Grant making is extremely important for many charities, both as an activity for funding charities and a source of funds for others. The Charity Commission in England & Wales (CCEW) have revealed that in 2024 grant making amounted to £17.84 billion, up from £16.97 billion the previous year. This included £12 billion to other charities. Grant making is therefore an extremely vital component of charitable activity in the UK, and a vital source of funding for many front-line charities. However, this is in the context of a significant increase in demand for charitable services. Funding is being squeezed and the “jam” is being spread more and more thinly.
On 03 June 2026, the Charity Commission published new guidance. It confirms that charities can make grants to other charities and, in many cases, to organisations that are not charities, such as Community Interest Companies, social enterprises, public sector bodies, co-operatives, and for-profit companies. However, the essential rule is clear: the funded work must help the grant-making charity carry out its own charitable purposes, and the funding must not support purposes outside that scope.
Given the scale of grant-making activity, many charities may find this a useful moment to review whether their own grant-making controls remain proportionate to the size, complexity and risk of the grants they award. An independent review of the grant lifecycle can help trustees identify any gaps, evidence good governance and focus assurance work where it is most needed.
Key Points
1.
The purpose of grant making is to achieve the charitable purposes of the grant-making charity not that of the recipient. Even where a proposed recipient is doing valuable work, the charity can only fund that work if it advances the grant-maker’s own purposes. This is especially important for charities with broad or multiple purposes. Trustees may choose to focus grant-making on one or more particular priorities, but those priorities should still sit within the charity’s objects. A clear link between the charity’s purposes, its funding priorities, and each individual grant decision will help trustees explain and justify their approach.
2.
The Charity Commission expects charities to have appropriate processes for making grants. These do not need to be unnecessarily complex, but they should be proportionate to the size, nature, and risk of the grants being made. This might include deciding on funding priorities, how applicants will apply, the level of grant funding in the year, the type of projects to be supported and for how much, and how decisions are made. If grant-making is a material part of the charity’s activities the Trustees’ Annual Report should explain the charity’s grant making policy.
A proportionate assurance framework does not need to be burdensome. It should help trustees and management distinguish between lower-risk, routine grants and those that require enhanced checks, monitoring or independent verification. Menzies can support charities in designing or refreshing these frameworks, including risk scoring, delegated authority, due diligence requirements, reporting templates and escalation processes.
3.
Consideration should be given to identifying and appropriately dealing with potential conflicts of interest, in the same way for any other charitable activity.
4.
The recipient does not need to be a charity itself. However, grants to non-charities are higher risk because these organisations do not have to follow charity law, have charitable purposes, or operate for the public benefit. Trustees should not assume that an organisation is a charity simply because it carries out similar work or describes itself in charitable terms. They should check the Charity Commission register where appropriate, and in the case of charities that do not need to register, they may ask for evidence of HMRC recognition for tax purposes. Before funding a non-charity, trustees should check their governing document, restrict the grant so it can only be used for the charity’s purposes, ensure the recipient understands the restrictions in writing, confirm that the grant can be monitored, consider any personal benefit issues, keep proper records of decisions, and protect the charity from terrorism, fraud, and other abuse.
Unrestricted grants are particularly helpful for recipients as this helps to cover the back-office costs, which are essential for the proper functioning of charities, but which are often difficult to fund. This can however only be done where the recipient’s charitable purposes are the same or narrower than the funding organisation’s purposes.
5.
Before making a grant, a charity must carry out appropriate checks on the recipient organisation. This is often referred to as due diligence. The level of checking should be proportionate, but trustees should satisfy themselves that the organisation is genuine, suitable to work with, capable of delivering the funded work, well managed, and capable of being monitored.
Risk is not something charities must avoid altogether. The guidance recognises that grant-making always involves some degree of risk, and that trustees may sometimes decide to accept a higher level of risk, for example to fund an innovative project with the potential for significant impact. The key point is that trustees should understand the risks, decide what checks are appropriate, and use those checks to inform their funding decision.
For higher-value or higher-risk grants, trustees may wish to go beyond standard application checks. This could include reviewing the recipient’s governance, financial resilience, safeguarding arrangements, use of restricted funds, connected parties, sanctions exposure and capacity to deliver the funded work. External due diligence can provide an independent view and a clear audit trail for trustees when deciding whether the grant risk is acceptable.
Where grant-making decisions are delegated to staff, advisers, or a sub-committee, trustees should have written terms of reference and robust reporting procedures. The guidance also warns that high-risk or novel decisions should not usually be delegated.
6.
The guidance recommends setting out grant terms in writing. These should explain how the grant must be used, the period for delivery, how the grant will be monitored, what reporting is required, what happens if terms are not followed, and when the grant may be terminated. Terms may also need to cover safeguarding, intellectual property, use of the charity’s logo, or other protections.
7.
Grant making does not end when funds are transferred. There must be appropriate safeguards to ensure that the money is properly spent for the purposes for which it is given. In all cases, there should be some form of checks on organisations before supporting these, and a written document setting out the terms and conditions of the grant. Depending on the size and duration of the grant, and the assessment of risk, additional procedures might include:
Formal reporting on achievements by the recipient, either a one-off report on completion or regular reports over the duration of the project,
Evidence of expenditure such as copy invoices or other evidence,
Independent verification of the use of grant funding such as grant-audits, and
holding back future funding until progress has been evaluated.
Some situations require additional due diligence. Multi-year grants, grants to non-charities or grants overseas require exceptional care because of the additional risks. Please bear in mind for grants overseas HMRC require that reasonable steps be taken to ensure the funds are used for charitable purposes before these can qualify as charitable expenditure and not impair charitable tax reliefs.
Grants to non-charities, overseas organisations or newly established delivery partners can be entirely appropriate, but they often require a more structured assurance approach. In these cases, grant-makers may benefit from independent due diligence before funds are awarded and periodic assurance once delivery is underway, particularly where trustees need to demonstrate that funds have been applied only for the charity’s purposes.
8.
Consideration should be given to identifying and appropriately dealing with potential conflicts of interest, in the same way for any other charitable activity.
There are specific requirements regarding disclosure of grant making activities in the annual accounts.
Where unconditional grants are made over more than one period these create a constructive obligation and the whole value of the grant should be accrued. Where however there are performance related conditions that need to be met by the recipient these do not create a liability until those conditions are met, so these would not be accrued but would be disclosed as a commitment.
The Charity Commission’s guidance does not discourage charities from making grants. On the contrary, it recognises that grant-making can be an effective and flexible way to deliver public benefit. But it does expect trustees to be intentional, informed, and accountable.
For trustees, the practical checklist is straightforward:
Check that each grant advances the charity’s own purposes.
Set clear priorities and a proportionate grant-making process.
Carry out appropriate due diligence before awarding funds, with enhanced due diligence for higher risk grants.
Use written grant terms, clearly defining eligible expenditure, reporting requirements and monitoring rights.
Restrict grants where necessary, particularly when funding non-charities.
Monitor how funds are used, whether the grant achieves its intended impact and whether independent verification is needed.
Keep proper records of due diligence, application, grant decision and assurance work und
The best grant-making is not just generous; it is disciplined. By combining clear charitable purpose, proportionate checks, written terms, and effective monitoring, trustees can support important work while protecting their charity and meeting their legal responsibilities. Where trustees would value an independent perspective,Menzies can help review grant-making arrangements, design practical assurance frameworks, undertake due diligence and provide targeted grant audits over selected grantees.
