What do voluntary organisations spend their money on?

Overview

The voluntary sector spent £53.8bn in 2020/21

  • Voluntary sector spending stands at £53.8bn in 2020/21. This is a £4.9bn (8%) decrease from 2019/20, after adjusting for inflation. Given the smaller decrease in sector income (£3.6bn or 6%), the gap between income and spending grew – with spending worth 95% of all income, compared with 97% in 2019/20.
  • The biggest type of spending is on charitable activities at £36.9bn or 69% of all voluntary sector spending, followed by £9.7bn (18%) on grants and £6.6bn (12%) on activities for raising funds.
  • Compared to the previous year, the cost of charitable activities went down by £4.6bn (11%), activities for raising funds fell by £900m (12%) and grants rose by £600m (7%).

Most voluntary sector spending is on charitable activities, followed by grants

Over time

  • Overall spending has risen from £35.1bn in 2000/2001 (adjusting for inflation) to £53.8bn in 2020/21 – a 53% increase.
  • By 2010/11, voluntary sector spending rose to £48.1bn. Spending declined slightly in 2011/12, likely due to the impact of the Global Financial Crisis and government austerity, then rose again steadily from 2012/13 until 2019/20. It has dropped back by 8% in 2020/21.
  • This decreased spending could probably be attributed to the effects of the Covid-19 pandemic when many charities had to close down operations and/or resorted to online activities over in-person activities.
  • For types of spending, activities for raising funds are almost double the level in 2000/01, from £3.6m to £6.6bn in 2020/21. Charitable activities are 65% higher, rising from £22.4bn to £36.9bn in the same period. Grants rose from £6.4bn to £9.7bn. However, governance costs fell from £2.7bn to £582m, a decline of 78%.
  • Compared with 2019/.20 spend, in 2020/21, the only type of spending that did not decline was grants, which rose 7% from £9bn to £9.7bn. Spend on activities to raise funds fell by 12% from £7.5bn to £6.6bn, while spending on charitable activities fell by 11% from £41.5bn to £36.9bn. This provides further evidence that changes in expenditure were related to the pandemic.

Overall spending had risen fairly consistently from 2000/01 to 2019/20, but has declined in 2020/21 on all activities other than grants, for which spending has continued to increase

By subsector

  • The highest spending subsector is social services (£11.9bn) followed by health (£6bn) and international and grant-making organisations (each £5.6bn).
  • Employment and training organisations (84%) spent the largest proportion on charitable activities while grant-making foundations spent the least (28%)
  • Organisations in development spent the most on activities for generating funds (23%) while village halls spent the lowest (5%).
  • Grant-making foundations spent the largest proportion on grants (58%) followed by research (39%), while the lowest proportion was spent on education (6%) and playgroups and nurseries (5%).
  • Unlike in 2019/20 when parent-teacher associations had spent 47% on grants, this spending stands at just 9% in 2020/21, with spending shifted to charitable activities (79% up from 42%). This may well reflect a shift in priorities during the covid-19 pandemic, with remote learning the norm.

Employment and training organisations spent the highest proportion on charitable activities, while grant-making foundations spent the highest on grants – spend for parent-teacher associations has shifted from grants to charitable activities in 2020/21

By size

  • Major and super-major organisations (income over £10m) account for over half (55% or £30bn) of all voluntary sector spending.
  • Micro and small charities (income less than £100,000) made up 80% of all voluntary sector organisations, yet make up only 4% (£2.4bn) of all spending.
  • Micro and small, and medium organisations spent a lower proportion on activities for raising funds (8% and 10% respectively) and grants (13% and 11%) than all sizes of larger organisations (income of £100,000 or more).
  • While in 2019/20, micro and small organisations had spent a smaller proportion on charitable activities and more on grants than medium organisations and above, in 2020/21, there was a shift away from grants towards charitable activities overall for this size of organisation. In 2020/21, spending on charitable activities was higher for micro and small (73%) and medium organisations (76%) than for major (67%) and super-major charities (64%). The spend on grants of micro and small (13%) and medium (11%) organisations was lower than those of major (20%) and super-major charities (22%).
  • Similar to 2019/20, micro and small organisations spent a lower proportion on activities for raising funds (8%) than super-major organisations (14%) and more on governance (7% compared with close to 0%).

Compared with larger charities, small and micro organisations spend a larger proportion on charitable activities, and a smaller proportion on grants (a reversal of the pattern in 2019/20), but they continue to spend a relatively larger proportion on governance

More data and research

Links and resources

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
  • 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  – for example, with direct marketing, seeking grants or contracting agencies to seek funds on behalf of the organisation.
  • Investment management costs – for example, obtaining investment advice, rent collection and property repairs.

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 do not fit in either of the above categories.

Fundraising ratio

There are different ways of considering the effectiveness of fundraising. One way it is calculated is by working out the raised funds as a proportion of an organisation’s total spending.

This is often used as a way to show efficiency. A challenge with this approach is that 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, divided by 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.

This page was last reviewed for accuracy on 12 October 2023