Have you accounted for your Charity Grant?

The UK alone has approximately £2.65 billion available in government grants and £4 billion available from external grant makers. Grants are one of the most desired sources of funding available to charities being that there is no interest payable and those privileged to receive one, will not have to pay it back. This being said, many charities miss out on thousands available to their charity each year and/or fail to properly account for this income correctly, exposing them to excessive funds.

Applying for a Grant

Grants vary in amounts and are awarded depending on the size, nature and objectives of the prospective charity. As desirable as a grant may be, they are fairly difficult to obtain and with so many available, it can be difficult to find the most suitable one. Websites such as Big Lottery Fund provide funding for projects and help support charities through their application. Also, Dummies.com is a great resource for introducing you to the types of grant available and how you can get started with a grant application. Alongside this, sites such as “GRANTfinder” host an array of grant makers who cater to a range of industries and sectors, currently the site features 8,000 funding opportunities. It is important to remember that, depending on the grant maker, there may be rules and guidelines that those receiving the funds must follow. In some cases, grants may only be available for specific uses or can even be a substitute for a fund amount, such as assets or favours. For example, The Google Grant offers charities up to £10,000 worth of google marketing and online advertising.

How to Account for Grants: Restricted and Unrestricted funds

Correctly maintaining an accurate set of charity accounts is essential to restoring the public’s trust and confidence in the sector. Under the Statement of Recommended Practices (SORP), a charity must account for all resources that come into the organisation, including grants. Commonly, these fall under one of the two categories: unrestricted funds or restricted funds.

Unrestricted Fund

Unrestricted Fund refers to finance which has no restriction or limitation as to what the charity spends it on. Consequently, donations and Gift Aid fall under this category. However, as with all grants, Unrestricted Funds must contribute to achieving the charitable aims and purposes of the charity, as set out in the charity’s governing document.

Restricted Funds

In the instance that the funds given can only be used for a specific purpose or explicit use, this is known as aRestricted Fund. More often than not, the grant maker will state the intent, which the fund must be used for (this will be outlined in a contract or terms and conditions). Where this is the case, the grant should be referred to as a ‘contract’ due to its limitations. Failure to use the grant for its intended use is illegal and the funder can request for the amount to be paid back in full.

If a charity does not use the entire grant, this should usually be returned. Where this is not the case, the fund often becomes restricted and must be used for a specific purpose only, as determined by the funder. In the case of a contract not being used, unless specified that it should be returned, this should often be kept as part of a reserve fund for the charity. Failure to correctly account for external income is illegal and a breach of the Charities Act. In some cases charities may face a statutory inquiry from the Charity Commission. If you would like to discuss the reporting requirements and your obligations in more detail, please contact Suda Ratnam at Suda.ratnam@raffingers-stuart.co.uk.