A charity I know does extraordinary work. They have been embedded in their community for twelve years. They have relationships, trust, and a track record that no newcomer could replicate. They are exactly the kind of organisation a company should be partnering with for social value.
They were turned down at due diligence.
Not because their work was poor. Because their public liability insurance had lapsed, their last set of accounts was filed four months late, and their current financial outlook is handled by a volunteer who does the same job for four other charities. Their safeguarding policy referenced legislation that had been superseded two years earlier.
The company moved on. The charity heard nothing further. The community got a donation to a national charity instead.
What is due diligence
When a company wants to formally partner with a charity for social value delivery, they cannot simply hand over money and hope for the best. Their procurement team, their legal team, or their compliance function will require evidence that the charity is a legitimate, stable, and capable organisation.
That process is due diligence. It is not designed to catch charities out. It exists to protect everyone involved, the company, the charity, and the communities being served.
The checks typically fall into five areas.
1. Legal and governance
The company will check that your organisation actually exists and is properly constituted. For a registered charity this means current registration with the Charity Commission, up to date filings at Companies House if you are also a limited company, and a governing document, your constitution or articles, that is current and fit for purpose.
They will want to see that you have a functioning board. Not just names on a form, but evidence of active governance. Recent board minutes, a list of trustees with their roles, confirmation that meetings are happening and decisions are being made.
If anything is out of date or missing, the process stops here.
2. Financial stability
The company will want to see your most recent audited or independently examined accounts. They are looking for evidence that you are financially stable enough to deliver what you are promising without folding mid-contract.
Red flags include significant deficits, reserves that have been declining for several years, or accounts that are substantially late. None of these automatically disqualify you, but they will generate questions you need to be able to answer.
For larger contracts, they may also ask for a recent management account or a cash flow forecast.
3. Insurance
You will need current certificates for:
Public liability insurance, minimum usually £5 million, sometimes £10 million for larger contracts.
Employer’s liability insurance if you have any staff or volunteers working on your behalf.
Professional indemnity insurance if you are providing advice, training, or any service where poor delivery could cause financial or reputational harm.
This is one of the most common failure points. Insurance lapses, policies get renewed and certificates don’t get filed, or the level of cover is lower than the company requires. Check yours before you start any conversation with a corporate partner.
4. Policies
The company will ask for copies of your key policies. The list typically includes:
Safeguarding policy, covering both children and adults at risk, referencing current legislation and with a named designated safeguarding lead.
Health and safety policy, appropriate to the activities you deliver.
GDPR and data protection policy, covering how you handle personal data and who is responsible for it.
Equality, diversity and inclusion policy.
Some companies will also ask for an environmental policy, a whistleblowing policy, and an anti-bribery statement.
Policies that exist but haven’t been reviewed in three or more years are a risk. Policies that reference outdated legislation are a risk. Policies with nobody named as responsible are a risk.
5. Delivery capacity
Finally, the company wants evidence that you can actually do what you’re offering to do. This might include:
Case studies or evidence of similar work delivered previously.
Staff or volunteer capacity, who will deliver this, and do they have the right skills and qualifications.
References from previous partners or commissioners.
A clear delivery plan for the specific social value activity being proposed.
This is the part charities are often most confident about, because it is about the work itself. The irony is that it is rarely what causes the process to fail. It is almost always something in the first four categories.
Companies are right about this.
Due diligence is not unreasonable. A company handing public contract money to a charity that then collapses, or that lacks safeguarding protection, or that has no insurance when something goes wrong, is a company with a serious problem on its hands.
The requirements exist for good reasons.
But meeting them takes time, money, and in many cases external support that most small and medium charities have never needed to access before. Getting your governance in order, your policies reviewed, your insurance checked, your accounts filed on time, none of it is complicated, but all of it takes resource.
And resource is exactly what most charities don’t have to spare. Which raises a question that the next article answers directly.
If everyone benefits from a due-diligence-ready charity sector, who should be paying for it?
