"We have incurred operating deficits between 2009 and 2011," says the report, which covers the year to the end of December. "This is not sustainable in the long-term. In light of this, some major decisions were made to change the way we operate.
"The reduced staff levels will inevitably present lots of new challenges and these should not be underestimated. However, we believe it also presents opportunities to work in new and innovative ways."
The charity, which has about 500 staff, said in September that it planned to make 80 staff redundant and hoped to save £2m.
The accounts also show that the charity was forced to repay £1.1m of over-claimed Gift Aid, plus £300,000 of interest and penalties, after HMRC disagreed with its "tax treatment of the adoption process".
The annual report shows that the charity received a £4.2m repayment of VAT, also connected to the tax treatment of the adoption process.
The charity’s income during the year rose by about £1m to just under £37m, of which £20.4m came from legacies.
The charity has £62.5m of reserves, of which £58.4m is unrestricted.