On 3 June, the Charity Commission updated their guidance on grant-making. If you are a trustee of a charity which makes grants, business as usual is no longer enough. The new framework demands stronger oversight and more robust decision-making with evidence at every stage of funding.
With over £17.8 billion in grants distributed across the sector in 2024 and demand for services continuing to rise, the message is clear: charities must fund effectively, act proportionately, and evidence their decisions.
Key changes at a glance
1. Deeper due diligence required
Trustees must take a more active role in ensuring grant recipients are legitimate by conducting increased due diligence into the identity of the recipient.
2. Written agreements are now essential
All grants must be backed by a written agreement. The complexity of the agreement depends on the risk of the grant; the Charity Commission is clear that the agreements should be proportionate to the grant in question.
The agreement must set out:
- The purpose of the grant,
- How the funds will be used,
- Monitoring and reporting expectations, and
- What happens if terms are breached.
3. Risk based assessments on grant-making
Trustees should assess the size of the grant, the type of recipient and the level of risk involved and act proportionately. Trustees must assess the financial and reputational risk of such grants.
4. Monitoring is no longer optional
Monitoring grants after they are made is now a clear expectation, not just good practice. Trustees must confirm how funds are used, whether any agreed terms are being met and take corrective action where necessary.
While the guidance focuses mainly on grants to other charities and organisations, the same precaution should be taken with grants to individuals to promote good governance.
What should trustees do now?
- Review and update grant-making policies
- Strengthen due diligence (including anti-money laundering checks)
- Ensure all grants are supported by written agreements
- Build proportionate monitoring into processes
- Reassess your approach to risk
How we can help
We advise charities and trustees on all aspects of grant-making, including:
- Reviewing and updating grant-making frameworks
- Drafting robust, risk-appropriate grant agreements
- Advising on funding to non-charities and individuals
- Strengthening due diligence and risk processes
If you would like support reviewing your approach or implementing the new guidance, please contact Chelsea Rosak who would be happy to help.
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