Charity Due Diligence Checklist Including Fundraising Donations And Donor Compliance

A non profit and charity due diligence checklist - donations, new fundraising donors, grants, or others, plus Charity Commission compliance templates

Charity Due Diligence Checklist & Compliance Template

To meet Charity Commission, fundraising and other regulator due diligence compliance rules for donors, donations, grants and partners, first use this policy template to assess the potential scale of risk.  Then use the checklist to identify the specific risks and appropriate action to manage these. For large scale, complex issues, this may require formal due diligence by lawyers and accountants. However, basic due diligence for a contractor may be as simple as phoning round to check that your proposed new window cleaner is reliable.

There is guidance on anonymous donations and sanctions towards the bottom of this page and links to detailed regulatory guidance by the Charity Commission and OFSI at the end.

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FUNDRAISING DUE DILIGENCE - DONORS, DONATIONS AND GRANTS

The main elements of fundraising due diligence for donors, donations and grants.

Fundraising - Partnerships, Donor & Donation Due Diligence

Due diligence of fundraising partnerships, donors and their donations is probably where this is most widely used within charities. You should undertake reasonable due diligence of donors, to ensure they don't hold views or are involved in activities that might be incompatible with your role and damage your reputation. In terms of donations, you should ensure that any gift is safe to accept and, doing so, would be in the best interests of your charity.

The checks in this resource enable you to do that, but the Charity Commission has also published compliance toolkits; see below.

Due Diligence Related Fundraising Policy Templates

For example, the objects and powers in your charity governing document restrict what you can do, so you cannot just accept any donation.  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 asking the AI bunny nicely.

CHARITY DUE DILIGENCE CHECKLIST

This due diligence policy 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.

How Much Due Diligence Is Needed - The Scale of Risk

·        Is the donation or contract particularly sensitive, important, complex or large scale?

·        Is the organisation or donor well known and respected, or might they hold views, undertake activities or work in an area that may potentially be problematic?

·        How much potential is there for things to go wrong and what’s the worst that could happen?

Quick, Easy To Do, Basic Charity Due Diligence Checklist

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.

·        If they have a website, check that what they’re proposing fits with what’s on there. If available, review what it says about key members of their team and, download and review, their annual report/accounts.

·        Carry out an internet search. On the company, partner, or donor, to see if there is anything of concern. Don’t just check page 1, as older issues may be sufficiently serious to still be relevant.

·        Speak to someone who has worked with them, or knows their sector well. A phone call is best, as people tend to be more open.

·        Take up references, if appropriate.

There are various types of software that you can use to review companies. I'm not specifically recommending it to you, but Due Dil is one of them that has a free version.

More In-depth Due Diligence Checklist

Detailed below are some issues you may wish to think about and due diligence checks you might consider.

Charity & Fundraising Ethics

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.

· Any relevant compliance checks above, plus designated people and proscribed organisations.

· For large companies, you may wish to ask about their compliance with the Modern Slavery Act UK, including their supply chain management.

Charity Commission & Other Compliance

Significant breaches of regulatory or other frameworks, investigations by government agencies/police, court cases, debt default, or disqualifications.

·        Check with any relevant regulator for reports and other information that might be available. You can find a list of regulators here.

·        Confirm registration with any relevant trade/professional bodies, and that any licenses, qualifications or insurances are held and in-date.

·        For individuals, checks for disqualified directorinsolvency/bankruptcy or Charity Commission automatic disqualification.

·        For donors - potentially tainted donations (tax avoidance schemes).

Finance Due Diligence

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.

·        If applicable, Companies House (or other registrar) records and obtain a copy of their accounts.

·        Buy an online company assessment/risk report.

Ability to Deliver

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.

·        Check during negotiations and take up references specifically covering any areas of concern.

Reputational Risk

Any potential negative media attention, or concerns from other funders/partners from being associated with this company/individual.

·        Ask them.

Contract Due Diligence

Check that the balance between the costs, benefits and liabilities is fair, and there are no onerous or unreasonable obligations.  Also check for any hidden costs.  For example, additional management fees, charges you weren't expecting, unreasonably large late payment penalties, automatic annual uplifts in prices, or increases decided by the other party without your agreement.

Conflicts of Interest

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.

ANONYMOUS DONATIONS, SANCTIONS & SCAMS

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.

Anonymous Donations & Scams

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.  There can be no absolute guide to what may be suspicious, but indicators are where significant sums are being donated, particularly if this is unusual, in cash or from overseas.

Any prospective donor who wishes cash to be forwarded in advance or for the charity to pay some of the donation to a third party will always be considered highly suspicious.

The trustees will consider reporting suspicious donations as a Charity Commission Incident report.

Charity Due Diligence - Sanctions

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.

CHARITY DUE DILIGENCE - TRUSTEES AND MANAGEMENT

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.

CHARITY DUE DILIGENCE - REGULATOR COMPLIANCE TOOLKITS

Listed below is due diligence regulatory guidance from the Charity Commission and the OFSI (Office of Financial Sanctions Implementation). I'm not personally convinced that the sanctions risk is significant enough to merit any additional due diligence over and above what any charity should be doing anyway.  However, the Charity Commission and at least some banks are specifically raising this issue with charities, particularly those operating in areas, such as Iraq, Afghanistan and the Ukraine.

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This Resource Doesn't Constitute Professional Opinion

I have worked in the sector at senior level for decades and hold an ACCA postgraduate qualification, but am neither an accountant, nor a lawyer and no advice can be applicable to all organisations, in all circumstances, so this resource does not constitute professional opinion.  Essentially, I've summarised the wide ranging and detailed regulatory guidance and augmented this with my own experience and Internet research to create a layman's guide, with links to the source guidance. I hope you found it useful.  I am not competent to issue professional advice but you can find that pro bono using Help Finder.

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