When we think of due diligence in fundraising and philanthropy, often the focus is on the donor conducting due diligence on the beneficiary organisation.
While it is important that for-purpose organisations demonstrate they are a good fit and a good investment for prospective funders, it is equally important to ensure those you are seeking donations and grants from:
- Align with your organisation’s values;
- Do not pose a reputational risk; and,
- Comply with relevant laws and the FIA Code for accepting donations.
Some for-purpose organisations will have clear guidelines in their gift acceptance policy and related processes to effectively make this assessment. For others, this assessment may be more ad hoc, made on a case-by-case basis where the ‘good and bad’ of the donor is weighed against the impact of the donation on the mission of the beneficiary organisation.
On occasions donations may be reconsidered after they have been accepted, particularly when a donor’s finances, priorities or behaviour changes, or when due diligence was not undertaken in the first place and new information comes to light.
Recently, The Chronicle of Philanthropy published a story regarding a US for-purpose organisation returning a major donation as there was a misalignment in values and the donor’s changing behaviour did not align with their code of conduct. Despite the donation being at a level of significance to the organisation, their CEO felt it was important to be ethical and has publicly spoke about how donor-nonprofit relationships run two ways.
Also overseas, a Florida university made headlines last month for backing away from a $237M donation they’d already accepted and received in shares. This case highlights what can happen when due diligence and gift acceptance processes are not established or followed.
In Australia, due diligence processes at several universities have recently been scrutinized regarding funding arrangements and collaborations with weapons manufacturers and companies linked to Israel. Some university stakeholders have requested more transparency in funding arrangements, gaining significant media attention.
Implementing due diligence in your organisation
Due diligence frameworks will understandably differ greatly between organisations pending their purpose – consideration needs to be given as to the kinds of donor activities that exacerbate the problems they are working to address.
What’s important is that for-purpose organisations think through their values and purpose in relation to the suitability of prospective funders and if potential risks and other issues are identified, establish a framework for this decision-making ahead of time.
To be most effective with your due diligence practices, organisations should have a framework that aligns with their mission and values, is promoted internally with clearly identified responsibilities, and implemented with consistency.
Charity Excellence Framework provides a simple but very useful donor compliance checklist you can adopt for your fundraising due diligence:
- Legal Check: Ensure the donation complies with relevant laws and codes.
- Reputation Check: Assess potential impact on reputation of your for-purpose organisation.
- Ethics Check: Verify alignment with your organisation’s mission and values.
- Risk Check: Identify and manage potential risks associated with the donation, such as the financial stability of the donor, if a pledge is to be paid over several years.
- Transparency Check: Demonstrate transparency and accountability in fundraising practices. For example, by disclosing the source and amounts of large donations, as long as this doesn’t violate any privacy laws or agreements with the donor.
Ensuring that the values of prospect funders align with, or are not in contradiction to, your own organisational values is one part of an efficient and systematic approach for Prospect Identification and Project Matching, being one of the 7 key success factors of the Strategic Grants Best Practice Tracker. You can self-score your organisation here.