The Charity Commission has published new guidance to help charity trustees make confident, responsible grant-making decisions at a time when many charities are facing sustained financial pressure.

Thousands of charities carry out their purposes by making grants to other organisations. This guidance explores the fundamentals of effective grant-making, from setting funding priorities and carrying out due diligence, to monitoring grants and reporting impact.   

In March, the charity regulator revealed that grant-making charities awarded £17.84 billion in grants during 2024, up from £16.97 billion in 2023, which included £12 billion to other charities. However, for a third year in a row, the analysis has shown an ongoing financial squeeze in parts of the sector. This follows a three-fold increase in demand for charitable services across England and Wales.   

The new guidance replaces and expands on previous guidance to now cover all grant making. It makes it clearer that grant-making charities have the flexibility to provide unrestricted grants to charities with the same, or narrower, purposes than their own. This gives charities that receive grants the freedom to use funds how they think best. Funds must be used to further a charity’s purposes, but an unrestricted grant enables trustees to be responsive to things like changing beneficiary needs in their area of work, changes to their activities and can help cover core costs to ensure continued operation.   

The guidance explains that charities can fund organisations that are not charities, which can help reach new beneficiaries or grow grant-making charities’ impact. This can be particularly effective in communities where there are very few charities operating. However, given that non-charities are less regulated, trustees must take reasonable steps to assess and manage potential risks. 

In all cases, grant-making charities must have a written agreement in place and should monitor it to make sure the recipient organisation is meeting the agreed terms. The Commission expects charities to complete appropriate checks on potential recipients of funds, including ensuring they understand how the organisation operates, checking if it is genuine, and that the grant can be effectively monitored. 

The guidance has been updated as part of the Commission’s work programme of supporting effective philanthropy across England and Wales, in line with the regulator’s five-year strategy. The full guide can be found on GOV.UK. 

Mazeda Alam, Head of Trustee Guidance at the Charity Commission said: 

Many charities are finding it hard to keep running services that communities increasingly depend on. We also know that securing funding for core costs – the kind that keeps a charity running – can be a significant challenge.   

Grant-making 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.  

She added:  

Any funding decision must ultimately be driven by one question: will this help the grant-making charity further its purpose, and make a difference to the people and causes it exists to serve? This guidance gives trustees assurance that they can answer that question, and to make decisions that are both bold and responsible.