The assets of the City Parochial Foundation derive from the philanthropy of the people of London. Around 1,400 separate charitable gifts and bequests, some of them 400 years old, were held by the 112 parishes within the City of London, to be used for the benefit of the churches or, more often, the poor of those parishes. During the 19th century, the City grew to be a world financial centre and the income of these charities, many endowed with City properties, rose substantially. In contrast, the numbers of beneficiaries fell. Some parishes had no residents at all.

On 10 August 1878, a Royal Commission was appointed to investigate the parochial charities of the City of London. Its report resulted in the City of London Parochial Charities Act, 1883. This Act provided that the five largest parishes should continue to manage their own charitable endowments, but that the bulk of the remainder should be administered by a new corporate body, to be known as the Trustees of the London Parochial Charities, with perpetual succession and a Common Seal. The Act further provided that the Charity Commissioners should prepare Schemes for the proper application of these funds. It defined the area of benefit as the City of London and the Metropolitan Police District of London, the largest boundary definition available for Greater London. The outcome was a Scheme promulgated on 23 February 1891 which brought all the endowments together into two funds, a City Church Fund and a Central Fund. Together these constituted the City Parochial Foundation, with the Trustees under the 1883 Act serving as the Foundation's Central Governing Body.

The Foundation is still governed by the 1891 Central Scheme and various subsequent amending Schemes and orders.

Both the Central Fund and the City Church Fund have a permanent endowment fund and an income fund. Use of income from the Central Fund is restricted to the area of benefit. It cannot be used for the advancement of religion but may be spent on furthering any charitable purpose which is directed to the benefit of poor inhabitants of the area. The income may also be applied to benefit poor persons who are for the time being located within the area of benefit. In furtherance of these objects, the Trustees make grants to charitable organisations or projects that work, directly or indirectly, to benefit poor inhabitants of that area.