Charity Commission Funding Compliance Guide 2025: Essential Requirements for Grant Recipients
Charity Commission compliance is essential for successful grant funding. This comprehensive guide covers regulatory requirements, reporting obligations, and best practices to ensure your charity maintains compliance while maximising funding opportunities in 2025.
Critical Compliance Alert - 2025 Changes:
New Requirements:
- • Enhanced financial monitoring for grants over £25,000
- • Mandatory cyber security assessments
- • Digital-first reporting requirements
- • Strengthened safeguarding obligations
Increased Penalties:
- • Automatic funding suspensions for non-compliance
- • Public inquiry triggers reduced
- • Cross-funder information sharing
- • Disqualification thresholds lowered
The regulatory landscape for charity funding has intensified significantly in 2025, with the Charity Commission implementing stricter compliance requirements and enhanced enforcement mechanisms. Understanding these requirements is not optional—it's essential for accessing and retaining grant funding.
Recent high-profile charity failures have led to increased scrutiny of grant recipients, making compliance excellence a competitive advantage in funding applications. Funders increasingly require evidence of robust governance and regulatory compliance before making awards.
Core Compliance Framework for Grant Recipients
Trustee Duties and Grant Management
Charity trustees bear legal responsibility for ensuring grant funds are used in accordance with charitable objects and funder requirements. This responsibility cannot be delegated, even to professional staff.
Fiduciary Duties
Trustees must act in the charity's best interests and ensure prudent management of resources.
- • Exercise reasonable care and skill in decision-making
- • Avoid conflicts of interest or declare them appropriately
- • Ensure charitable funds are used only for charitable purposes
- • Maintain appropriate oversight of grant expenditure
Due Diligence Requirements
Trustees must conduct appropriate due diligence before accepting grants and throughout project delivery.
- • Verify funder legitimacy and grant terms compatibility
- • Assess organisational capacity to deliver grant objectives
- • Ensure grant activities align with charitable objects
- • Establish appropriate monitoring and evaluation systems
Accountability Obligations
Trustees are accountable to beneficiaries, funders, and the public for the stewardship of charitable resources.
- • Maintain accurate records of grant income and expenditure
- • Provide regular reports to funders as required
- • Ensure transparent communication about grant activities
- • Submit timely returns to the Charity Commission
Financial Management and Reporting
Robust financial management systems are essential for compliance and form the foundation of funder confidence. The 2025 changes place additional emphasis on real-time financial monitoring.
Enhanced Financial Monitoring Requirements (2025)
For Grants Over £25,000:
- • Quarterly financial reports to funders showing grant expenditure against budget
- • Monthly management accounts available for inspection
- • Annual independent examination of grant-funded activities
- • Digital financial tracking systems with audit trails
For Grants Over £100,000:
- • Real-time financial monitoring with funder access to systems
- • Independent financial oversight through qualified finance committee
- • External audit requirement regardless of charity size
- • Risk management framework specific to grant delivery
Grant-Specific Compliance Obligations
| Grant Value | Compliance Requirements | Reporting Frequency | Oversight Level |
|---|---|---|---|
| Under £10,000 | Basic financial records, annual returns | Annual | Standard |
| £10,000 - £25,000 | Detailed expenditure tracking, board oversight | Bi-annual | Enhanced |
| £25,000 - £100,000 | Quarterly monitoring, independent examination | Quarterly | Intensive |
| Over £100,000 | Real-time monitoring, external audit, risk management | Monthly | Maximum |
Safeguarding and Protection Requirements
Safeguarding requirements have been significantly strengthened in 2025, particularly for charities working with vulnerable groups or receiving public funding over £25,000.
Mandatory Safeguarding Framework
Policy and Procedure Requirements
Essential Policies:
- • Safeguarding children and adults at risk
- • Safer recruitment and DBS checking
- • Whistleblowing and incident reporting
- • Data protection and privacy
- • Health and safety management
Implementation Requirements:
- • Board-approved policies reviewed annually
- • Staff and volunteer training programmes
- • Clear reporting procedures and contact points
- • Regular policy communication and updates
- • Incident monitoring and reporting systems
New 2025 Requirements
Enhanced Due Diligence:
- • Online safety assessments for digital services
- • International background checks for overseas projects
- • Continuous monitoring of staff and volunteer suitability
- • Partnership due diligence for collaborative projects
Reporting Obligations:
- • Annual safeguarding reports to Charity Commission
- • Serious incident reporting within 24 hours
- • Quarterly safeguarding audits for high-risk activities
- • Cross-sector incident notification requirements
Digital Compliance and Cyber Security
2025 introduces mandatory cyber security requirements for charities receiving significant grant funding, reflecting increasing digital threats to the sector.
Cyber Security Obligations
Mandatory Requirements for Grants Over £50,000
Technical Controls:
- • Multi-factor authentication on all systems
- • Regular software updates and patches
- • Encrypted data storage and transmission
- • Firewall and antivirus protection
- • Regular data backups and recovery testing
Governance Requirements:
- • Board-approved cyber security policy
- • Regular risk assessments and audits
- • Incident response and recovery plans
- • Staff training and awareness programmes
- • Third-party supplier security assessments
Compliance Evidence:
- • Annual cyber security certification
- • Penetration testing reports
- • Incident logs and response records
- • Staff training completion certificates
- • Supplier compliance attestations
Data Protection and Privacy
Grant activities often involve processing personal data, making GDPR compliance essential for both regulatory and funding requirements.
Data Protection Impact Assessments (DPIA)
Required for all grant projects processing sensitive personal data
Before project start
Privacy Notices and Consent
Clear information about data use with appropriate consent mechanisms
Before data collection
Data Sharing Agreements
Formal agreements required when sharing data with partners or funders
Before sharing
Governance and Oversight Requirements
Board Governance Standards
Strong governance is increasingly viewed as essential for accessing significant grant funding, with funders requiring evidence of effective board oversight.
Board Composition Requirements
- • Minimum 3 trustees with relevant skills and experience
- • Chair and treasurer roles clearly defined and filled
- • Skills audit completed annually with gaps addressed
- • Diversity and inclusion considerations in recruitment
- • Succession planning for key governance positions
- • Conflict of interest register maintained and updated
Board Performance Standards
- • Regular meetings with documented decisions and actions
- • Strategic planning process with measurable objectives
- • Financial oversight including budget approval and monitoring
- • Risk management framework with regular review
- • Performance monitoring against charitable objectives
- • Annual governance review with external input
Internal Controls and Risk Management
Essential Internal Controls for Grant Recipients
Financial Controls:
- • Segregation of duties in financial transactions
- • Dual authorization for expenditure over set limits
- • Regular bank reconciliations and independent review
- • Annual independent examination or audit
- • Budget monitoring with variance analysis
Operational Controls:
- • Written procedures for key processes
- • Regular monitoring of service delivery
- • Quality assurance and evaluation systems
- • Complaint and feedback mechanisms
- • Document retention and management policies
Regulatory Reporting and Transparency
Charity Commission Reporting
The 2025 changes introduce enhanced reporting requirements with digital-first submissions and real-time monitoring capabilities.
Annual Returns Enhancement
New Required Information:
- • Detailed breakdown of grant income sources
- • Impact measurement data and outcomes achieved
- • Safeguarding incident summary and actions taken
- • Cyber security compliance certification
- • Partnership and collaboration details
Digital Submission Requirements:
- • Machine-readable financial data formats
- • Digital signatures from all trustees
- • Automated cross-checking with HMRC data
- • Real-time validation and error checking
- • Integration with funder reporting systems
Key Deadlines for 2025
Public Transparency Requirements
| Information Type | Publication Requirement | Update Frequency | Accessibility |
|---|---|---|---|
| Trustee Information | Names and roles on charity website | Within 30 days of changes | Publicly accessible |
| Annual Accounts | Full accounts on website and Charity Commission | Annually | Publicly accessible |
| Grant Impact Reports | Summary impact data on website | Annually | Accessible format required |
| Safeguarding Policy | Policy summary on website | When updated | Publicly accessible |
Compliance Risk Management
Common Compliance Failures and Prevention
Understanding common compliance failures helps organisations implement preventive measures and avoid regulatory sanctions.
High-Risk Compliance Areas
Financial Management:
- • Risk: Mixing restricted and unrestricted funds
- • Prevention: Separate accounting codes and regular reconciliation
- • Risk: Inadequate expenditure authorization
- • Prevention: Clear delegation limits and dual approval processes
Governance Failures:
- • Risk: Undeclared conflicts of interest
- • Prevention: Regular register updates and meeting declarations
- • Risk: Inadequate board oversight
- • Prevention: Structured reporting and regular performance reviews
Early Warning Indicators
Financial Red Flags:
- • Unexplained budget variances over 10%
- • Delayed financial reporting
- • Cash flow difficulties
- • Incomplete audit trail
Governance Issues:
- • Frequent trustee resignations
- • Poor meeting attendance
- • Unresolved conflicts
- • Lack of strategic planning
Operational Concerns:
- • Increasing complaints
- • Staff turnover spikes
- • Service delivery problems
- • Partner relationship breakdowns
Building a Compliance Culture
Organisational Compliance Framework
Successful compliance requires embedding regulatory awareness throughout the organisation, not just relying on senior management oversight.
Staff Training and Awareness
All staff should understand their role in maintaining compliance and the potential consequences of failures.
- • Annual compliance training for all staff and volunteers
- • Regular updates on regulatory changes
- • Clear escalation procedures for compliance concerns
- • Integration of compliance into induction programmes
Continuous Improvement
Compliance systems should evolve with changing requirements and organisational growth.
- • Regular compliance audits and reviews
- • Benchmarking against sector best practice
- • Integration of lessons learned from incidents
- • Technology upgrades to support compliance
"Compliance is not a burden to be managed, but a foundation for trust. Funders increasingly see strong compliance as an indicator of organisational capability and reliability." - Charity Commission Senior Regulatory Officer
Ensure Compliance Excellence with Crafty
Crafty's platform includes comprehensive compliance monitoring tools, regulatory update alerts, and automated reporting features to help your charity maintain excellence in regulatory compliance.
Compliance Monitoring
Real-time regulatory tracking
Automated Reporting
Streamlined submission processes
Risk Management
Early warning systems
Key Compliance Takeaways
Essential Compliance Actions for 2025:
- Implement enhanced financial monitoring systems for all grants over £25,000
- Complete mandatory cyber security assessments and implement required controls
- Update safeguarding policies and procedures to meet strengthened requirements
- Establish digital-first reporting capabilities for Charity Commission submissions
- Strengthen board governance with annual reviews and skills audits
Charity Commission compliance in 2025 requires proactive management and continuous attention to evolving requirements. The organisations that excel in compliance will find themselves better positioned for funding success, with enhanced credibility and reduced regulatory risk.
Remember that compliance is not just about avoiding sanctions—it's about building the trust and credibility that funders seek when making significant grant awards. Strong compliance systems demonstrate organisational maturity and reliability, making your charity a preferred partner for funders seeking to maximise their impact.