The Charity Commission has reminded trustees that they must carry out due diligence checks on organisations that they fund, as part of new guidance published today.
In its guidance, which replaces and expands on its previous advice, the regulator advises that grantmaking charities must only make grants that align with their purposes and must manage conflicts of interest.
It directs trustees to undertake appropriate checks on any organisations to whom their charity makes grants, including setting out terms and conditions for recipients and subsequently monitoring how money is spent.
The guidance says additional precautions must be taken before making grants to non-charities, such as community interest companies (CICs), and that trustees must not “assume that an organisation with similar purposes or activities to your charity is a charity”.
In all cases, grantmaking charities must have a written agreement in place and should monitor it to make sure the recipient organisation is meeting the agreed terms, the guidance reads.
The guidance advises that some grantmaking decisions can be delegated but that trustees usually retain overall power over high-risk or unusual decisions.
In March this year, the regulator revealed that grantmaking charities awarded £17.8bn in grants during 2024, up from £17bn in 2023, which included £12bn to other charities.
Sector body welcomes guidance
Mazeda Alam, head of trustee guidance at the commission, said: “Grantmaking charities and philanthropists play a vital yet often unappreciated role in providing financial support to the sector.
“This guidance is designed to give them the flexibility to use their best judgement when awarding funds and encourage them to do so confidently, growing the reach of their support.”
Jim Cooke, head of practice and learning at the Association of Charitable Foundations (ACF), said: “We are pleased the commission’s new guidance highlights the positive role grantmaking can play in delivering impact.
“ACF members give more than £4bn every year and want to make sure these funds are used as effectively as possible.
“This means being confident using all the tools available to them – which can include unrestricted funding, capacity building and making grants to non-charities.
“The guidance recognises that all grantmaking involves a degree of risk, which can be managed by proportionate due diligence and monitoring.
“As the membership body for UK foundations and charitable grantmakers, ACF will continue to support the sector to strengthen its practice.”
