Financial vetting and due diligence of funders

Not every funder requires the same level of scrutiny. Cultural organisations typically apply:

Lighter checks for small, low-risk donations

In-depth checks for large gifts, corporate sponsorship, naming rights, or funders linked to higher-risk sectors or jurisdictions

This aligns with Charity Commission guidance that trustees should take reasonable steps, not exhaustive investigations. An approach could include due diligence relating to:

• Donations from individuals or organisations of £x or more

Organisations can stipulate what size of donation will be subject to due diligence, rather than committing to assessing all donations regardless of size. For example, theGate Theatre stipulates that any donation over £5,000 will be subject to public record research. This ensures that the organisation’s due diligence requirements are manageable.

• All partnership proposals

Before entering any formal partnership or contract, an organisation might stipulate that it will conduct checks and research on the potential partner. This can ensure that organisations do not work with partners whose practices contradict their own standards.

Organisations should also outline what implementation of the Due Diligence Framework will prevent and why this is important to the ongoing credibility and security of the organisation.

Organisations should outline what will be assessed through due diligence checks and how the checks will be performed (e.g. reviewing annual reports and accounts, checking records with regulators like CompaniesHouse etc). This process should also be informed by the Know your donor key questions and Know you donor – checklist from the Charity Commission.

Organisations should also outline who in the organisation will conduct and review the due diligence checks. For example: Due diligence checks will be performed by the Senior Management Team and will be reviewed by the Board of trustees. Organisations should establish basic parameters for accepting or refusing donations based on these lines of investigation. Examples could include:

• Refusing donations from organisations whose historical or current activity do not align with the organisation’s purpose or stated public commitments
• Refusing donations from individuals who qualify for Charity Commission automatic disqualification.

Before accepting funding, confirm:

• The legal name of the individual or organisation
• Country of incorporation or residence
• Company or charity registration number (where relevant)
• Beneficial ownership (for companies or trusts)

This prevents confusion between similarly named entities and reduces fraud risk.

Cultural organisations should take reasonable steps to ensure that funds are not:

• The proceeds of crime
• Linked to money laundering or sanctions breaches

Common checks include:

• UK CompaniesHouse records
• Charity Commission register (for charitable funders)
• Basic sanctions lists (e.g. UK sanctions regime)

For high-value gifts, some organisations request a source of funds declaration. A source of funds declaration is a statement (sometimes a form) where you explain exactly where the money you are using came from.

It is commonly requested by banks, solicitors, mortgage lenders, accountants and investment firms, to help prevent fraud and money laundering. A simple version might include the following:

DONOR SOURCE OF FUNDS DECLARATION

Donor name:

Address:

Donation amount:

Date:

Source of funds (please tick or describe):

• Employment income / savings
• Business income
• Sale of property or assets
• Investment returns
• Inheritance
• Gift from family member
• Other (please specify):

Declaration I confirm that the funds being donated are from legitimate sources and are not the proceeds of crime, fraud, or any illegal activity. I understand that the charity may carry out appropriate due-diligence checks and may request additional information if required. I also confirm that this donation is made freely and does not create any obligation for the charity beyond its stated mission.

Signature:

Print name:

Date:

Some cultural organisations may also wish to undertake Politically Exposed Persons (PEP) screening. This is a compliance check used by banks, charities, financial firms and some businesses, to identify people who may present a higher risk of bribery or corruption because of the public positions that they hold, or have held.

It is part of anti-money-laundering (AML) regulations in theUK and many other countries.

A Politically Exposed Person is someone entrusted with a prominent public function, such as: a head of state or government, senior politicians, high-ranking military personnel, supreme court or constitutional courtjudges, ambassadors and directors of state-owned companies. Screening often covers close family members (spouse, partner, children and parents), known close associates and business partners.

In conducting due diligence checks, organisation’s must adhere to legal, regulatory, or any other code of good practice pertaining to the organisation.

For example:

• Charity Commission for England and Wales Guidance, OSCR in Scotland, and CCNI in Northern Ireland
• Fundraising Regulator
• Charity Commission guidance on Due Diligence, Monitoring and Verifying the Use of Charitable Funds
• General Data Protection Regulations (GDPR).

Organisations should take time to review legal and regulatory guidance to make sure that their processes and practices are compliant. Some cultural organisations may also seek access at their own cost to respected databases to carry out due diligence checks such as LexisNexis WorldCompliance data.

A structured open-source media check is standard practice. This could include:

• Recent news coverage
• Regulatory investigations or fines
• Court cases or enforcement actions
• Credible NGO or watchdog reporting

This helps to identify reputational risks that could reasonably affect public trust.

For corporate funders or major donors, consider:

• Recent annual accounts or filings
• Financial solvency and trading status
• Whether the organisation is a going concern

This protects against accepting funds that may later be withdrawn or challenged.

Arts organisations will often also consider areas including:

• Environmental impact
• Human rights concerns
• Labour practices
• Alignment with artistic or curatorial independence

These checks should relate clearly to the organisation’s purpose and stated public commitments and should be applied consistently.

Good governance requires a clear audit trail; this should include areas such as:

• What checks were carried out
• What risks were identified
• Who reviewed and approved the decision/s
• Any mitigation applied (e.g. limited branding)

This protects staff and trustees if decisions are later questioned. The process should also integrate with an organisation’s own conflicts ofinterest policy and the Charity Commission’s guidance to trustees on managing conflicts.

Where significant risks are identified:

• Escalate to senior leadership, or trustees, or to a fundraising committee
• Seek legal or professional advice if necessary
• Consider refusing or returning the donation if the risks outweigh the benefits

This reflects Charity Commission expectations that trustees retain oversight of high-risk decisions.

Due diligence does not end at the acceptance of funds; organisations will need to:

• Monitor long-term funders and sponsors
• Revisit checks if circumstances change
• Include review points in multi-year partnerships

This is especially importantfor corporate sponsorship and naming agreements. Organisations should record information about how they will monitor and update due diligence checks.

This could include a commitment that:

• Relevant guidance will be reviewed annually and updates to guidance will be applied to the policy.
• The process for conducting due diligence checks will be reviewed annually by the trustees and updated as required to remain effective and relevant.
• Due diligence checks will be performed again on existing partners, if new guidelines or processes have been implemented since the last check.

It is also important to keep a record of the dates, times, people involved, and rationales for both the drafting of the original document and any revisions that are made. This ensures that the development of the document is clear to see and review.

It is worth updating staff, trustees, volunteers and relevant stakeholders on the rationale and process for due diligence checks and ensuring that training and guidance is provided for individuals engaged in this work.