The Charity Commission has published new guidance aimed at helping trustees make effective and responsible grant-making decisions as charities across England and Wales continue to face
growing financial pressures.
The updated guidance, released on 3 June, provides practical advice for charities that distribute funding to other organisations. It covers key aspects of grant-making, including setting funding priorities, carrying out due diligence, monitoring grants and measuring impact.
The move comes amid signs of continued strain across the charity sector. In March, the regulator reported that grant-making charities distributed £17.84 billion in grants during 2024, up from £16.97 billion the previous year. Of that total, £12 billion was awarded to other charities. Despite the increase in funding, the Commission’s analysis found that parts of the sector have experienced a financial squeeze for a third consecutive year, against a backdrop of a threefold rise in demand for charitable services.
The revised guidance expands on previous advice and now applies to all forms of grant-making. It also clarifies that charities can provide unrestricted grants to organisations with the same or narrower charitable purposes. Such grants allow recipient charities greater flexibility in deciding how funds are used, including responding to changing beneficiary needs, adapting activities and covering core operational costs.
The Commission said unrestricted funding can help charities remain agile and sustainable, provided the money continues to be used in support of charitable objectives.
The guidance also outlines how charities can award grants to organisations that are not registered charities. According to the regulator, this approach can help funders reach new groups of beneficiaries and extend their impact, particularly in areas where few charities operate. However, trustees are advised to carry out appropriate checks and manage risks carefully, as non-charitable organisations are subject to less regulatory oversight.
Under the new guidance, grant-making charities are expected to have written agreements in place for all grants and to monitor recipients to ensure funding is used as intended. Trustees are also expected to undertake proportionate due diligence, including verifying that recipient organisations are legitimate, understanding how they operate and ensuring grants can be effectively monitored.
The updated guidance forms part of the Charity Commission’s wider programme to support effective philanthropy and strengthen the resilience of the charity sector under its five-year strategic plan.
