Grant funding organisations that aren’t charities
Awarding grants to non-charities.
Many charities award grants to support activities that are in line with their charitable objects. Many of the organisations to which grants are paid will be charities themselves. However, there may be instances where the charity wants to support an organisation which is not a registered charity. It may want to award grants to social enterprises or projects overseas. The Charity Commission has issued updated guidance on the additional considerations for Trustees on whether the awarding of grants to these organisations is appropriate.
Before considering awarding a grant to an organisation that is not a charity, you should first ensure that it is permitted by your governing document.
A charity has to carry out activities in line with its charitable purposes for the public benefit. An organisation which is not a charity does not have the same constraints. In awarding a grant, Trustees will need to ensure that the organisation is clear on what the grant can and cannot be used for to ensure that it doesn’t include activities outside the charity’s own objects.
What to consider before awarding a grant
It is important that Trustees have sufficient information when considering awarding grants to allow them to make informed decisions based on their assessment of the risk involved. Grant applications should be structured such that they include all relevant information to allow effective risk assessment and consideration of the project to be undertaken.
The Trustees should then carry out appropriate checks on the organisation and the application. The Trustees need to consider if the organisation is genuine and suitable for the charity to work with. The level of due diligence will vary depending on the organisation and the project to be undertaken. Trustees will need to assess the level of scrutiny and evidence required to manage the risk of working with the organisation. Issues to consider include the reputation of the organisation and its governance structure. The Trustees may also consider financial factors such as the financial stability of the organisation, its past record in the management of similar projects and the effectiveness of its controls and procedures. If an organisation wishes to work with the charity, it should be willing to supply supporting documentation and evidence of its effectiveness to allow Trustees to make informed decisions. Trustees should be able to justify all decisions and discussions should be documented and any supporting evidence retained.
Monitoring the project.
Once the grant has been awarded, it is important that the Trustees include in the terms and conditions that the grant is only to be used for the purposes stated which are in line with the charity’s own objects. A time period should be set for the delivery of the activities and the Trustees also need to decide on the level of independent monitoring they require. This could include periodic reports throughout the project or a single report at the end. Copy invoices may also be obtained in order to evidence project expenditure. The terms and conditions also need to make clear what will happen if the conditions of the grant are breached.
As a guiding rule, as with any other decision, Trustees should be satisfied that they have acted in the best interests of the charity.
If you would like any further information in respect of the above, please contact a member of the charity team.