How Do I Show Funders Where Their Money Is Spent

Funders want confidence. They want to know that the money they give is used responsibly, aligns with their expectations, and makes a measurable difference. Whether a charity receives grants, donations, corporate sponsorship, or public funding, one of the most important responsibilities trustees have is showing funders exactly where their money goes.

Being transparent does more than satisfy reporting requirements. It strengthens credibility, builds trust, increases the likelihood of future funding, and demonstrates professionalism. In my opinion charities that communicate their impact clearly stand out immediately because funders want reliability as much as they want results.

This guide explains the practical ways charities can show funders how money has been spent, what information funders expect to see, how to organise reporting, and how to avoid the common mistakes that weaken funder confidence.

Why Showing Funders Where Money Is Spent Matters

Funders care about impact, governance, and financial stewardship. They need confidence that their money:

• Has been used as intended

• Supports the agreed activities

• Reaches the right beneficiaries

• Is accounted for properly

• Produces measurable results

When charities provide clear evidence of spending funders are more likely to:

• Renew grants

• Provide multi year funding

• Increase the size of the award

• Recommend the charity to other funders

• Trust the charity with greater responsibility

Transparency also protects trustees. If a charity can show a clear audit trail it reduces the risk of challenge from stakeholders or the Charity Commission and prevents accusations of mismanagement.

What Funders Expect to See

Most funders expect information that shows both financial accountability and practical impact. Although every funder sets its own requirements, most want some combination of:

1. A breakdown of how the money was spent

2. Evidence that spending matched the proposal

3. Data showing the output or outcomes achieved

4. Case studies or examples of the work delivered

5. Financial records or receipts if required

6. A narrative summary explaining challenges and successes

7. A comparison between planned and actual activities

8. Confirmation that funds were not used for unapproved purposes

Funders are not just checking for fraud. They want reassurance that the grant or donation created real value.

The Two Types of Reporting: Financial and Impact

Showing funders where money is spent usually involves two separate types of reporting. Financial reporting shows how the money was used. Impact reporting shows what difference the money made.

Both matter. A charity can spend money exactly as planned but still not achieve meaningful results. Likewise a charity can create a strong impact but weaken funder confidence if it cannot demonstrate where the money went.

Financial Reporting: How to Show the Money Was Used Properly

Financial reporting varies depending on the size of the grant and the funder’s expectations. Most charities use the following methods to show financial accountability.

1. A Detailed Income and Expenditure Statement

This shows:

• How much money the charity received

• How it was allocated

• How much has been spent

• How much remains unspent

It should match the categories in the grant agreement such as staff costs, equipment, venue hire, materials, travel, outreach, and administration.

2. Ring Fenced Accounting

Ring fencing means keeping project funds separate inside the accounts so they can be tracked easily. This is often done by:

• Creating a separate fund within accounting software

• Assigning a project code

• Using restricted funds

• Keeping a clear audit trail

Ring fencing makes it easier to show funders exactly where spending occurred.

3. Receipts and Documentation

Some funders require proof of spending. This includes:

• Receipts

• Invoices

• Payroll records

• Contracts

• Bank statements

• Delivery notes for purchased materials

Not all funders need this level of detail but charities should always keep documentation for seven years.

4. Budget Versus Actual Comparison

This compares the original budget with what actually happened. It highlights:

• Underspends

• Overspends

• Savings

• Cost changes

• Unexpected expenses

Funders appreciate honest explanations. If costs were different from expected the charity should explain why.

5. Using Accounting Software

Modern accounting software makes project reporting easier. Packages allow:

• Project tags

• Cost centre reporting

• Restricted fund tracking

• Custom financial reports

This removes guesswork and ensures funders receive accurate numbers.

Impact Reporting: Showing the Difference the Money Made

Impact reporting explains the human or environmental benefit funders helped create. It is the story, evidence, and outcomes that demonstrate value.

1. Outputs

These are the direct activities delivered. Examples include:

• Number of workshops held

• Number of people supported

• Hours of training delivered

• Meals provided

• Items distributed

Outputs are straightforward and measurable.

2. Outcomes

Outcomes describe the changes created by the work. Examples include:

• Improved confidence

• Reduced isolation

• Better health

• Increased employment

• Higher skill levels

Outcomes show effectiveness. Many funders care more about outcomes than outputs.

3. Data and Statistics

Funders value numbers such as:

• Surveys

• Attendance figures

• Progress assessments

• Feedback scores

• Completion rates

• Follow up evaluations

Data provides evidence. It strengthens credibility.

4. Case Studies and Stories

Human stories help funders connect emotionally with the project. Case studies might describe:

• A person whose life improved

• How a family benefited

• How the project helped a community group

• A specific moment that illustrates impact

These stories make reporting memorable and relatable.

5. Photos and Media

Where appropriate the charity can include:

• Photos

• Short videos

• Visual summaries

• Project highlights

Funders respond positively to well presented visual evidence. Charities must ensure they have permission before sharing any images.

6. Testimonials

Testimonials from beneficiaries, partners, or participants provide authenticity. They help show funders that the project has real support.

7. Evaluation Reports

For larger projects funders may expect a formal evaluation. This often includes:

• External reviewer findings

• Methodology description

• Measurable results

• Recommendations

This is more common for large grants or multi year programmes.

How to Prepare for Reporting Before Spending Begins

Charities often make reporting difficult for themselves by waiting until the end of the project to collect evidence. The best approach is to plan the reporting system before spending begins.

Step 1: Read the funding agreement carefully

It will specify exactly what evidence is required.

Step 2: Create a reporting plan

Allocate:

• Who collects data

• How receipts will be stored

• What outcomes will be measured

• Which forms or tools will be used

Step 3: Set up accounting codes

This keeps financial information clean and trackable.

Step 4: Create data collection tools

These might include:

• Sign in sheets

• Feedback forms

• Surveys

• Baseline measurements

Step 5: Tell staff and volunteers what evidence is needed

Clear expectations prevent gaps later.

In my opinion preparing early is the easiest way to impress funders with strong reporting.

How Often Should Charities Report to Funders

The frequency depends on funder requirements. Typical reporting cycles include:

• Quarterly reports

• Mid year reviews

• End of project reports

• Multi year annual reports

• One off completion summaries

If reporting is not required regularly charities should still monitor progress internally. Good internal reporting makes external reporting faster and more accurate.

Showing Funders Where Money Is Spent in Annual Accounts

Annual accounts provide another layer of transparency. They include:

• Income and expenditure

• Balance sheet

• Funds analysis

• Notes explaining restricted funds

If a funder gives restricted funds the charity must show:

• How much was received

• How much was spent

• What remains

• Whether the restriction has been fulfilled

Clear annual accounts build long term credibility.

The Role of Restricted Funds

Restricted funds are one of the best tools for showing funders where money is spent. They allow charities to:

• Separate money for a specific purpose

• Track spending with precision

• Produce fund by fund reporting

• Provide clarity for trustees and funders

Funders appreciate restricted funds because they guarantee their money is used correctly.

Using Visual Tools to Improve Reporting

Many charities strengthen their reporting by using visual tools including:

• Pie charts showing how money was allocated

• Bar charts showing results

• Infographics summarising outcomes

• Dashboards showing progress

• Simple tables showing spend by category

Visual reporting is easy to digest and funders often share these resources internally.

Technology That Helps Charities Demonstrate Spending

Several tools make reporting faster and more accurate.

Accounting software

Xero, QuickBooks, Sage, and FreeAgent help track project spending.

Expense and receipt apps

These capture proof of spending and organise documentation.

Project management tools

Asana, Trello, and Monday can help monitor progress.

Data collection tools

Google Forms, SurveyMonkey, and JotForm assist with outcome collection.

CRM systems

These track relationships, participants, and beneficiaries.

Using even two or three of these tools can make reporting significantly easier.

Real Examples of Good Reporting

Example 1: A youth charity

They run workshops funded by a local foundation. They send funders:

• A clear financial breakdown

• Photos of sessions

• Quotes from young people

• Attendance numbers

• A short evaluation summary

The funder renews the grant for another year.

Example 2: A food bank

They use restricted funds to purchase food and pay storage costs. They show:

• How many parcels were delivered

• The cost per parcel

• Number of households supported

• Feedback from recipients

The funder increases their contribution because reporting is clear and honest.

Example 3: An arts charity

They run a creative project. They provide:

• A full financial report

• A video showing the exhibition

• A booklet of participant work

• Outcome data on confidence and wellbeing

Funders comment that the clarity of reporting made a difficult project easy to understand.

Common Mistakes Charities Make When Reporting to Funders

Some mistakes reduce credibility and make funders nervous. These include:

• Failing to track spending from day one

• Mixing restricted and unrestricted funds

• Leaving reporting until the last minute

• Providing vague descriptions instead of evidence

• Reporting outputs without outcomes

• Not explaining underspends or changes

• Sending overly long or unfocused reports

• Using unclear or inconsistent financial categories

Most of these issues are easy to avoid with planning.

How to Impress Funders With Strong Reporting

Keep it accurate

No funder expects perfection but they do expect correctness.

Keep it simple

Clear figures and clear impact always work best.

Keep it honest

If challenges occurred say so. Funders appreciate transparency.

Keep it linked to the original purpose

Show that spending aligns with what was promised.

Keep it timely

Late reporting makes funders reluctant to offer further support.

Keep it human

Stories, quotes, and examples bring numbers to life.

In my opinion a charity that can communicate finances and impact with confidence is far more likely to build long term relationships with funders.

Final Thoughts

Showing funders where their money is spent is not just a compliance exercise. It is an opportunity to build trust, demonstrate professionalism, and showcase the difference the charity makes. Strong reporting helps secure future funding and strengthens the charity’s reputation.

A good approach combines accurate financial information with clear impact evidence. When charities adopt ring fenced accounting, collect data from the start, document spending properly, and communicate results clearly, funders feel reassured that their money is used responsibly and effectively.

In my opinion everything comes down to preparation and communication. If a charity sets up systems early and stays transparent throughout the project funders will always feel confident supporting it again.