The Charity Commission has issued a statement calling on charities to exercise "greater vigilance" when they consider funding non-charitable bodies.
A statement published on the regulator’s website yesterday says that charity trustees must ensure that funds given to non-charitable organisations must be used only for charitable activities that further the funder’s purposes and do not expose it to reputational risks.
The regulator’s move comes after it issued a separate statement on Monday saying that it was examining more than £300,000 in grants made by the Joseph Rowntree Charitable Trust and the Roddick Foundation to the Islamic-focused human rights group Cage.
The regulator's Monday statement said it had operational compliance cases open into the funding of Cage by both charities. These, it said, were looking into "how the trustees have ensured that charitable grants made to non-charitable bodies are used only for exclusively charitable purposes in line with their objects".
The commission’s latest statement says that trustees must undertake reasonable due diligence to ensure that they are protecting their charity’s funds and reputation when making grants.
It warns that failure to comply with these requirements could lead to the commission taking regulatory action.
The statement says trustees must ensure that they assess whether funding a particular organisation would pose reputational risks to the charity, carry out appropriate due diligence checks on the proposed recipient, take reasonable steps to monitor how their funds are used and seek repayment if they are not spent in accordance with the charity’s terms and conditions.
"Some charitable purposes such as community development and the promotion of human rights are difficult to interpret," the statement says. "While both these purposes can be charitable, not all activities that fall under these headlines are capable of being charitable.
"This means that trustees considering funding organisations to pursue community development or to promote human rights must take particular care to assure themselves that the grant will be used only to fund activities that further their charity’s purposes."