Following the money: transparency in charity funding flows

The debate in brief

When a donor gives money to a charity, or a government department awards a grant, there is a reasonable expectation that the money can be tracked to the point where it does something useful. In practice, the trail is often harder to follow than it should be. Large charities routinely sub-grant to smaller organisations, pass funds through intermediary bodies, channel money to non-charity delivery partners, or use commercial subsidiaries to carry out activities at arm's length. Each link in the chain reduces visibility. By the time the money reaches frontline delivery, it may have passed through two, three, or more organisations, each taking a share for management and administration, and each reporting on the transaction in different ways -- or not at all.

This is not primarily a story about fraud, which remains rare in the charity sector. It is a story about structural opacity -- the way legitimate funding arrangements can make it genuinely difficult for regulators, donors, parliamentarians, and the public to understand where money goes, how much is spent on what, and whether the end result justifies the original investment. The concern has grown as the largest UK charities have become more complex, more international, and more reliant on mixed funding models that blur the boundaries between charitable and commercial activity.

Quick takeaways

The arguments

The case that transparency is inadequate

The current charity accounting framework, based on the Charities SORP (Statement of Recommended Practice), requires charities to report their income and expenditure by type and activity, and to describe their activities in a trustees' annual report. But the SORP does not require charities to itemise individual grants made to other organisations, to disclose the identity of sub-grantees, or to report how much of their income is passed through to delivery partners versus retained for management costs. For larger charities, the accounts may show millions of pounds categorised as "grants to institutions" without any breakdown of who received what.

This matters most in three contexts. First, in international development, where UK-based charities routinely channel funds to local partner organisations overseas. The Independent Commission for Aid Impact (ICAI) has repeatedly noted that the UK aid chain involves multiple intermediaries, each taking a management fee, and that tracking funds to the point of delivery is often impossible from published accounts alone. Second, in government commissioning, where prime contractors (often large charities) sub-contract to smaller organisations, with the National Audit Office and Public Accounts Committee expressing concern about visibility and value for money. Third, in domestic grant-making, where community foundations and intermediary funders distribute money from pooled sources, making it difficult for original donors to track the ultimate use of their contributions.

The Charity Commission's 2022 thematic review of financial controls in grant-making charities found "significant variability" in the quality of due diligence and monitoring applied to downstream grants, with some organisations exercising robust oversight and others relying on minimal reporting from recipients.

The case that the system works well enough

Defenders of the current framework argue that charity accounts are already more transparent than those of most private companies, and that the SORP strikes a reasonable balance between accountability and administrative burden. Requiring charities to itemise every sub-grant would impose significant reporting costs, particularly on smaller organisations, without a proportionate benefit.

The Charity Finance Group has argued that the focus should be on outcomes rather than input tracking -- what matters is whether the money achieves its charitable purpose, not the precise route it takes to get there. Excessive transparency requirements can also have perverse effects: if charities are required to disclose every downstream partner, smaller delivery organisations may be exposed to hostile attention, competitive disadvantage, or unwanted contact from other funders seeking to bypass the intermediary.

In international development, there is a particular sensitivity. Local partner organisations in fragile or conflict-affected states may face security risks if their funding relationships are publicly disclosed. The Bond network, which represents UK international development organisations, has cautioned against transparency requirements that do not account for the operational realities of working in difficult environments.

More broadly, the argument is that charity regulation should be proportionate. The Charity Commission already investigates cases where financial controls are inadequate, and serious incidents involving misapplied funds must be reported. Adding layers of reporting for the many to address the failures of the few is a familiar regulatory trap.

The structural gap

The most significant transparency gap is not within the charity sector but at the boundary between it and other organisational forms. When a charity passes money to a community interest company, a social enterprise, a private consultancy, or an overseas non-governmental organisation that is not a UK-registered charity, the downstream body is not subject to charity reporting requirements. Its accounts may be filed at Companies House with minimal detail, or -- in the case of overseas organisations -- may not be publicly available at all.

This is the point where the money trail most often goes cold. Not because anyone is hiding anything, but because the regulatory frameworks for different organisational types do not join up. A pound of public money can move from a government department to a charity, from the charity to a CIC, from the CIC to a private consultancy, and at each stage the reporting requirements change, the visibility decreases, and the practical ability of any single regulator to follow the trail diminishes.

The evidence

The scale of charity-to-charity and charity-to-non-charity funding flows is not centrally tracked, which is itself indicative of the problem. The 360Giving initiative, which encourages funders to publish open grant data in a standardised format, has made significant progress: as of early 2026, over 320 funders have published data on more than 1 million grants through GrantNav, the initiative's open data platform. But participation is voluntary, coverage is uneven (large institutional funders are well represented; smaller charities and pass-through arrangements are not), and the data captures first-tier grants rather than downstream flows.

The National Audit Office has examined charity funding chains in several contexts. Its 2019 report on government grants found that departments had "limited visibility" of how grant funding was used once it reached intermediary bodies. The Public Accounts Committee's 2020 report on the management of government grants concluded that "too often, departments cannot demonstrate that grants achieve value for money" and recommended improved tracking of funds through delivery chains.

In international development, ICAI's reviews have consistently identified the "aid chain" as a transparency challenge. A 2021 review of UK-funded programmes in East Africa found that funds typically passed through three to four organisations before reaching beneficiaries, with each layer taking between 5% and 15% for overhead and management costs. The review noted that while individual transactions were generally well documented, the cumulative effect was a significant reduction in the proportion of funding reaching frontline delivery -- and that this was not visible from the lead organisation's published accounts.

The Charity Commission's annual report on serious incident reports provides some relevant data. In 2024-25, the Commission assessed 3,132 new serious incident reports, with financial crime and fraud accounting for a significant minority. Cases involving misapplied grants or inadequate financial controls in sub-granting relationships appear regularly, though the Commission does not publish a detailed breakdown of these categories.

Current context

Several developments have brought this issue into sharper focus. The Charity Commission's 2023-2028 strategy includes a commitment to "improving transparency" and "making better use of data," including exploring how charity reporting requirements might be updated to capture more information about downstream funding. A consultation on changes to the annual return, including new questions about grant-making to non-charity bodies, was undertaken in 2024, with revised requirements expected to take effect from 2026-27.

The 360Giving initiative continues to expand. Its 2025 strategy emphasises moving beyond first-tier grant data to capture funding flows through chains, though the technical and practical challenges of this are substantial. The initiative has also partnered with the Charity Commission to explore linking open grant data with charity register information, which would make it easier to trace funding between registered charities.

In parliament, the All-Party Parliamentary Group on Charities and Volunteering has taken an interest in funding transparency, holding evidence sessions in 2025 on the accountability of intermediary funders and pass-through arrangements. Several witnesses, including representatives from NCVO and the Association of Charitable Foundations, acknowledged the transparency gap while cautioning against disproportionate reporting burdens.

The broader political context is one of tightening scrutiny. High-profile cases -- including questions about funding flows involving UK charities operating in conflict zones, and media investigations into the use of charity funds by organisations with political connections -- have kept the issue in public view. The Charity Commission has emphasised that charities must be able to demonstrate that funds are used for charitable purposes, even when delivery is outsourced to third parties.

Last updated: April 2026

What this means for charities

Any charity that makes grants to other organisations, sub-contracts service delivery, or channels funds through intermediaries should anticipate that reporting expectations are going to increase. The direction of travel is clear: the Charity Commission, parliament, and the public want to be able to follow the money further than current reporting allows.

The practical implication is that charities need robust systems for tracking downstream funding -- not just for compliance, but for their own assurance. A charity that cannot demonstrate where its grants went, what they achieved, and how much was absorbed in intermediary costs is vulnerable to both regulatory scrutiny and reputational damage. This is particularly important for organisations that receive public funding, where the NAO and PAC have made their expectations explicit.

For smaller charities that receive funding through chains, the transparency agenda is double-edged. Greater visibility may help them demonstrate their impact and attract direct funding. But it may also expose them to additional reporting requirements imposed by upstream funders, adding to the compliance burden that already weighs disproportionately on smaller organisations.

The most constructive response is to get ahead of the change. Publishing open grant data through 360Giving, maintaining clear records of downstream funding relationships, and being transparent in annual reports about how much funding is passed through and how much is retained are all steps that charities can take now, before regulatory requirements mandate them.

Common questions

What is sub-granting?

Sub-granting is when a charity that receives a grant passes some or all of the funding to another organisation to carry out the work. It is standard practice in international development, government commissioning, and community grant-making. The original funder awards a grant to a lead charity, which then distributes portions to delivery partners. Each stage may involve a management fee or overhead deduction.

Do charities have to disclose who they fund?

Current requirements vary. The Charities SORP requires charities to report expenditure on grants in their accounts, and the trustees' report should describe grant-making activities. But there is no general requirement to list individual grants, name recipients, or disclose how much each received. Some funders publish this information voluntarily through 360Giving; many do not. The Charity Commission is exploring enhanced disclosure requirements for future annual returns.

How much money is lost in funding chains?

"Lost" is the wrong word -- intermediary costs are generally legitimate management and administration expenses. But the cumulative effect can be significant. ICAI reviews of international aid chains have found that between 15% and 40% of original funding can be absorbed by intermediary organisations before reaching frontline delivery, depending on the number of layers and the nature of the programme. In domestic commissioning, the percentages are typically lower but still material.

What is 360Giving?

360Giving is a UK initiative that promotes open, standardised grant data. Over 320 funders publish data through its platform, covering more than 1 million grants. The data is freely accessible through GrantNav and allows researchers, policymakers, and the public to see who is funding what. Participation is voluntary, and coverage of downstream or pass-through funding is limited.

Is this a bigger problem in international development?

The transparency challenge is more acute in international contexts because of longer funding chains, multiple jurisdictions, different regulatory frameworks, and the practical difficulties of monitoring in fragile or conflict-affected states. But the structural issues -- multi-layered delivery, funds passing to non-charity bodies, and inconsistent reporting -- exist in domestic funding too, particularly in government commissioning.

What reforms are being considered?

The Charity Commission is updating annual return requirements to capture more information about grant-making to non-charity bodies, with changes expected from 2026-27. 360Giving is working to extend open data coverage beyond first-tier grants. Parliament has signalled interest in stronger accountability for intermediary funders. The NAO continues to press for better tracking of public funds through charity delivery chains. No single reform will resolve the issue, but the cumulative direction is toward greater transparency.

Key sources and further reading

• 360Giving: GrantNav -- 360Giving, ongoing. The open data platform for UK grant-making, with data from over 320 funders covering 1 million+ grants.

• Government grants: management and assurance -- National Audit Office, 2019. NAO report finding limited departmental visibility of how grant funding is used once it reaches intermediary bodies.

• The management of government grants -- Public Accounts Committee, 2020. Parliamentary committee report recommending improved tracking of public funds through charity delivery chains.

• Review of UK aid programmes in East Africa -- Independent Commission for Aid Impact, 2021. Assessment of funding chains in international development, including analysis of intermediary costs and downstream visibility.

• Charity Commission thematic review: financial controls in grant-making charities -- Charity Commission, 2022. Review finding significant variability in due diligence and monitoring of downstream grants.

• Charity Commission Strategy 2023-2028 -- Charity Commission, 2023. The regulator's strategic framework, including commitments to improving transparency and data use.

• Charities SORP (FRS 102) -- Charity Commission / OSCR, current edition. The accounting framework for charity reporting, including requirements for disclosing grant-making activity.

• Bond: Principles for transparency in international development -- Bond, various publications. The UK network for international development organisations, including guidance on balancing transparency with operational security.