How to undertake grantmaking due diligence

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While there’s no single ‘formula’ for gauging charitable effectiveness, here is a pragmatic approach to undertaking some basic due diligence before making a grant.

1. Check the public domain

Obtain a copy of the organisation’s key constituent documents, annual report and last audited financial statements (usually available on the organisation’s website or the Australian Charities and Not-for-Profits Commission website, Familiarise yourself with its constitution (do its current activities reflect its original purpose?), management and staff profiles, key governance structures and controls (including the board mix and level of engagement), historic performance and current financial health.

2. Eyeball the organisation

Visit an organisation, meet the staff and its clients (if that’s appropriate), talk to decision-makers.  Does your sense of the organisation match its brand in the public domain? Proportionality is key: don’t be forensic if your likely level of support is limited – be respectful of the organisation’s time
and limited resources.

3. Ask good questions

These will vary, depending upon the nature of the organisation’s work, but could include:

  • What risks is your organisation managing? (Volunteers? Board or staff churn? Diminishing government funding? Key-person risk? Founder syndrome?)
  • What constitutes success, and how do you measure progress across your activities? (What are the specific internal and external evaluation processes in place to measure social impact? Not only program-level logic but also the organisation’s commitment to
    performance and learning – how does the organisation cultivate a culture of continuous improvement?)
  • Who else do you work with and how? (Which other organisations are delivering similar services? What is your organisation’s point-of-difference and how do you collaborate with others? Under what circumstances might this organisation contemplate a merger, or fold altogether?)
  • What are the main policy-level or structural drivers informing your organisation’s work? (Are you pursuing an advocacy agenda for system-level outcomes – convening private sector, community and government stakeholders around the issues?)

4. Consider how you can best get involved

Talk to the organisation about what they struggle to raise funds for, or how they feel philanthropic funding would be best deployed. Are there ways to leverage your impact through matched or co-funding? Do you have time, skills or networks that could be put to work for the benefit of the organisation? How else could you involve yourself in the organisation, beyond funding?

5. Phone a friend

Check the list of funders in the organisation’s annual report and call one of them. Ask them for any feedback on their experience of the organisation – what has worked, or not, in their partnership to date? APS may be able to help you with introductions if you’re not sure who to contact.

6. Discuss your expectations

If you decide you wish to proceed with a donation, it’s best to establish parameters and expectations around communications and reportage before you make a grant. Would you like to meet with the charity every six months, receive a progress report every 12 months, or just sign up to their newsletter and annual report? Or is your engagement model more involved? Would you like to involve your children or other foundation stakeholders in the partnership, in some way?

Need help?

If you don’t have time to undertake your own due diligence on an organisation you’re considering supporting, or perhaps you’re contemplating a significant or multi-year commitment, StartGiving can put you in touch with clever people that can undertake formal due diligence that investigates all of the dimensions outlined above, and more.