Be diligent about due diligence: our top ten tips for charities applying for funding

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What is due diligence?

Firstly, let’s address this question, as often eligibility is confused with due diligence. Eligibility is the criteria required to meet the requirements of a grant programme, such as having a certain level of income or confirming your project meets the aim of the programme. Due diligence refers to the action that is considered reasonable for an organisation to be expected to take to keep themselves or others and their property safe. For example, this could cover a safeguarding policy and ensuring it has the necessary information in it to safeguard children and at-risk adults.

Funders will want to ensure that organisations have the necessary policies to ensure they are meeting their legal requirements, they are following best practice, they are safeguarding their users, mitigating risks and that potential grantees are robust and protected.

In most cases funders will work with organisations not meeting due diligence requirements by setting additional time related terms and conditions to grant agreements to provide some breathing space to ensure these are in place. For example, a health and safety policy may be in place but is undated and has no future review date in place. A condition could be added to agree that a revised policy with a current date and a future review date needs to be provided within 1 month of the grant agreement.

We have listed 10 areas that tend to form part of due diligence requirements although this can vary in relation to the funder or size of grant being offered.  You can use this as a starter checklist but check with the funder requirements first for more specific additions.

1. Are complaint with regulators, particularly that accounts are being submitted to Companies House or Charities Commission on time and that you have a physical address, not a PO Box.
2. Have governing documents that show you have charitable aims and objectives, are aligned to your delivery and that you have a dissolution clause to show that assets will go to a similar charitable organisation if your organisation were to close.
3. Have a website or materials available demonstrating who your Senior Managers are and the experience and leadership they bring to their roles.
4. Have at least 3 unrelated Trustees or at least 2 Directors, though some funders are moving to increase this to 3.
5. Disclose any conflicts of interest between your organisation and the funder, ensuring all parties involved from application through to decisions have no vested interest.
6. Have relevant insurance in place to protect your organisation against any claim. There are several types of insurance which are described in more detail here. Policies must be in your name, in date and at the right level of cover. This will include:
   • Employer’s liability insurance – Legally employers must have at lease £5m of cover.
   • Public liability insurance – Cover is normally a minimum of £1m. This may very depending on the extent of your contact with the public, the types of clients and the size of the projects you manage. In most cases, while a minimum may be set, the funder will rely on you to know that you have sufficient cover in place.
   • Professional indemnity insurance – Whilst a limit may not be set by the funder, best practice is to have this in place to protect your organisation from claims for accidentally disclosing data, losing confidential documents, or providing incorrect advice
7. Have up-to-date policies that make clear they have been reviewed in the last 2 years with a review date and a future review date to show they will be reviewed in the next 2 years. There are resources available which provide templates, including Small Charity Support.  Required policies are likely to include:
   • Safeguarding for children and/or vulnerable adults. A template can be found here.
   • Health and safety.
   • Anti-bribery.
   • Whistleblowing.
   • Equality, diversity, and inclusion.
   • Data protection, security and GDPR.
8. Have a risk assessment policy or statement. This will show how you assess hazards and mitigate against any perceived risks.  A template and examples can be found here.
9. Have financial control documents that show the financial position of your organisation. It is unlikely you will be asked for all these documents unless you are receiving a large grant, but they might include: 
   • A cashflow forecast.
   • Filed financial accounts providing a minimum of an income, expenditure and balance sheet.
   • An organisational budget.
   • Management accounts. These are normally quarterly.
   • A bank statement in the name of your organisation and dated within the last 3 months.
10. Minimise any adverse media content. Many funders are now reviewing X/Twitter, LinkedIn, Facebook, and Instagram accounts to ensure organisations are professional and not posting controversial content which may provide additional risk to the funder.

We offer training on preparing for due diligence. To find out more and receive further information on this half day course, contact info@rocketsciencelab.co.uk.