Due Diligence: how funders verify a grantee before awarding funds

What is due diligence in grantmaking?

Due diligence is the verification a funder carries out before awarding a grant. It confirms that a prospective grantee is legitimate and fit to receive funds by checking legal status, financial health, governance arrangements, and the absence of conflicts or sanctions exposure.

In short, it answers a different question from evaluation. Scoring asks "is this a good proposal?"; due diligence asks "is this a safe and legitimate organisation to fund?" A strong proposal from an organisation that fails due diligence still cannot be funded.

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How much due diligence is enough?

The right depth scales with the amount and the risk involved. A small, low-risk community grant may need only basic confirmation of legal status, while a large, multi-year award, or one in a higher-risk jurisdiction, warrants deeper scrutiny of finances, governance and sanctions lists.

Proportionality is the principle. Applying the same heavy checks to every grant wastes effort and slows the process, while applying light checks to every grant leaves a funder exposed. Matching the level of verification to the level of risk is what keeps due diligence both rigorous and workable.

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How is due diligence different from related checks?

Due diligence is distinct from two things it often sits beside. It is not GDPR compliance, which governs how the applicant's personal data is handled rather than whether the applicant is sound. And it is not the same as managing a conflict of interest, which concerns bias on the funder's side of the table.

Due diligence looks outward at the applicant organisation; the other two concern data handling and reviewer impartiality. A robust program treats all three as separate controls rather than folding them together.

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Recording due diligence in a grant platform

Due diligence is only as valuable as the evidence it leaves. A grant management software platform captures each check within the application workflow, so verification is done consistently and recorded in the audit trail, ready to show if a decision is ever questioned.