The Charity Commission has published draft guidance for charities that offer grants to non-charitable organisations, which says that such funds must go towards furthering a charity’s objects.
The commission promised to release the guidance as a result of the High Court case brought against the regulator by the advocacy group Cage when the regulator asked the Joseph Rowntree Charitable Trust and the Roddick Foundation to agree not to fund Cage any more.
The case was withdrawn when the commission agreed to issue a statement saying it had no power to forbid charities to fund organisations in the future.
In a statement released today, the commission said the draft guidance brought together from other pieces of guidance the key principles on which trustees could base their decisions.
The draft says that trustees should make sure they understand their own charity’s purposes, have appropriate governance systems and procedures in place for making decisions about grants, and take reasonable risk assessment and due diligence steps with regard to the organisations they give to.
It says trustees should ensure grant recipients understand the charity’s purposes and any conditions linked to the funding, but must be aware that they remain responsible for grant decisions even if those decisions are delegated.
The guidance says: "A charity can only make grants for activities that in principle it could carry out itself."
Sarah Atkinson, director of policy and communications at the commission, said in a statement it was particularly important that trustees "recognise any risks that come with making grants to non-charitable organisations".
She said: "The number of charities that might want to consider grants to non-charitable organisations is likely to be a small proportion of the sector.
"But for those that do, this guidance will be essential reading. We want this guidance to set out clear boundaries for trustees to ensure that charity funds are applied properly and to help them if things go wrong or circumstances change during the life of a grant."
The commission consulted the Association of Charitable Foundations when drawing up the advice.
David Emerson, chief executive of the ACF, said the guidance was "underpinned by the important principle that charity trustees have independence to pursue their charitable objectives in whichever way delivers them most effectively".
He said: "We therefore welcome the clarification that this can be carried out through grant-making to a wide variety of organisations, charitable or otherwise, within the limits set by charity law."
The commission will be accepting consultation responses on the draft guidance until 8 April.