Making Grants to Non-Charitable Organisations

Partner Nick Burrows, in our Charities & Education team, outlines guidance for trustees from the Charity Commission on grant funding for non-charitable organisations.

The Charity Commission has published helpful guidance that sets out the key principles that trustees must follow when making decisions about grant funding non-charitable organisations. Sarah Atkinson, Director of Policy and Communications at the Commission, stresses that “it is particularly important that [trustees] recognise any risks that come with making grants to non-charitable organisations. This is why due diligence and risk assessments are so important”.

When making grants to organisations, whether to a charity or non-charity, trustees need to ensure that their first thought is to their own charity’s purposes. They should ask themselves:

• will this grant further the charity’s purposes?
• willl the funds be applied properly?
• will the grant comply with the powers and restrictions in the charity’s governing document?
• does the recipient understand and agree with the aim of the grant?

It is important to agree with the organisation at the outset the purpose of the grant, what it can and cannot be used for and to avoid it being applied for activities that are not charitable or that are outside the charity’s purpose. The grant should be solely used to cover costs that are directly connected to carrying out the activities the charity has agreed to fund.

The Charity Commission’s guidance (published here) sets out in detail what trustees should do both before agreeing the grant and after the grant has been agreed. Trustees should:

1. Confirm whether the organisation they are considering giving a grant to is a charity or not;
2. Make sure they understand their own charity’s purposes as set out in the governing document;
3. Have appropriate governance systems and procedures in place for making decisions about grants. These systems and procedures should:

• Allow trustees to set priorities for funding;
• Require sufficient detail in the grant application, and monitoring procedures, to enable the trustees to identify and assess risks and make informed decisions; and
• Ensure grants are authorised by the trustees, or within a framework of delegation that ensures appropriate oversight and scrutiny by the trustees.

4. Take reasonable steps to assess risks and carry out appropriate due diligence on the organisation. Trustees will need to ensure:

• The organisation is reliable and competent to carry out the activity being funded;
• The organisation is suitable for the charity to work with and fund;
• They, the trustees, have the ability to check and confirm that the funds are being used for the proper purposes; and
• They, the trustees, have identified and managed any potential exposure to risks.

5. Ensure that the organisation receiving the grant understands their charity’s purposes;
6. Be aware that they remain responsible for grant decisions, even if decisions are delegated, and understand where extra care may be needed;
7. Set appropriate grant conditions and ensure that the organisation understands and accepts them;
8. Put appropriate monitoring arrangements in place; and
9. Know what to do if things go wrong.

For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.