Due diligence is the legal review and compliance check to confirm that the prospective grantee and their proposed work are eligible to receive charitable funding.
Below are a few examples of items typically requested during due diligence*, according to the type of entity receiving the funds (i.e., either your organization or your fiscal sponsor/intermediary).
US-based Nonprofits
- Confirm IRS tax status.
- Confirm up-to-date filing
of IRS Form 990.
- (if the project involves
lobbying or political
activity) Determine public
disclosure requirements.
- (if the project involves
lobbying or political
activity) Confirm
compliance with the
relevant lobbying/political
activity filing requirements.
International Charities
- Confirm legal status and
organization structure.
- Confirm active Equivalency
Determination** certificate.
(This is the last step if an
active ED certificate is on
file.)
- Review the organization's
mission and recent activities.
- Review financials for the
past 2-5 fiscal years and
previous grants received by
the organization.
- Confirm organization and
key persons do not appear in
anti-terrorism or sanctions
databases.
- (if applicable) Review
itemized project budget and
the narrative project description.
For-Profits & Other Organizations
- Confirm legal status and
organization structure.
- Review the itemized project
budget and narrative
project description. (In
some cases, this is the last
step.)
- Review the organization's
mission and recent activities.
- Review financials for the
past two tiscal years and
previous grants received
by the organization.
- Confirm organization
and key officers do not
appear in anti-terrorism or
sanctions databases.
*This is not a comprehensive list. The actual items requested may vary.
** When making grants to charitable organizations outside of the United States, grantmakers sometimes evaluate whether a prospective foreign grantee is equivalent to a U.S. public charity through a process called "Equivalency Determination" or “ED”.