Can a charity make grants to non-charitable organisations? Yes, but…

Two recent case reports from the Charity Commission highlight the need for trustees of grant-making charities to take special care when making grants to non-charitable organisations.

In the case of the report into the activities of the Earl of Chester’s Fund, the trustees had made a grant of £24,000 to a non-charitable company which made giant figurines. In the case of the report into the activities of the Politics and Economics Research Trust, the trustees had made grants to both Business for Britain and the Taxpayers’ Alliance.

In both cases, the Charity Commission was not satisfied that the trustees had taken appropriate steps to safeguard their charities’ property, and ensure that the funds provided to the non-charitable organisations would be applied properly for the respective charitable purposes of the two charities.

So, what steps should the trustees have taken to make sure they acted in accordance with their duties to safeguard their charities’ funds, to act in the best interests of their charities, and to make balanced and adequately informed decisions in the interests of their charities?

• Carried out due diligence on any non-charitable organisation applying for a grant to ensure they were fully informed about both the organisation and the proposed application of the funds.
• Ensured the non-charitable organisation receiving the grant:
  • understood the charitable purposes of the grant-making charity,
  • understood the grant conditions placed on the use of the funds received from the charity so that such funds were properly applied to further the charitable purposes of the charity and
  • agreed to the grant conditions imposed by the charity.
• Made sure any funds of the charity received by the non-charitable organisation were only applied in a way which furthered the purposes of the charity, by monitoring their use after the transfer to the non-charitable organisation.
• If the non-charitable organisation did not correctly use the charitable funds in accordance with the grant conditions, seek the return of the charitable funds from the non-charitable organisation.

Trustees of grant-making charities are responsible the for application of their charities’ funds even after a grant is made, and they must maintain proper oversight of grants made. Taking the steps set out above mean that they should be able confidently to make grants to non-charitable organisations while still complying with their trustees’ duties.