What happens if we cannot spend a grant or need to change the project?

England and Wales: This page sets out the position in full. Scotland: the same rule for a live grant — the funder’s clause governs — and a different route for money with no one left to ask: an OSCR reorganisation scheme rather than cy-près. See the section below. Northern Ireland: the same rule for a live grant, and a cy-près and scheme route of its own that is in force. See the section below.

Live grant or no funder left: which situation are you in?

Before dealing with a grant underspend or a change of plan, the trustees separate two situations that most guidance runs together. The problem usually shows up first in the report, when you deliver against the grant and report on it. The conversation with the funder needs the actual restricted fund balance from when you built your balance sheet, not an estimate. The table shows what governs each situation.

If the funder is still there, you are in the first row. That is nearly every grant still running. The funder’s clause will bite long before cy-près could be relevant. The rest of this page takes the rows in that order.

Why tell the funder before you change anything?

Because an unauthorised change can put the whole grant at risk. Circumstances change faster than funders answer, so the temptation is to adapt the project and explain afterwards, and funders read that the wrong way.

Garfield Weston Foundation’s terms say, verbatim:

It is important that you inform us immediately of any proposed changes so we can approve these. If changes happen without our agreement, we reserve the right to reclaim some, or all, of your grant.

Note the words “or all”. An unauthorised change does not put only the changed part at risk. It can put the whole grant at risk under the funder’s clawback clause, the one worth querying when you read and negotiate the grant agreement.

Most agreements have a variation procedure requiring prior approval. Few commit the funder to a turnaround time. So ask early, as soon as the change is likely rather than certain.

What happens to a grant underspend or overspend?

A grant underspend is money the project does not spend, and it reduces what the funder pays; an overspend is the charity’s own risk. The Heritage Fund’s guidance puts both sides in two sentences, verbatim:

If you spend less on the project than you were expecting, then we will not pay you the full grant. If you spend more on the project than you were expecting, we are unable to give you more than the grant we awarded.

That is the common pattern, and it is lopsided:

• An underspend reduces what the funder pays. You do not keep the difference to spend elsewhere.
• An overspend is the charity’s own risk. The extra comes from unrestricted money, or it does not come at all.

Where the money has already been paid and some is left, check what the agreement says. It may say nothing. Then the Charity Commission’s guidance CC37 is clear that, verbatim, “Any surplus funds will be subject to the same restrictions unless the terms of the grant stipulate otherwise.” Left-over grant money is still restricted money.

How to ask for a variation

A variation is a change to a grant’s agreed activity, dates or budget that the funder approves. The order below is practice, not a sourced rule. Put the request in writing and cover:

1. what has changed, and when you found out
2. what you propose instead — the new activity, dates or budget lines
3. what happens to the outputs and outcomes you promised
4. what happens to the money: an extension, a reallocation, or a repayment you are offering

Get the funder’s answer in writing too. Minute both at the next trustee meeting. That pair of documents is what protects the charity if anyone later asks why the money was spent differently.

When there is nobody left to ask: England and Wales

Sometimes a restricted fund has no live funder behind it. The grant has ended, or the money came from a legacy or a public appeal, and its purpose has become impossible. The trustees cannot simply repurpose it. That seems a sensible decision to make, and it is not one they have the power to make.

In England and Wales the route is cy-près, under the Charities Act 2011 ss.61 to 66, in Part 6 of the Act. Section 62 lists the occasions when the purposes can be changed. They include purposes that:

• have been fulfilled as far as they can be, or cannot be carried out at all or as directed
• use only part of the property
• have been adequately met by other means, or have stopped being a suitable and effective way of using the money

It needs a scheme. A scheme is not a board decision. The Commission’s own scheme-making route was not read for this guide, and this page gives no income threshold for it.

Where the charity is closing, the process is covered when you settle liabilities and deal with restricted funds. Changing a charity’s own purposes, rather than one fund’s, is a separate step: change your charitable purposes.

When there is nobody left to ask: Scotland

Scotland reaches the same place by a different route, and the route proves the same point: ask the funder first.

The Charities and Trustee Investment (Scotland) Act 2005, ss.43A to 43D, lets OSCR approve a restricted funds reorganisation scheme. One of the conditions is that the charity is unable to find out the wishes of the donor. So before applying, you try to ascertain the donor’s wishes and follow them. A live grant, with a funder you can ask, goes straight back to that funder’s own clause.

Where the donor cannot be reached, the charity applies to OSCR directly. That is not a court process. The Charities Restricted Funds Reorganisation (Scotland) Regulations 2012 set out what the application must contain. The procedure scales with the size of the fund, with a simpler route for the smallest funds.

One thing runs the other way from what a reader used to England might expect. OSCR’s own power to act, under s.43B, is the harder route: it means an application to the Court of Session.

When there is nobody left to ask: Northern Ireland

For a live grant, Northern Ireland is the same: the funder’s clause governs.

Sometimes the grant has ended and the money cannot be used for its purpose. For that case Northern Ireland has its own cy-près route, and it is in force.

The Charities Act (Northern Ireland) 2008 ss.26 to 30 set out the occasions for cy-près, and s.29 gives the power to make a scheme. That is worth saying plainly, because parts of the 2008 Act have never been switched on. This part has.

That closes the grant cycle. The rest of this hub deals with money raised from the public rather than from funders. A page on setting up compliant regular giving is coming; the step to run a fundraising event lawfully applies now.

Common mistake: adapting the project first and telling the funder afterwards

Circumstances change faster than funders answer. But Garfield Weston’s terms say, verbatim: “If changes happen without our agreement, we reserve the right to reclaim some, or all, of your grant.”

Common mistake: assuming the trustees can repurpose an unspendable restricted fund

It seems a sensible decision to make. But where the purpose has become impossible, the route in England and Wales is cy-près under the Charities Act 2011 ss.61 to 66. That is a scheme, not a board decision.

Worked example

Tollgate Youth CIO has a grant to run weekly sessions at a community centre. Halfway through the year the centre closes without warning. The project cannot run as described.

The funder is live and contactable, so this is a grant-agreement problem, not a cy-près one. Tollgate writes to the funder the same week. It explains what happened, proposes a new venue and a short pause, and asks for the end date to move to cover the lost weeks. It does not move the sessions and tell the funder later.

The funder agrees an extension in writing. Tollgate minutes both letters.

Had the grant already ended, with money left over and no way to use it for the purpose, the question would have been different. Even then, the first move would be to ask the funder. Cy-près only comes in when there is no one left to ask.