The average number of full-time-equivalent people employed by the commission fell to 285 in the year to 31 March 2016, down from 317 the year before, the report shows.
From a spending limit of £23.2m set by parliament, which included a core budget of £21.2m as well as additional Treasury funding to help improve the commission’s efficiency, the commission spent £22.8m, leaving a surplus of £416,000.
The commission’s budget of £21.2m has roughly halved in real terms since 2008 and has been frozen until 2020, a move which the National Council for Voluntary Organisations has said could amount to a cut of as much as 8.5 per cent in real terms.
The report says: "The commission’s funding position continues to reflect a tight fiscal policy across government as a whole, with austerity measures meaning that there is now less funding available for regulatory activity."
Spending on staff actually increased over the year, from £14.3m in 2014/15 to £16.9m in 2015/16, and this was largely driven by increased spending on agency staff, which almost tripled from £900,000 to just under £2.7m.
But according to the report, the increase in agency costs was largely incurred because of the recruitment of specialist staff on short-term contracts to deliver the commission’s transform programme – this has been established to redesign the regulator’s processes and make them more straightforward and efficient, including through the use of digital technology.
Much of this has been paid for by investment funding of £2m from the Treasury, as part of a three-year, £8m investment in the programme on top of the commission’s budget, the report says.
Despite the fall in the number of full-time-equivalent staff, the commission met 16 out of 17 of its internal key performance indicators, according to the report.
William Shawcross, chair of the commission, said: "Last week we published our research on public trust and confidence in charities, which found that public trust has fallen over the past two years.
"How to address this decline presents a significant challenge to the sector and to the commission as its regulator, and will remain an important part of our work in the coming months. We believe strong governance is key to restoring trust."
The Charity Commission faced strong criticism from the National Audit Office in 2013, which said the commission was failing in its key roles and not providing value for money.
The annual report says the commission has made good progress on most of the recommendations in the NAO report, including completing a review of its governance framework.
Paula Sussex, chief executive of the Charity Commission, said: "Our annual report tells the story of how we have promoted stronger governance in charities, how we have delivered against our strategic plan and made progress on the NAO’s recommendations.
"It also explains how we are continuing to digitally transform our work to achieve more with the same budget, improving our services to charities and making them faster."
The report was also the first commission document to bear its new logo, bearing a crown, which was created by Design 102, an in-house team at the Ministry of Justice at cost of just over £5,000.
Shawcross said the new logo reflected the commission’s transformation into a more efficient and effective regulator.