Commission amends guidance on grants to non-charities after criticism

11 Aug 2017 News

The Charity Commission has published the final version of its guidance on giving grants to non-charities and has made changes after charities warned the language could discourage grantmakers.  

The commission issued draft guidance on giving grants to non-charities for the first time in February 2016, following a battle over charitable grants to Cage, a not-for-profit body accused of acting as an apologist for terrorism.

The Joseph Rowntree Charitable Trust and the Roddick Foundation became the subjects of compliance cases after providing Cage with grants. They took the Commission to court, but the judicial review was withdrawn and all three parties agreed a statement. 

The Commission said in its orginal guidance that funders “must be able to show how any grant to another organisation (whether it’s a charity or not) furthers their charity’s purposes”. 

But the Association for Charitable Foundations, NCVO and Charity Finance Group raised concerns about the tone of the guidance. 

There was not a formal consultation on the guidance because the content was drawn from existing guidance “and does not represent any new regulatory requirement” but there was a period to comment on the draft guidance which closed in April 2016.

In a joint submission to the regulator they said the guidance should “begin with a more positive statement of how grant-funding non-charities can be an important means for funders to achieve their charitable purposes and that the principles that it is based on are applicable to good grant making generally”. 

Core costs reference removed 

ACF, NCVO and CFG also said that they were concerned about how draft guidance’s stipulation that a “charity can’t fund the ‘core’ costs (or overheads) of a non-charity”. 

They said that this section could be “confusing for grant-makers and could inhibit important good practice in a way that must be contrary to the Commission’s overall policy intent”. 

The Commission has removed reference to core costs and the new version says: “A charity can grant fund the support costs of activities, services or outcomes delivered by another organisation that is not a charity, provided these are intended only to further the charity’s own purposes. The charity must not fund any costs which are outside its purposes.”

‘Risks and boundaries’

The Commission said its guidance is supposed to help trustees understand the “risks and boundaries”. 

Jane Hobson, head of guidance and practice at the Charity Commission, said: “Our updated guidance makes clear that making grants to organisations that are not themselves charities can be an impactful way for a charity to fulfil its purposes and meet the needs of those it exists to help. 

“There will always be limits and conditions on what a charity can fund, however, and our guidance helps trustees ensure that they consider the relevant risks and boundaries when making such decisions. 

“We have worked closely with a number of charities in developing this guidance, including the Association of Charitable Foundations, and I am confident that trustees will find it a helpful resource.”

‘Much improved’ 

ACF and NCVO said the tone of the final version is an improvement on the draft guidance. 

Carol Mack, chief executive of ACF said: “We are grateful to the Commission for its engagement with the sector and addressing the points we raised during the consultation period.

“It’s really important to recognise that grant-making to organisations that are not charities, such as social enterprises and community groups, can be a highly effective way for charities to achieve their aims, by enabling them to benefit from the reach and expertise of other types of organisations. This guidance recognises the value of such grant-funding and will help inform those that are considering making grants to non-charities.”

Elizabeth Chamberlain, head of policy and public services at NCVO, said: ‘It's good to see that the Commission has learnt from the Cage case and used it as an opportunity to provide trustees with guidance on what can sometimes be a challenging decision. 

“The result is a helpful piece of guidance, the overriding message of which is that trustees must keep their duty to ensure funds are used for their organisation’s charitable purposes front of mind when awarding funds to a non-charity. It allows freedom for trustees to make decisions based on their own judgement of how the funds will further the charitable purposes. 

However she said that the length of the guidance could be a barrier to it being used by trustees. 

“There’s a bit of a risk that this positive message could be lost, as the guidance is quite long and legalistic, which could in itself send the message that this sort of funding is risky or not encouraged,” she said. “But I hope trustees will be able to overcome this and make use of the guidance in their decision making.”


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