04 April 2016

Guidance published for charities funding non-charitable organisations

Alison Paines
Partner | UK

The Charity Commission has published new guidance for charities which fund non-charitable organisations. The guidance explains the various points which trustees should consider when making the decision to fund non-charitable organisations.

The guidance highlights that trustees should:

1. Confirm that the organisation they are considering giving a grant to is not a charity.

Where there is any doubt, trustees should assume that it is not a charity. 
2. Make sure they understand their own charity's purposes.

Trustees must ensure that all of the charity's activities are aimed at achieving the purposes for which it is set up and for the public benefit. When funding another organisation, trustees must show that such funding is clearly in line with the charity's purposes.
3. Have appropriate governance systems and procedures in place for making decisions about grants.

This will allow trustees to set funding priorities, make informed decisions and ensure that there is appropriate oversight and scrutiny by trustees.
4. Take reasonable steps to assess risks and carry out an appropriate process of assurance (or due diligence) on the organisation.

Trustees must carry out an appropriate risk assessment and due diligence process to ensure that the organisation is reliable and competent to carry out the activity and is suitable for the charity to work with; that charity funds will be properly used and any exposure to fraud or terrorism is properly managed.
5. Ensure that the organisation receiving the grant understands your charity's purposes and their boundaries (part of the due diligence process).

A charity can only make grants for activities that in principle it could carry out itself, therefore the grant must be restricted to charitable activity and can only fund costs directly connected with those activities.
6. Be aware that trustees remain responsible for grant decisions even if decisions are delegated

7. Set appropriate grant conditions and ensure that the organisation understands and accepts them.

These will ensure that the grant is spent in accordance with the charity's objects and that monitoring and reporting is in place. The Charity Commission advises that charities should be repaid if the terms and conditions are breached.
8. Put appropriate monitoring arrangements in place.

Trustees should ensure that funds are being used for the charity's purposes and in accordance with the terms of the grant agreement that has been put in place.
9. Know what to do if things go wrong.

Trustees should be able to explain and justify decisions – whether to funders, the Charity Commission, beneficiaries or the press.

The Commission invites comments on the guidance before 8 April 2016.

The guidance is available here sits alongside the Charity Commission's guidance on working with other charities available here

Alison Paines Partner | London, Cambridge

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