture and recreation (14%).
  • While spending on raising funds as a proportion of an organisation’s total spending is often used as an indicator of efficiency, it doesn’t measure return on investment. Within the Almanac we estimate that for each pound spent on raising funds, £4.57 was raised. Find out how we produce the fundraising ratio in our notes and definitions.

Social services, health, and culture and recreation organisations spend the most on activities for raising funds

Staff costs

  • The voluntary sector employs more than 900,000 people and spending on staff costs makes up a notable proportion of the sector’s total expenditure (38%). In 2017/18, total staff costs increased by 4% and stood at £19.5bn.
  • Smaller organisations are less likely to employ staff, so they tend to spend a smaller proportion of their expenditure on staff. Staff costs made up 10% of micro and small organisations’ total spending while they accounted for more than a third of total spending for medium-sized and bigger organisations.

Smaller organisations spend a smaller proportion of their expenditure on staff costs

By size

  • Larger organisations spend a larger proportion of their income on activities for raising funds than smaller organisations. In 2017/18, super-major organisations spent 17% of their total income on this, compared to 9% of micro and small organisations.
  • Micro and small organisations report the highest proportion of spending on grants (21%) – this includes a number of asset rich trusts and foundations that give out money from their funds but don’t generate a lot of income. Medium sized organisations report the highest proportion of spending on charitable activities (76%).
  • Smaller organisations spend a bigger proportion of money on governance, with micro and small, and medium organisations each reporting 3% of their total spending on this.
  • Of all voluntary organisations 1,716 (1%) organisations report no expenditure at all. The majority of these are micro and small organisations.

Larger organisations are more likely to spend money on activities for raising funds

By subsector

  • Social services continued to be the subsector that spend the most, with their total spending amounting to £11.2bn in 2017/18. However, in terms of average spending, research organisations spend the most: £1.2m per organisation compared to £347,000 for social services organisations. Parent-teacher associations spent the least per organisation (£12,700).
  • Charitable activities make up the majority of spending for most subsectors, except for research organisations and grant-making foundations.
  • Grant-making foundations spend the majority of their money on grants (£2.5bn), accounting for over half (55%) of their spending. Likewise, research organisations spend 40% on grants and have the highest proportion of spending on raising funds alongside health organisations, making up 20% of total spending for both subsectors.

Overall spending is highest for social service organisations, but average spending is highest for research organisation

More data and research

Notes and definitions

Spending

The Financial Reporting Standard FRS102 requires voluntary organisations to assign their spending to one of three categories. Each of these then include all costs related to that activity, including staff costs, management and administration.

Expenditure on raising funds includes the costs of:

  • Fundraising trading, for example costs for organising events, lotteries or running charity shops
  • Generating voluntary income or fundraising costs with direct marketing, seeking grants or contracting agencies to seek funds on behalf of the organisation
  • Investment management costs, eg obtaining investment advice, rent collection, property repairs etc.

Expenditure on charitable activities includes the cost of:

  • Money spent delivering the work that the organisation was set up to do, including governance costs

Other expenditures include expenditures that fit in neither of the above categories.

Fundraising ratio

There are different ways of considering the effectiveness of fundraising. While the spending on raising funds as a proportion of an organisation’s total spending is often used as an indicator of efficiency, it doesn’t measure return on investment.

In the Almanac we use the following fundraising ratio:

(Voluntary income + income from activities for raising funds) / (spending on raising funds – cost of managing investments)

This ratio considers all voluntary income and the income from activities for raising funds, over the total amount spent on raising funds minus the amount spent on managing investments. We believe this provides a good overall indication of fundraising performance by capturing the full range of fundraising income and costs.