“With great power comes great responsibility” – new Charity Commission guidance highlights essential safeguards needed in grant funding

Grant-making is a significant activity in the UK. In 2024 alone, almost £18 billion in grants was distributed, with approximately £6 billion awarded to non-charitable organisations (i.e., organisations that are not themselves formal UK charities). These figures underline the scale of the sector and the corresponding level of responsibility placed on trustees.

Key messages for trustees

The guidance confirms that the Charity Commission regards it as the primary responsibility of the trustees of a charity to be satisfied that they are making a grant in furtherance of their charity’s charitable objectives (or objects).  The guidance goes on to outline that trustees may make grants to non-charity organisations (such as NGOs and other not-for-profit organisations) where this advances the charity’s objects and delivers public benefit. However, it also highlights that such arrangements can carry increased risk, as funds move outside the regulatory framework provided by charity law. Trustees must therefore take appropriate steps to understand and manage those risks.

In particular, the guidance reinforces several core governance principles:

• Trustees have a legal duty to ensure that charitable funds are used exclusively to further the charity’s objects.
• Funding decisions should be appropriately considered and properly documented.
• Appropriate due diligence must be undertaken before awarding grants to non-charity bodies.
• Trustees must actively monitor the use of grant funding and take action, such as withholding further funding or seeking repayment, where outcomes are not achieved.

Written agreements and monitoring of grants

One of the central themes of the guidance is the importance of having a robust written agreement in place with any non-charity recipient of funding. This agreement should clearly set out key matters such as:

1. The purpose of the grant.
2. Any conditions attached to the grant, including how the funding should be used and, perhaps as importantly, how it should not be used.
3. Reporting back requirements, including how the recipient will evidence use of funds and outcomes to the trustees making the grant.
4. The circumstances under which funds must be repaid, or funding arrangements may be terminated.

Trustees must also ensure that the use of funds is actively monitored. The level of oversight should be proportionate to the size and nature of the grant, but in all cases should provide sufficient assurance that funds are being applied appropriately.

What does this mean for trustees?

The guidance is a clear reminder that grant-making is not a passive activity. Trustees cannot simply distribute funds and step back; they remain responsible for ensuring those funds are applied in furtherance of the charity’s objects.

Effective grant-making, therefore, requires robust governance, clear documentation, and ongoing oversight. It also demands a careful assessment of risk, particularly where funding is provided to organisations operating outside the charity sector.  In essence, charity money is regarded as public money and, therefore, the Charity Commission expects it to be safeguarded to the same standard.

In light of the updated guidance, trustees of grant-making charities may wish to review their grant-making policies (including written agreements), due diligence processes, funding agreements, and monitoring arrangements to ensure they remain in line with current expectations.