I'm not aware of a specific power to do this. But since it isn't a matter that involves any expenditure by the council, it seems to me that there is no reason the council cannot do this. The council would have an obligation to use the money for the purpose it is given.
In fact, the council is a good candidate for handling the money as it is guaranteed to continue in existence (or to hand over its responsibilities to another public authority) and cannot go bust.
A local council can spend money on promoting local sporting activity, provided it is agreed by a council decision in the usual way.