Nonprofit boards and charity trustees who make grant decisions carry significant governance responsibilities. They are legally accountable for how charitable funds are distributed, personally exposed to liability if grants are made improperly, and responsible for setting the governance framework within which staff administer grant programmes.
This guide covers what nonprofit boards need to know about their grants management responsibilities and how well-designed systems support good governance.
Charity trustees are ultimately responsible for how charitable funds are used — including grants. This responsibility includes:
Strategic direction. Setting the organisation's strategic priorities and the grantmaking framework that flows from them. What types of grants does the organisation make? What are the eligibility criteria? What outcomes is the grantmaking intended to produce?
Policy approval. Approving the grants policy — the documented framework that governs how grant decisions are made, what approval authority staff have, how conflicts of interest are managed, and what accountability is required of grantees.
Decision-making at appropriate levels. Making grant decisions directly for grants above the staff delegation threshold, and providing oversight of the decisions staff make within their delegated authority.
Fiduciary responsibility. Ensuring that charitable funds are applied to charitable purposes consistent with the organisation's rules, trust deed, or founding document.
Accountability to beneficiaries. Trustees hold charitable assets in trust for the community the charity serves — not for themselves, not for donors, not for the government. Their accountability runs to the beneficiary community.
Conflicts of interest are one of the highest-risk governance areas in grantmaking. Trustees frequently have connections to organisations that apply for grants — they may sit on the board of an applicant organisation, employ someone who works for an applicant, or have personal relationships with applicant leadership.
Duty to declare. Trustees have a legal duty to declare any conflict of interest before participating in decisions on related grant applications. This applies even where the trustee believes they can be objective.
Management after declaration. When a conflict is declared, the standard approach is for the conflicted trustee to:
- Leave the room during discussion of the application
- Not vote on the application
- Not receive the assessment papers for that application
- Have the conflict and its management recorded in the minutes
The "benefit test." A conflict of interest exists whenever a trustee or their connected parties would benefit from the grant decision — directly or indirectly. "I've worked with that organisation before and they do good work" is not a conflict; "my daughter works for that organisation" is.
Board-level COI policies. Boards should have a formal COI policy that defines what constitutes a conflict, how it should be declared, and how it will be managed. This policy should be reviewed and re-adopted annually, with trustees completing fresh declarations each year.
Most grant programmes involve delegation — the board delegates authority to staff to make grant decisions up to defined limits, reserving larger decisions for board or committee review. A well-designed delegation framework:
Specifies authority levels. Who can approve grants up to $X? Who approves above that? What requires full board approval? These thresholds should be specific dollar amounts, not vague descriptions.
Documents the basis. Delegation authority should be documented — in board resolutions, in the grants policy, or in delegations registers. Informal verbal delegations are inadequate.
Is reviewed regularly. As programmes grow and change, delegation thresholds should be reviewed. Delegation frameworks set years ago may not reflect current grant sizes or staff capability.
Applies to grant variations and payments as well. Delegation frameworks often focus on grant approvals but should also address who can approve grant variations, who can approve payment processing, and who can authorise bank account changes.
Boards need regular information about grant programme activity to discharge their governance responsibility. Typical board reporting on grants includes:
Summary of grants approved. For each period — what was approved, by whom (board vs delegated), total committed, breakdown by programme.
Active grants status. What grants are currently active? What milestones are due? What reporting is overdue? What compliance concerns are flagged?
Financial reconciliation. Total grants committed vs total grants paid vs total budget. Any significant variances.
Programme performance. At a strategic level, how is the programme performing against its intended outcomes? Are the grants producing the outcomes the board intended?
Exceptions. Any grants approved outside standard process (emergency grants, ministerial discretion, etc.) with the basis for the exception.
Trustees who want assurance that grants are being administered well should understand what systems are in place:
Is there a comprehensive audit trail? Can we produce a complete record of any grant decision — who applied, how it was assessed, who approved it — for any grant at any time?
Are COI processes working? Is there a documented COI declaration process? Is it being followed? Are conflicts recorded and managed?
Are delegation limits being respected? Does the system enforce delegation limits, or is it possible for staff to approve grants above their authority without board knowledge?
Are reporting obligations being met? Is grantee reporting being collected? Are overdue reports being followed up?
What happens if a grantee misuses funds? What is the process for investigating and recovering misused grants?
Purpose-built grants management software supports board governance in specific ways:
Delegation enforcement. System-level controls that ensure grants can only be formally approved by users with appropriate authority — preventing unauthorised approvals without governance oversight.
COI workflow. Structured COI declaration process at the start of each assessment round, with records of declarations and management of declared conflicts.
Board reporting modules. Configurable board reports that extract the information trustees need without manual compilation by staff.
Audit trail. Complete, tamper-proof records of all grant actions — assessable by the board if they want to review any specific grant.
Exception flagging. Automatic flagging of grants processed outside standard parameters — emergency approvals, grants above delegation thresholds, payments to changed bank accounts — for board awareness.
Tahua provides grants management software with the governance controls, delegation enforcement, and board reporting that supports responsible trustee oversight.