"What processes/policies should a small charity have in place for grant-making to individuals overseas, as well as other overseas organisations?"

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It’s true that small charities play a vital role in addressing a range of global issues. Whilst the need can be significant, it is important that all charities (regardless of size) have an appropriate set of policies and procedures in place. Although it is important for all grant-makers to have suitable policies, this is especially important for those making grants overseas where the risks can be even greater.

Charities making grants overseas should refer to the Charity Commission’s guidance “Charities: how to manage risks when working internationally”, which addresses a range of factors including the risks associated with money transfers.

Clear policies in place

All charities providing grants should have a clear grant-making policy. Whilst the content of the policy will depend on the size and complexity of the charity, an appropriate policy will include details of the charity's mission, objectives, and criteria for awarding grants. It should also specify the types of grants available, eligibility requirements, application procedures, and the evaluation processes.

A good policy will include a clear and transparent selection process. Eligibility requirements should be tailored to the type of grants being made. For example, a grant to an individual for schooling may focus on factors such as financial hardship and academic aims, whereas a grant to an organisation for humanitarian work may focus more on proposed outcomes of the work.

Risk assessment and due diligence

Charities making grants should carefully assess the associated risks. Based on the risk assessment, appropriate due diligence should be conducted on the potential recipients. The level of due diligence required will vary based on identified risks, and effective due diligence will consider a range of factors.

For example, when making grants consideration should be given to the organisation’s capacity, reputation, governance and financial statements. Making grants to individuals is more likely to focus on verifying the individual’s identity and need.

Charities should also consider the location of where the grant is being made, and whether it brings any local compliance requirements.

Clear terms and conditions

The terms and conditions for grants should be clearly understood by both parties. Larger grants to organisations should have a partnership agreement or Memorandum of Understanding in place. For smaller grants to organisations or individuals, an award letter is likely to be appropriate.

Ensuring effective use of funds

With international grants, a charity needs to be able to show it has ensured the effective use of funds. Again, how a charity does this will depend on the size of the grant being made and the recipient.

For a larger grant, this may include regular progress and financial reports, putting in place key milestones, or even site visits. Larger grants are likely to be paid in multiple tranches, with a clear budget put in place.

A simple, straightforward report may be suitable for a small charity making grants on a smaller scale. With grant-making, there is no one size fits all approach as there are a range of factors to consider. For individuals or small organisations, the charity could require the submission of receipts, reports, and other documentation that demonstrates the grant is being used for its intended purpose. It may also be appropriate to have a mechanism to share positive outcomes from grants made.

Through effective monitoring controls, a charity can also consider any changes required in the future to ensure it uses its funds appropriately.

Conclusion

Effective grant-making policies are proportionate to the size and scale of grants made, as well as the risks of the grant-making activities. It is essential for charities to consider what is appropriate and tailor these policies for their specific needs. However, when making grants overseas, it is especially important to consider the higher risks involved and charities should do so in accordance with the Charity Commission’s guidance. Feel free to reach out to me or one of the HaysMac charity team for support with taking the necessary steps to ensure your grant-making practices are both appropriate and well-managed.

This article is sponsored by HaysMac and written by the firm's partner, Steve Harper.

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