What You Will End Up With
A due diligence routine that matches the grant in front of you: light for a small, low-risk award, firmer where the money or the risk is larger. Due diligence is the range of practical steps you take to be confident that you know the people and organizations you work with, and to identify and manage the risks. How much you do should match the risk.
Done well, it asks applicants for only what your decision genuinely needs.
Before You Start
Do three things before you design any check.
- Look at your criteria. Revisit them to be sure they do not favor established or well-funded organizations. A study found that net unrestricted assets for organizations led by Black leaders are 76% smaller than for those led by white leaders, so a test that rewards large reserves can shut out groups you may want most.
- List what public records can tell you. Records can show a prospective grantee's purpose, programs, leadership and financial standing. Know what you can find yourself before you ask.
- Decide what you will do with each answer. If you cannot say how an answer would change your decision, you do not need the question.
Steps
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Start with public records. Use them to learn the applicant's purpose, programs, leadership and financial standing, instead of asking for new disclosures. This is homework the funder does. Trust-based philanthropy moves the work of initial vetting and relationship building from the nonprofit to the funder, and saves grantees from paperwork that adds nothing.
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Have a conversation. Phone calls, video calls and meetings in person can show you more about a group's work than a written report does. A phone conversation is more interactive and helps build deeper relationships. One private foundation spends time up front getting to know prospective grantees, meeting them at their offices and attending sessions, classes or conferences they lead.
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Say what you fund, and say no early. Be explicit, out loud and in writing, about your funding priorities, your decision process and your timeline. If a group is not a good fit, tell them quickly. A fast no does not mislead them or waste their time. A slow maybe does both.
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Cut what you ask before the proposal. Reduce pre-proposal requirements. A short letter of intent can tell you whether funding is likely before anyone writes a full proposal. One private foundation invites prospective grantees to send a proposal they already submitted to another funder in place of a formal application. You can also accept reports that were written for other funders.
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Scale the checks to risk and size. Build three tiers: small and low risk, mid-sized, and large or higher risk. For the first, public records and a conversation may be enough. For the second, add the specific questions you cannot answer yourself. For the third, add the checks that protect you from an untrustworthy partner, such as questions about governance and money. Official charity guidance says the higher the risks, or the more significant the partnership, the more steps for due diligence are needed. Write down which tier a grant falls in and why, so the choice is not made by mood.
An illustration, not a real case: a family fund is weighing a small award to a village group that has never had outside money. Public records show little. A call with two of the group's members, and one question about who will hold the money, is all the tier asks. The same fund, weighing a large award to an established organization, adds its audited accounts and a look at who governs it.
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Drop what you will not use. Ask only what you cannot determine on your own and that you genuinely need to know. Go through every question on your form and ask whether you would act on the answer. Delete the ones where you would not.
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Pay for large asks and clear the jargon. If you request feedback or input that takes significant time outside a group's usual work, offer compensation similar to what a consultant would be paid. Check your forms and reports for phrases such as "theory of change," "quantifiable metrics" and "scalability." They can alienate or exclude some organizations.
A word on lived experience. One source advises funders to adjust their criteria so that at least half of their funding goes to organizations led by individuals with lived experience of the issues they address. That is a choice for your own strategy and not a universal rule. If you take it, check for it through conversation with the group, not through a form.
Using AI Safely
An AI assistant can summarize what public records say about an organization's purpose and leadership. It can also make mistakes, and it may lean toward groups with the longest paper trail.
- Verify against the source. Check every fact in a summary against the original record, and do not rely on anything the tool says that you cannot find there.
- Keep private material out. Do not paste confidential applicant information or your internal deliberations into a public tool.
- Watch for tilt. Ask whether the summary treats a small, young group less fairly than an established one, and correct it by hand.
- Check the summary adds nothing. It should reflect the public record and not include claims you cannot confirm.
Common Mistakes
- Asking for what you can look up. Requests for information in public records, or already given to another funder, waste applicants' time.
- Relying on paper alone. Written reports miss what a call or a visit would show you.
- Building bias into the checks. Requirements that favor larger reserves or longer histories can exclude groups led by people with lived experience.
- Treating every grant alike. One heavy routine for every award punishes small groups and gains you nothing on small, low-risk grants. Decide the tier first.
- Answering slowly. Keeping a poor fit waiting wastes their time and misleads them. Say no quickly.