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A simple charity due diligence checklist to meet Charity Commission compliance rules. First use this charity checklist to assess the potential scale of risk then the due diligence checklist to identify the specific risks and action to manage these. The checklist starts with basic checks, anyone can carry out quickly, then follows with more specific checks to use, if you wish to. There are links to detailed Charity Commission and other regulator due diligence and compliance checklists at the bottom. We have a separate fundraising donor due diligence guide.
Charity due diligence is about checking to ensure that any potential partners, often donors, are trustworthy, responsible, and aligned with your charity's goals and that legal and regulatory requirements will be met. This might include checking their financial records, reputation, and how they operate to ensure the charity's resources are used effectively and ethically.
The in-system bunny can download this charity due diligence checklist in Word format and also 40 other charity policy templates. Register (everything is free), then login and click the in-system AI bunny icon in the bottom right of your screen. Click its Policies button, ask it to hop off and get you a charity due diligence checklist then select the downloads option. If you think that's quite clever it can also write funding bids for you.
For example, the objects and powers in your charity governing document restrict what you can do, so you cannot just accept funding from any donor. And if you do but need to refund it, it's not quite as simple as it might sound. You may also need to consider issues, such suspicious donations, or managing large anonymous gifts, or those from vulnerable individuals. If you need any of these fundraising policy templates, you can download an Acceptance & Refusal of Donations, Refunds and Ethical Fundraising policies by logging in and asking the AI bunny nicely.
In the event your due diligence uncovers a significant problem, you must be mindful of your obligations to report major incidents to the Charity Commission and, if appropriate, the Fundraising or other regulator; see below.
This charity due diligence checklist covers the main compliance issues you may need to think about and due diligence checks you may choose to carry out, with links to the relevant Charity Commission and OFSI regulatory guidance at the end, so you can adapt it as necessary to meet your charity's needs.
Due diligence can be time consuming, so taking a risk based approach to determine what and how much makes sense. Ask your self these questions:
Below are some very simple, but effective checks that anyone can carry out, followed by others that are a bit more technical. This due diligence checklist is not exhaustive and not all will apply - use the ones you need.
There are various types of software that you can use to review companies.
Detailed below are some issues you may wish to think about and due diligence checks you might consider.
Activities that are illegal or incompatible with your charity's values. Issues such as corruption/bribery, criminal activities, discrimination, exploitation of people, or the environment, or involvement with radical groups, or companies, regimes, products or services that conflict with your aims/values.
Significant breaches of regulatory or other frameworks, investigations by government agencies/police, court cases, debt default, or disqualifications.
Risk of takeover, sustained annual operating losses, level of leverage (debt) too high for their sector, bad credit risk, liquidity (cash flow) issues, weak asset base, unusual related party or intercompany transactions, or significant amounts of capital being taken out of company, adverse comments by auditors, court judgements, significant recent debt restructuring/profit warnings or redundancies.
Capacity to deliver services/products, track record in delivery, security around key staff (eg a small company relying on a single individual), any supply chain issues (eg reliance on shipments from overseas), or an organisation that has operated in only a single area delivering in an entirely new one.
Any potential negative media attention, or concerns from other funders/partners from being associated with this company/individual.
Ensure that your conflict of interest policy is complied with. If you don't have one, you can download one. Additionally, our sector is driven by passion and funding is hugely challenging for many, which brings with it the risk of urgent need clouding thinking. The fundraisers and project leaders may well be best placed to carry out due diligence. However, their findings should be reviewed and approved by someone with the necessary experience and seniority, who is also sufficiently and demonstrably distant from the issue.
Charities are at risk from attempts to breach sanctions and scams and, anonymous donations, may pose a particular risk. Outlined below are how these will be managed, with detailed procedures contained in the Charity Commission Compliance Toolkit.
Donations through collection tins and online platforms are often anonymous and any donor may remain anonymous if he or she chooses to. The Charity Commission 'know your' donor principle does not mean charities cannot accept anonymous donations and doing so is perfectly acceptable providing charities look out for suspicious circumstances and put adequate safeguards in place.
Trustees will take reasonable and appropriate steps to know who the charity's donors are and will not accept a donation where the risk to the charity is assessed to be greater than the benefit of having the funds donated. We have a separate guide for fundraising due diligence, with donor compliance checklist.
With the crisis in the Ukraine both the Commission and banks are focussing much more on the risk of breaching sanctions. This is a complex area as the sanctions applied can be to individuals, organisations or even countries, the sanctions applied vary and other countries also apply sanctions. In some circumstances a charity may obtain a licence from OFSI or rely on an exception in the legislation.
However, other than those exemptions, it is against the law to receive money, goods or economic resources from, or send these to – an individual or organisation subject to financial sanctions. In the event of any grounds to suspect the charity may be involved, or may become involved with a sanctioned individual, organisation or work in a sanctioned country, the first step is to read the OFSI guidance below, then seek and comply with their advice.
Trustees and CEOs may delegate authority, but the responsibility for getting it right remains theirs. Do you have adequate processes in place and what controls/checks are carried out to enable you to be confident these are working? Perhaps an agenda item for your next board meeting? Because, if something does go wrong, you may well be asked what you did to prevent it.
Listed below are Charity Co9mission and other regulator due diligence compliance checklists and guidance.
A registered charity ourselves, the CEF works for any non profit, not just charities.
Plus, 100+downloadable funder lists, 40+ policies, 8 online health checks and the huge resource base.
Quick, simple and very effective.
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To access help and resources on anything to do with running a charity, including funding, click the AI Bunny icon in the bottom right of your screen and ask it short questions, including key words. Register, then login and the in-system AI Bunny is able to write funding bids and download 40+ charity policy templates as well.
This due diligence article and compliance checklists are for general interest only and does not constitute professional legal or financial advice. I'm neither a lawyer, nor an accountant, so not able to provide this, and I cannot write guidance that covers every charity or eventuality. I have included links to relevant regulatory guidance, which you must check to ensure that whatever you create reflects correctly your charity’s needs and your obligations.
In using this resource, you accept that I have no responsibility whatsoever from any harm, loss or other detriment that may arise from your use of my work. If you need professional advice, you must seek this from someone else. To do so, register, then login and use the Help Finder directory to find pro bono support. Everything is free.
