Parish Council Grants: Section 137 Powers, What You Can Fund, and How to Record It

Parish councils make grants to local organisations every year — to village halls, sports clubs, community groups, charities, and arts organisations. The power to do this sits primarily in section 137 of the Local Government Act 1972, and it comes with conditions that many councils do not fully understand. Getting the conditions wrong does not usually cause immediate harm, but it creates audit exposure and, in serious cases, can make the expenditure unlawful.

Where the grant-making power comes from

Section 137(1) of the Local Government Act 1972 provides: "A local authority may, subject to the provisions of this section, incur expenditure which in their opinion is in the interests of, and will bring direct benefit to, their area or any part of it or all or some of its inhabitants."

That is the general power. The section then imposes a set of conditions:

1. The direct benefit test. The benefit must be "commensurate with the expenditure." A grant to a local sports club that keeps young people active and prevents antisocial behaviour is likely to pass. A grant to an organisation operating outside the parish area with no direct local benefit would not.

2. No duplication. The power cannot be used for something the council already has a specific statutory power to do — or is required to do — under other legislation. If the council has the power to make a grant under a different Act, it must use that Act rather than section 137.

3. The annual spending limit. A parish council cannot spend more on section 137 in any financial year than the product of: the current per-head sum (set annually by statutory instrument under Schedule 12B to the LGA 1972) multiplied by the relevant population of the parish. The per-head limit is adjusted each year based on the retail prices index. To find the current limit, check the most recent annual order published on legislation.gov.uk or contact your county association of local councils.

What can be funded

Section 137 grants can be made to:

• Charitable organisations and charitable purposes
• Bodies providing a public service to the area on a non-profit basis
• Funds established for the benefit of residents following a specified event (such as a disaster relief fund)

In practice, the most common recipients in a parish context are:

• Village hall trusts
• Community transport schemes
• Local sports clubs (particularly those with charitable status)
• Arts and cultural organisations
• Citizen advice and welfare charities operating locally
• Youth clubs and uniformed organisations

What section 137 is not designed for:

• Grants to businesses or commercial organisations
• Political organisations or campaigns
• Bodies that exist primarily to influence public opinion on political matters
• Purposes where the council already has a separate grant-making power (for example, some allotment-related expenditure has its own legislative basis)

How to make a grant properly

Council resolution. Every grant must be approved by a resolution of the full council (or an authorised committee with delegated power). The resolution must identify: the recipient organisation, the amount, the purpose, and that the council is satisfied the grant meets the benefit test under section 137. Minutes must record this — the internal auditor will look for it.

Conditions. For any grant above a de minimis amount, the council should attach conditions: how the money must be used, an obligation to account for it, and a clawback provision if the conditions are not met. This is not a statutory requirement but it is good practice and reflects what the SAPPP Practitioners' Guide expects auditors to check.

Separate accounts. Section 137 spending must be tracked separately in the council's accounts. The AGAR guide covers the accounting return, but the underlying obligation to maintain clear financial records is in the Accounts and Audit Regulations 2015 and the council's own financial regulations.

Publicity. Councils can publicise grants they have made — announcing community funding is a legitimate transparency obligation. What they cannot do is use the grant announcement for political purposes. The Local Government Act 1986 section 2 prohibits publishing material that appears designed to influence support for a political party, and this applies to how grants are communicated as much as anything else.

The annual limit in practice

The per-head limit sounds technical but the practical effect is modest for most small parishes. At the most recent rate, a parish with 1,500 electors would have a section 137 limit in the range of roughly £9,000–£14,000 per year depending on the current per-head figure. The exact amount changes each April when the new statutory instrument takes effect — check the current order before setting the grants budget.

If the council makes grants under both section 137 and other powers in the same year, only the section 137 grants count against the section 137 limit. Grants properly made under other legislation are separate and do not eat into the section 137 headroom.

What the internal auditor checks

The internal auditor reviewing grants will look for:

• A council resolution approving each grant, with the amount and recipient named
• Evidence that the benefit test was considered (the minutes should show the council was satisfied)
• Confirmation that the total section 137 expenditure in the year did not exceed the annual limit
• Separate accounting entries for section 137 expenditure
• Any grant conditions attached, and whether the council followed up on recipients' compliance

A common audit finding is that grants were paid without a formal resolution, or with a resolution that does not record the council's consideration of the benefit test. The fix is straightforward — adopt a standard grant resolution template and use it consistently.

Other grant-making powers

Section 137 is the most used, but not the only, grant-making power for parish councils. Some councils make grants under:

• Section 19 of the Local Government (Miscellaneous Provisions) Act 1976 — for recreational facilities
• Specific acts governing particular services (allotments, burial grounds, and so on)

Where a specific power exists, use it in preference to section 137 — it avoids the annual limit and is cleaner to account for. If you are unsure whether a specific power exists for a particular grant, your county association of local councils can advise.

Sources

• Local Government Act 1972, section 137 — expenditure for the benefit of the area
• Local Government Act 1972, Schedule 12B — section 137 spending limit mechanism
• Local Government Act 1986, section 2 — prohibition on political publicity
• Accounts and Audit Regulations 2015

This article is for general guidance on the section 137 power only. Local councils have other grant-making powers under specific legislation. The current section 137 per-head limit changes annually — check the most recent statutory instrument or contact your county association of local councils for the figure in force for the current financial year.