Regulator publishes new guidelines on grant-making as charity sector continues to feel financial squeeze

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.