For many charities, the main recipients of their grant-giving are non-charity groups. Requests are received for funding and connections are made with organisations in the local community who need funding, which the charity can provide.
But, when considering a grant making request, charities must ensure that they are doing so within their own objects and that the causes they are supporting through these grants do not conflict with their own purposes.
Extremely worthy causes may approach you with fantastic opportunities to support them, but you can only provide funding where to do so will further your own objects.
When a request is received or an opportunity is identified, you must review your own objects to understand the boundaries of your own operations.
You must also consider public benefit. The applicant may not be a charity, but your funds must satisfy the public benefit test. You must stipulate how the funds can be used to ensure they fulfil this charity requirement.
You should research the potential recipient, understand what they do, how they are controlled and what they will use the funds for.
There must be suitably robust controls at the organisation to ensure your funds will be used for the specified purpose. You should conduct a risk assessment when receiving and considering applications so that you can minimise the risk of giving funds away and then not knowing how they have been spent. (see Charity Commission guidance on Trustee Decision Making)
When you offer funds, you should clearly set out how they can be used, and expect the organisation to report back to you once the funds have been spent so that you can see that they used them for the stated purposes.
Legitimate organisations will be accustomed to this and will be keen to report back so that they can keep the door open in case they need further funding at another time.
Fundamentally, everything you do has to be within your registered objects. If you breach these, your charity risks losing it charitable status.
When your charity has available funds, it can be easy to identify a very worthy cause and want to contribute to it. But, that cause must enable you to meet your own aims. No matter how individually worthy and valuable that other project may be, it must be within your own objects.
For any assistance in setting up procedures to monitor or assess your grant making process, speak to your usual Thomas Westcott contact.
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