President and CEO, Grantmakers for Effective Organizations
Selecting the right grantee partner is probably the most important decision a grantmaker makes. Yet GEO’s national survey of staffed foundations in the U.S. found that insufficient or ineffective due diligence is frequently cited (by 21 percent of respondents) as the reason a grant was unsuccessful. (You can download the study here.)
Written proposals are only one indicator of whether an applicant represents a good fit and a smart investment. Due diligence, when done well, ensures alignment with a grantmaker’s mission, helps to distinguish nonprofit organizations that have a greater likelihood of success, and enables grantmakers to understand and manage the risks associated with various grants.
Yet there is no perfect level of information. The challenge is to learn what you need to know about a potential grantee without placing an undue burden on the nonprofit organization. The scope and demands placed on the nonprofit should be appropriate relative to the size of the potential grant. For instance, very small grants can and should be made after doing only basic due diligence. However if a grantmaker is considering a multiyear, several hundred thousand dollar investment, it is worth both your time and the potential grantee’s to go deeper.
Though we don’t have data on grantmaker practices specific to due diligence more broadly, on a positive note, half of all funders reported that their application requirements were proportionate to the size and type of grant and about 35 percent indicated that their renewal grant application requirements were less than original requirements.
Do these kinds of changes really matter to nonprofits? These may seem like small adjustments, but when you are a nonprofit executive stretched for time, reductions to application requirements for smaller grants free you up to focus more time on serving your community.
This work is licensed under a Creative Commons Attribution 4.0 International License.
Permissions beyond the scope of this license are available in our Terms and Conditions.