How to safeguard your charity and implement due diligence procedures


Trustees are the custodians of their charities and are legally responsible for implementing due diligence procedures to protect the charity, which includes maintaining finances through robust controls.

Furthermore, it is imperative for charities to know who is donating to them and who is working for them as some charities can be exploited and abused by organisations and individuals with ulterior motives. For example, funds may be misdirected to areas other than they were intended for, which leads to mistrust from the general public.

According to the charity commission, the public’s trust of charities are declining and any hits to a charities reputation can be damaging to a charity and its mission. There are certain steps that charities can take to avoid fraud and abuse.

Implementing due diligence

A charity can take the step of implementing due diligence to safeguard and track organisations’ finances by carrying out background checks by implementing a system customised to the needs of your organisation and a good template for due diligence protocols. Know your donors, know your beneficiaries and know your partners by knowing their identity and their basic information. This will allow you to know who is involved and in broader terms know where money is coming from and whether it is appropriate to accept donations.

Another important step to reassure the public and to comply with  good governance procedures is to monitor funds, and to ensure they are being used for their intended purposes and are not being misused. This can allow the accounts of the charity to be traced and independently verified. A good monitoring system must include proper accounting of incoming funds and expenditures. These should include expenditures of employees and partners, ensure that funds allocated to projects have been received and have benefited the intended recipients.

The Charity Commission’s Compliance toolkit offers more information on how to protect your charity from fraud.

If risks and concerns arise, a risk assessment and management process will allow the charity to manage and deal with concerns that otherwise could be damaging to the charity. A risk assessment will allow you to identify and  judge the severity of the concern and in the worst case scenario will let you undertake actions to resolve the issue and create procedures to mitigate the consequences and to improve reactions to similar risks happening in the future. You can find further information on how to to assess risks and manage them here.

By implementing steps with guidance from the charity commission, A charity can protect its members its funds and ultimately the people it is supporting and protecting.