The Welsh government's grant funding for charities fell from £303m in 2012 to £240m in 2014, according to its Third Sector Scheme Annual Report released this week.

The report outlines the reduction of government grants as a reflection of the current “economic situation”.  

“The reduction in UK government funding for Wales have inevitably impacted on funding across all sectors,” the report said.

Total spending in the last year was £326.5m. The figure does not include indirect payments made via intermediary organisations. 

Lesley Griffiths, minister for communities and tackling poverty said the third sector was a "valued partner" of the Welsh government and "crucial to achieving its objectives... set out in our Programme for Government". 

But she also warned that the sector must make efforts to become more self-reliant. 

"We recognise the need to continue to support the sector. However, the third sector also needs to demonstrate what it can do to help us deliver meaningful outcomes," she said.

"This is particularly important given the need to make difficult and challenging funding choices going forward."

The Welsh charity sector also saw a rise of £22.8m in procurement expenditure over the past year, according to the report – from £43.7m in the year 2012-13 to £66.5m in the year ending March 2014.

In a joint foreword to the report, Peter Davies OBE, chair of the Wales Council for Voluntary Action (WCVA) and Ruth Marks MBE, chief executive of WCVA said: "The relationship between the third sector and the Welsh government is maturing and there continue to be new initiative and ways of working. 

"The key priorities for the sector going forwards are governance, innovation, evidence and impact and collaboration. We share the real desire to continue to focus on tackling poverty, reducing inequalities and contributing towards a sustainable Wales."