Six Ways to Prepare for Due Diligence Checks

Due diligence is an essential stage when it comes to bringing non-profits and grant-makers together. It empowers the grant-maker to make informed, confident decisions, whilst allowing the non-profit to show they are meeting their objectives and using funds appropriately.

Unfortunately, thousands of charities and non-profits miss out on vital grant funding every year because they “fail” due diligence for reasons that could have been avoided. These checks are essential, but without the right processes some unscrupulous organisations can slip through the net, and sometimes well-meaning charities can miss out on valuable funding because they mistakenly provided the wrong information. 

We do due diligence differently

Brevio first validates data supplied by applicants at the initial eligibility and pre-assessment stages, and then runs a comprehensive battery of checks in four key areas: Governance Documents, Financial Accounts, Regulatory Filings and Online/Social Presence. Brevio has automated the collection and cross-referencing of data from multiple systems of record, and integrated government-developed fraud detection software to run baseline checks at scale. Next, all applications are pulled through a structured manual review process that adds depth and detail, generating risk reports by category, which are provided back to the grant-maker.

In a typical funding round, Brevio has found circa 20% of organisations could have avoided some common mistakes in their application, primarily through better organisation and preparation. Below are some of the key tips that all non-profits can take to improve their chances of securing funding.

How to prepare for due diligence checks

1. Know the regulatory requirements for a non-profit of your size (and make sure to meet them)

This is an area where non-profits can fall short because regulatory requirements change as the organisation grows. For example, if you are a registered charity with an annual income of more than £25k, your accounts must be reviewed and signed off by an independent examiner from outside of your organisation. If your income exceeds £1 million, your accounts will need to be independently audited. 

Even if your organisation is just a little bit over the income threshold, you must have a signed, independent examination or audit which you should file with your annual accounts. This is a legal requirement as set out by the Charity Commission.

You can check out the Charity Commission’s guide to having your accounts audited or examined for more details. 

2. Check you meet the requirements for Trustees or Directors

Trustees and Directors play a vital role in charities and non-profits. Central to the Trustee's role is the requirement to be a 'guardian of purpose', making sure that all decisions put the needs of beneficiaries first. Trustees safeguard the charity's assets, both physical, such as money, equipment and property, and intangible, such as its brand and reputation.

Your organisation’s governing documents will set out the minimum, and in some cases maximum, number of Directors or Trustees that need to be formally on-boarded and appointed. Sticking to this, and ensuring you have fair representation on your board is vital. For example, ensuring no more than half your board is related.

The most important thing you can do is to be transparent and make sure this information is readily available to any grant-makers who you apply to.

Read the Charity Commission’s guidance for Trustees.

3. Keep your reserves in good shape

Funders often want to confirm that a non-profit has enough reserves to cover at least three months of running costs, and many charities often state in their governing documents that they wish to hold much more than this in reserves. Sticking to your policy is a great way to demonstrate your organisation's ability to manage costs and plan ahead. The pandemic could have hit your reserves hard, if not depleted them entirely. Grant-makers know this, and many are flexible during this current challenging time. Ensure your organisation can demonstrate its efforts to build its reserves back up again. 

Check out NPC’s guide to developing your reserves policy

4. Build your organisation’s online presence

Some non-profits overlook this because they feel they lack the time, skills or budget to invest in their digital presence. However, an up-to-date online presence is important in showing funders that your organisation is active in the community, doing what you say you are doing, and interacting with service-users and the general public in a way that is consistent with your grant application and its eligibility criteria.

Make sure your website content and details are up-to-date, showing the most recent version in your footer date, and share regular, relevant updates on suitable social media channels. 

5. Keep your details accurate and up-to-date with the Charity Commission

This is an easy mistake to make. Often an organisation has recently rebranded and changed names or moved offices without updating their details with the Charity Commission. Unfortunately, if core details provided in the application do not match the information lodged with the regulator, this may sound alarm bells when conducting even basic checks.

The best way to avoid this is to regularly review and update any official registration sites including the Charity Commission or Companies House

6. Sign all key documents, including any amendments

It is really important to ensure that key documents such as Memorandum and Articles of Association are signed and dated by all founding members. And that any amendments made are first approved by the regulator (if required) and signed by relevant members. Similarly, Annual Accounts and, where required, independent examination/audit must also be signed and dated.

Non-profits should put a process in place to regularly review their important documents and check that they accurately reflect the organisation's current purpose (its ‘objects’) and ways of working. And that any changes are approved, signed and dated. 

Fulfilling these basic requirements will ensure that you have the best chance of receiving funding.

“Brevio’s core purpose is to simplify the grant process for non-profits and grant-makers. We hope that by sharing our findings, we can help give non-profits a better chance at securing funding while stressing how important due diligence checks are for grant-makers,” says Brevio CEO Billy Wright.

Let us help you

We hope you enjoyed this article with tips on how to prepare for due diligence checks, if you have any questions about the content mentioned in this article or about the due diligence service that we offer please email info@brevio.org

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