Grantmaking Charities Must Have Written Agreement with Grantees, Regulator Says

Why It Matters

The requirement strengthens financial accountability and protects public trust while giving trustees a clearer framework for risk‑managed philanthropy.

Key Takeaways

• Written grant agreements now mandatory for all charity funders.
• Monitoring required; low‑risk grants may use simple letters.
• Trustees must assess risks when funding non‑charity entities.
• 2024 grants totaled $22.6 bn, highlighting sector’s financial scale.

Pulse Analysis

The Charity Commission’s latest guidance reflects a broader regulatory push to tighten governance across the UK charitable sector. By insisting on written grant agreements and systematic monitoring, the regulator aims to align funding decisions with each charity’s stated purpose and to safeguard against misuse. The distinction between low‑risk and high‑risk grants provides flexibility, allowing simple letters for routine disbursements while demanding detailed terms for larger or more complex awards. This tiered approach mirrors best practices in corporate grant‑making, where documentation and oversight are critical to demonstrating fiduciary responsibility.

For trustees, the new rules translate into concrete operational changes. Prior to the guidance, many charities relied on informal understandings when supporting partner organisations, especially non‑charities that fall outside the sector’s usual regulatory net. Now, trustees must conduct thorough due‑diligence—verifying the recipient’s legitimacy, assessing governance structures, and establishing clear performance metrics. The requirement to monitor compliance means charities will likely adopt tracking tools, periodic reporting, and contingency clauses to address breaches. While this adds administrative overhead, it also reduces exposure to reputational risk and potential legal challenges, reinforcing donor confidence and public legitimacy.

The sector’s financial magnitude underscores the importance of these reforms. In 2024, charities disbursed roughly $22.6 bn in grants, a figure that rivals the annual budgets of many large corporations. The Commission’s emphasis on accountability follows past controversies, such as the 2015 high‑court dispute involving the Joseph Rowntree Charitable Trust and the advocacy group Cage. By clarifying that trustees retain discretion while operating within defined safeguards, the new guidance seeks to balance bold philanthropy with responsible stewardship, positioning UK charities for sustainable growth in a complex funding landscape.