How do voluntary organisations spend their money?
- In 2016/17, voluntary organisations spent a total of £48.7bn representing 96% of their total income.
- More than two-thirds (71%) 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 14% 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 make up 14% of the sector’s spending.
Voluntary organisations spend the majority of their income on delivering their mission
- In 2016/17, the level of spending has grown by £343.4m to £48.7bn in line with income, although it grew more slowly than in previous years.
- Both, grant making and spending on charitable activities have seen a steady growth over the last five years. Compared to 2015/16, the biggest increase was on grants, with grant making going up by 5%.
- The amount that voluntary organisations spent on raising funds slightly dropped by £156.5m, although levels of spending on this remained relatively steady over the last five years.
- Spending on governance has dropped by 22% to its lowest levels, after a steep decrease in 2015/16. This is partly due to the new reporting standard in which governance costs are now included in other types of spending such as charitable activities or grant making.
Both spending on charitable activities and grants have gone up
- Voluntary organisations spent £6.6bn on activities for raising funds in 2016/17 which represents 14% of their total spending. The total amount has dropped slightly for the first time in six years.
- The subsectors with the highest proportion of spending towards raising funds includes research (23%), environment (19%) and health (19%).
- 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. Within the Almanac we estimate that for each pound spent on raising funds, almost £5 was raised. Find out how we produce the fundraising ratio in our notes and definitions.
Research, health and environment organisations spend the most on activities for raising funds
- Larger organisations spend a larger proportion of their income on activities for raising funds than smaller organisations. In 2016/17, super-major organisations spent 17% of their total income on this, compared to 7% of micro and small organisations.
- Super-major organisations report the highest proportion of spending on grants (19%) and 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 organisations reporting 4.3% of their total spending on this.
- Of all voluntary organisations, 5,270 (3%) organisation report no expenditure at all. The majority of these are micro and small organisations.
Bigger organisations are more likely to spend money on activities for raising funds
- Social services continued to be the subsector that spent the most, with their total spending amounting to £10.6bn in 2016/17. However, in terms of average spending, research organisations spend the most: £1.2m per organisation compared to £326,247 for social services organisations.
- 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 (£2.4bn), 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, making up 23% of their total spending.
Overall spending is highest for social service organisations, but average spending is highest for research organisations
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Notes and definitions
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.
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.