The Charity Commission's second annual Charity Sector Risk Assessment describes a sector facing more sophisticated abuse, including attempts to use charity status for private benefit and cases that cut across multiple regulators. The report is framed as guidance for trustees, but it also doubles as a signal to government about pressure points in the current oversight model. Read alongside the Commission's explanation of its own remit, the document is as much about regulatory gaps as it is about outright misconduct. Where responsibilities are split or unclear, the regulator says bad actors can exploit the seams between agencies and vulnerable users may be left with weaker protection than they expect.
According to the Charity Commission, concerns about charitable status being abused for private benefit rose by 29 per cent in 2025-26 to 374 cases. That followed a 38 per cent rise in 2024-25, when cases increased to 291 from 211 in 2023-24. The regulator also reports a rise in particularly complex casework, often where a charity operates in an area subject to multiple oversight bodies or where remits are not clearly drawn. Over the last year, the Commission formally passed information to other agencies 500 times, including to HMRC, the police and local authorities, an 8 per cent increase on the previous 12 months.
One of the clearest messages in the assessment concerns service delivery. Where charities run schools or care services, specialist regulators such as Ofsted and the Care Quality Commission can assess quality and standards. In other areas, including some out-of-school settings and certain housing services, there may be no equivalent subject-expert regulation. The practical consequence is significant. A charity may be meeting charity law requirements while users still face poor or unsafe services, and those users may have limited routes for redress. The Commission states plainly that, as charity law regulator, it can examine governance and legal compliance, but it does not have the powers or resources to guarantee service quality.
That creates a policy problem as well as an operational one. The Commission says it has raised these gaps with government and other stakeholders, while urging trustees to carry out proper due diligence before taking on new service delivery arrangements and to apply recognised practice in their field. The report also echoes calls from the National Lead Police Force for Fraud for policing and intelligence capability to keep pace with the rise in reported fraud in England and Wales. For the charity sector, that matters because fraud concerns often do not sit neatly in one system: they can involve tax, grant funding, identity checks, financial crime and safeguarding at the same time.
The financial picture is somewhat stronger than during the most acute recent pressures, but the assessment does not describe a settled recovery. The Charity Commission says sector income has edged up and is now increasing slightly faster than total spending, which may indicate an early improvement at aggregate level. That headline masks continued strain. Two in five charities saw spending exceed income, and a quarter of charities with annual incomes below £10,000 reported that they only just broke even in 2024. For trustees, the report places routine budgeting, cash-flow monitoring and financial forecasting firmly inside the risk management agenda.
The assessment also records a change in the tools available to fraudsters. Rapid advances in artificial intelligence are being used to support fraudulent applications, including attempts to register sham charities or obtain grant funding through more convincing documents and presentation. The Commission says it has tightened scrutiny at the registration stage, with fewer than half of all applications now being approved. In 2025-26, 45 per cent of applications led to a new registration, compared with 72 per cent in 2016-17. That is a marked shift in the operating environment for genuine applicants as well as for the regulator.
Safeguarding remains a major part of the Commission's casework. Around a quarter of concerns raised with the regulator in recent years have related to safeguarding, and the assessment draws particular attention to allegations involving people in positions of power or influence, including spiritual influence. Alongside safeguarding, the report repeats last year's warning about governance weaknesses, rising social tensions and wider geopolitical instability. The Commission says it has seen more casework linked to allegations of extremism or charities acting outside their stated purposes, particularly in matters connected to the Israel-Palestine conflict.
Paul Latham, the Charity Commission's Director of Communication and Policy, says the vast majority of charities are well run and continue to make a positive contribution, but that the smaller proportion affected by these risks can still have a disproportionate effect on beneficiaries, regulatory capacity, and public trust and confidence. The assessment is based on charity accounts, trustee annual reports, serious incident reporting, investigations, casework and intelligence referrals from other public bodies. Its immediate purpose is practical: to help trustees review risk registers, test assumptions about oversight, and decide whether existing controls are strong enough for a more complex operating environment. It also underlines that voluntary trustees are carrying a more demanding governance burden than many outside the sector may recognise.