A charity due diligence checklist for UK grant-makers

The Charity Commission removed over 4,600 charities from the register in 2023 alone. Some had simply become dormant. Some had merged with other organisations. But a proportion closed because they ran out of money, failed to file accounts, or could no longer account for where restricted funds had gone. In some of those cases, the warning signs had been sitting in publicly available documents for years before the problems became visible.

Due diligence does not guarantee a good outcome. Charities can fail in ways that nobody could have predicted. But many of the risks that funders care most about, financial fragility, governance weakness, overblown impact claims, are findable before a grant goes out. The checklist below is a practical guide to finding them.

Before you open the accounts

The first question due diligence tries to answer is simple: is this organisation real, functional, and doing what it says it does? That sounds like a low bar. In practice, it rules out quite a lot.

Start with the Charity Commission register at register-of-charities.charitycommission.gov.uk. Search for the organisation by name or registration number. Confirm that it is registered and currently active. Check whether there is any regulatory history: inquiries opened, regulatory action taken, or concerns noted on the register. These are not disqualifying on their own, but they need to be understood.

If the charity is also registered as a company limited by guarantee, search for it on Companies House too. The two sets of accounts should be consistent. If they are not, that is a question worth asking.

Checking the filing history

Charities with an annual income above £25,000 must file accounts with the Charity Commission each year, within ten months of the end of their financial year. Late accounts are not automatically a red flag, but persistent late filing, or gaps in the filing history, are worth noting.

A charity that has not filed accounts for two years is either exempt (unlikely at most grant-relevant income levels) or struggling to produce audited financials. Both are worth understanding before committing a grant.

When you find the most recent accounts, note the period they cover. If the most recent set covers a period that ended eighteen months ago, you are working with old information. Ask whether more recent management accounts are available.

Reading the financial statements

You do not need to be an accountant to get useful information from charity accounts. The Statement of Financial Activities (SOFA) and the balance sheet together answer most of the questions funders need to ask.

From the SOFA, look at income over three years if available. Is it growing, stable, or declining? Is it concentrated in one or two large sources? A charity that received 70% of its income from a single statutory contract last year is carrying risk that the trustees may or may not have a plan for.

From the balance sheet, look at the reserves. The notes to the accounts will usually break these down into restricted funds (money that must be spent on specific purposes) and unrestricted funds (money the charity can use as it sees fit). The free reserves, the unrestricted funds not tied up in fixed assets, tell you how long the organisation could survive a disruption to its income. Three to six months of operating costs is a reasonable target. Below three months is worth a conversation.

The auditor's report is worth reading carefully. An unqualified audit opinion does not mean the accounts are perfect. It means the auditor found no material misstatements and was satisfied that the accounts show a true and fair view. What you are looking for is a qualified opinion, an emphasis of matter paragraph, or any mention of going concern. These are not common, and when they appear they carry significance.

Governance checklist

Good governance does not guarantee good outcomes, but poor governance is a risk multiplier for everything else that might go wrong. The accounts and the trustees' report together give you most of what you need.

1. How many trustees are there, and are they independent? A board of fewer than three is thin. A board made up entirely of family members of the founder is a governance concern, not because families cannot govern well, but because independence is harder to maintain.
2. Are conflicts of interest declared? The trustees' report should mention whether any conflicts arose during the year and how they were managed. No mention at all in an organisation of any scale is itself a signal.
3. Does the organisation have a safeguarding policy? For any charity working with children or vulnerable adults, a current, published safeguarding policy is not optional. Check the date. A policy last updated in 2019 that has not been reviewed since is not a functioning safeguarding policy.
4. Is there a whistleblowing policy? Smaller organisations sometimes omit this. For organisations above a certain scale, its absence is worth raising.
5. Has trustee composition changed significantly? A board that has turned over completely in three years is worth asking about. Stability is not the same as stagnation, but high churn on a board often signals something worth understanding.

Impact claims

This is the area where due diligence most often relies on judgement rather than verification, because most impact data is self-reported and cannot easily be checked from the outside. That does not make it useless. It just means you need to read it critically.

The most important distinction is between outputs and outcomes. An output is what the organisation did: training sessions delivered, meals served, legal cases taken on. An outcome is what changed in someone's life as a result: skills gained, hunger reduced, rights protected. The former confirms delivery. The latter tells you whether anything actually shifted.

Independently verified impact evidence is rare. Organisations that commission external evaluations, publish their methodology alongside their findings, and acknowledge what the data does not show tend to be operating at a higher level of rigour than those that present only positive case studies. Neither type of evidence is conclusive, but the difference in approach tells you something about how the organisation thinks about accountability.

Questions to ask before you decide

Once you have worked through the available documentation, you will almost certainly have questions that the evidence cannot resolve. The right move is to put them to the charity directly. Most organisations welcome a substantive conversation with a potential funder. The ones that do not are telling you something.

Five questions that come up often in well-run grant assessments:

1. Your reserves have fallen over the past two years. What is your plan to rebuild them, and what would a further reduction mean for your programme delivery?
2. A large proportion of your income comes from one statutory source. What happens to this programme if that contract is not renewed?
3. Your impact report mentions the number of people you supported. How do you know that their situation improved, and how is that improvement measured?
4. The safeguarding policy on your website is dated 2021. Has it been reviewed since, and where is the most current version?
5. Who makes the final decision on grant expenditure within the organisation, and how is that decision documented?

The answers to these questions matter less than the quality of the response. An executive director who has clearly thought about reserves management is different from one who is hearing the question for the first time. That difference is not captured in any document.

Making due diligence manageable

A thorough due diligence process for a single charity should take between ninety minutes and three hours for an experienced reviewer. If it is taking longer, the process is probably gathering more information than it is using. If it is taking less than an hour, something is probably being skipped.

The discipline is knowing what to look for and where to look, rather than reading everything available. The Charity Commission register, the most recent two sets of accounts, and a direct conversation with the organisation will answer most of the questions that matter.

cleargiving.io works through this checklist automatically for any registered UK charity, pulling from the Charity Commission register, published accounts, and web sources, so your team can focus on the questions that require human judgement rather than the ones that require patience and a browser. You can request access here. For more on what a thorough assessment covers, see our giving guides and methodology.