Winning a grant is a fundraising job, but taking one is a governance decision that belongs to the trustees. This guide sets out what your board must decide before applying, check before accepting, and record in the minutes and annual report.
Grants are board business, not just fundraising business
It is easy to treat grants as something that happens off to one side: a keen volunteer writes applications, cheques arrive, everyone is pleased. But every grant creates commitments — promises about what the money will be spent on, reports that must be delivered, sometimes money that must be handed back. Trustees are collectively responsible for all of it, whether or not they saw the application.
The Charity Commission's core guidance, The essential trustee (CC3), is clear that trustees must ensure the charity's funds are used only to further its purposes, and must act with reasonable care and skill in decisions about resources. Grants sit squarely inside that duty. None of this needs to be heavy-handed in a small charity — a few agenda items and a few lines of minutes usually cover it — but it does need to be deliberate.
Who decides to apply — and what belongs in the minutes
Boards do not need to approve every application line by line. What they need is a clear, recorded answer to the question: who is allowed to apply for money in this charity's name, and up to what point?
Delegation means the board formally hands a defined task to someone — a staff member, the chair, a fundraising trustee — while keeping overall responsibility. Trustees can delegate the work of applying; they cannot delegate away responsibility for the outcome. A sensible small-charity arrangement looks like:
- Applications up to an agreed amount (say £5,000) may be made by the coordinator or fundraising lead, reported to the next board meeting.
- Applications above that amount, and any application that would commit the charity to new activity, new staff, match funding or multi-year delivery, need board approval before submission.
- All applications, whatever the size, are listed at each meeting: sent, pending, won, lost.
Whatever thresholds you choose, minute the delegation itself — the decision that creates the rule — then minute the exceptions as they arise. The Commission's guidance on decision-making, It's your decision (CC27), stresses that trustees should be able to show how significant decisions were reached. For a significant application, the minutes should record: what was applied for and how much, why it furthers the charity's purposes, what the charity is committing to if it succeeds, and who is authorised to sign. See what charity minutes should include for the wider list every decision like this needs.
A standing "funding pipeline" item keeps this painless: one short table at each meeting showing every live application and grant. If your board wants that pipeline built from a realistic list of funders rather than guesswork, how to choose grant funders for your charity covers that, and the free Find grants for your charity tool builds a shortlist from published UK grant-making data trustees can review at a meeting.
Check your charitable objects before you apply — not after
Every charity has objects: the purposes written into its governing document (the constitution, trust deed or articles of association) that define what the charity legally exists to do. Money — including grant money — may only be spent on those purposes.
This matters at the application stage, not the acceptance stage, because grants pull. A funder offers £10,000 for youth work; your charity supports older people; someone says "we could probably run something for young people too". That is how charities drift outside their objects — and spending charity funds on activities outside the objects is a breach of trust, a governance failure that trustees can, in bad cases, be personally liable to put right.
So before any application goes out, someone — ideally the board, for anything significant — asks the plain question: does the funded work fit within our objects as written, not as we vaguely remember them? Many trustees are surprised by what their objects do and do not cover. If the work is a genuine priority but sits outside the objects, the options are to not apply, or to amend the objects first — a formal process that may need Charity Commission involvement — never to take the money and hope.
Minute the check for significant applications: one line — "Trustees confirmed the proposed project falls within the charity's objects (clause 3 of the constitution)" — is enough.
Restricted and unrestricted funds, in plain English
When grant money arrives, your treasurer will ask one question first: is it restricted?
- Unrestricted funds are money the trustees may spend on anything within the charity's objects. General donations are usually unrestricted.
- Restricted funds are money given for a specific purpose — because the funder said so, or because you raised it with a specific appeal. A grant "for the lunch club" is restricted: it may only be spent on the lunch club.
The restriction is not a polite preference. It is legally binding. Restricted money that is spent on something else must, in principle, be made good, and misusing restricted funds is one of the classic small-charity failures — usually through muddle rather than dishonesty: everything sits in one bank account, cash gets tight, and the restricted money quietly leaks into general running costs.
What this means in practice:
- Your accounts must track each restricted fund separately — what came in, what was spent, what remains. You do not need a separate bank account for each grant, just bookkeeping that shows each fund's balance. Charities preparing accruals accounts under the Charities SORP (the rulebook for charity accounts — see SORP 2026 for trustees if you are unsure which tier applies to you) show restricted funds separately as a matter of course, and even receipts-and-payments accounts should distinguish them.
- The treasurer reports fund balances to the board — not just "money in the bank" but "of which £6,200 is restricted to the lunch club". A healthy-looking balance made mostly of restricted money is one of the most dangerous illusions in small-charity finance.
- If circumstances change — the project cannot go ahead, or costs less than expected — you cannot simply redirect the surplus. Ask the funder, in writing, whether the balance may be spent differently or should be returned.
Basic controls like these are exactly what the Commission's guidance on internal financial controls (CC8) expects trustees to have in place, scaled to the charity's size.
Grant conditions: why the board must see the paperwork
Most grants above a token size come with a grant agreement or offer letter setting out conditions. Common ones include:
- what the money may and may not be spent on, and by when
- reporting requirements — what you must send back, and when
- clawback — the funder's right to demand repayment if the money is misspent, the project does not happen, or conditions are broken
- publicity and acknowledgement requirements
- permission needed before changing the project or the budget
- for larger grants: policies you must hold (safeguarding, insurance), or access to your records
Accepting these conditions is a trustee decision. For any significant grant, the board (or a trustee it has delegated to) should actually read the conditions before the charity accepts — not skim the amount and sign. The questions are simple: can we genuinely deliver this, on this timetable, for this money? Can we meet the reporting dates? Is there anything here we cannot live with?
It is entirely proper to go back to a funder and query a condition. It is a governance failure to discover one for the first time when the funder invokes it.
Conflicts of interest: when a trustee knows the funder
Small-charity Britain is a small world. Sooner or later, a trustee will be connected to a funder — as a trustee of the grant-making trust, an employee of the funding company, or a relative of someone who decides.
A conflict of interest is any situation where a trustee's other loyalties or personal interests could affect, or appear to affect, their judgement. The connection itself is not wrongdoing — such links often help charities — but it must be handled openly. The Charity Commission's guidance, Conflicts of interest (CC29), sets out the standard three-step approach: identify the conflict, prevent it from affecting the decision, and record how it was handled.
For grants, that means:
- Declare it. The connected trustee states the interest as soon as the funder is discussed, and it goes in the minutes.
- Manage it on your charity's side. Usually the connected trustee takes no part in your board's decision to apply to or accept from that funder; the minutes record the declaration and the withdrawal.
- Mind the funder's side too. If your trustee also sits on the funder's board, the funder has its own conflict to manage; your trustee must not act as your advocate inside the funder's decision.
- Never let the connection replace the process. "Margaret knows the trust, she'll sort it" is precisely the arrangement that ends badly for both charities.
A running record of these declarations makes this easy to evidence later — see the charity conflicts of interest register template if your board does not already keep one.
Recording acceptance — and the treasurer's role
Applying and accepting are two separate decisions, and the second deserves its own minute. When a grant is offered, the record should show:
- the funder, the amount, and what it is for
- that the conditions were reviewed and the charity can meet them
- whether the fund is restricted, and for what
- who signed the acceptance, under what authority
- any conflict of interest declared and how it was handled
From acceptance onwards, the treasurer carries the machinery: record the grant correctly in the accounts (restricted or unrestricted) on receipt, track spending against the grant budget so drift is spotted early, diary the reporting deadlines and spend-by dates, report balance and progress to each board meeting, and flag immediately if the money cannot be spent as agreed so trustees can go back to the funder in good time.
None of this requires an accountant — just a spreadsheet, a calendar, and a treasurer who tells the board the truth about restricted balances.
What your annual report should say about grants
Every registered charity produces a trustees' annual report alongside its accounts each year — for small charities this can be brief. Gov.uk's guidance on preparing a trustees' annual report sets out what is required at each size of charity.
Handled well, the annual report is where good grant governance becomes visible:
- In the accounts, restricted funds are shown distinctly, with movements in and out. Charities preparing accruals accounts under the SORP also disclose income by source. Your independent examiner or accountant will steer the technical presentation.
- In the narrative, explain in plain words what grants supported: "A grant of £8,000 from the XYZ Trust funded our lunch club for the year, providing weekly meals for around 30 older people." That is honest accountability — and funders read it.
- Acknowledge funders as their conditions require, and thank them regardless.
- If a grant went wrong — returned, clawed back, or unspent — deal with it accurately in the accounts and, where material, in the narrative. Quiet omissions age badly.
A charity whose annual report clearly accounts for its grants also, not coincidentally, finds the next grant easier to win: funders check the register, and a clean report is evidence of a board in control.
Checklist: grant governance for a small board
- The board has agreed, and minuted, who may apply for grants and above what threshold board approval is needed
- Every live application and grant appears in a short pipeline report at each board meeting
- Before any significant application: trustees have checked the funded work against the objects in the governing document, and minuted it
- Before accepting any significant grant: the conditions (reporting, clawback, spend-by dates) have been read and the board is satisfied the charity can meet them
- Each grant is recorded as restricted or unrestricted, and restricted balances are tracked and reported separately by the treasurer
- Trustees' connections to funders are declared, managed and minuted in line with the conflicts of interest policy
- The decision to accept each significant grant is minuted: funder, amount, purpose, conditions reviewed, who signed
- Reporting deadlines for every grant are in a diary someone owns
- The funder is asked, in writing, before any grant money is used differently from the original purpose
- The annual report and accounts show restricted funds properly and describe what grants achieved
Common questions about grants and governance
Do the trustees really need to approve every grant application? No — that would grind a small charity to a halt. The board must decide and minute a delegation: who may apply, up to what amount, and which applications (large, novel, multi-year, or committing the charity to new obligations) come back to the board first. Every application should at least be reported afterwards.
Can we spend restricted grant money on our general running costs? Only to the extent the grant budget allows it — for example, if the funder agreed a budget including a share of overheads. Beyond that, no: restricted money may only be spent on its stated purpose. If you cannot spend it as agreed, ask the funder in writing whether the restriction can be varied or returned. Do not borrow from restricted funds to cover cash-flow gaps.
A trustee of ours is also a trustee of a trust we want to apply to. Is that a problem? It is a conflict of interest to manage, not a bar. The trustee should declare the connection, take no part in your board's decision about that funder, and stay out of advocating for you within the funder's own decision-making. Minute the declaration and how it was handled — CC29 is the Charity Commission's guidance to follow.
What happens if we can't deliver what the grant was for? Tell the funder early, honestly and in writing. Most funders would rather agree a revised plan than discover a failure at report time, and many agreements require you to notify changes anyway. If the money genuinely cannot be used as agreed, expect to return the unspent balance — and record it in the minutes and accounts.
This guide covers England and Wales. Scottish charities are regulated separately by OSCR, and Northern Ireland charities by CCNI — both take a similar approach to trustee duties and restricted funds, but check the equivalent regulator's own guidance rather than assuming these rules apply in full.
Building the funder shortlist that leads to this point? See how to choose grant funders for your charity and how to write your first grant application. For the record-keeping side, see what charity minutes should include, the conflicts of interest register template and SORP 2026 for trustees — or browse the full guides library.