Due Diligence: Moving Beyond Status Quo

Due Diligence: Moving Beyond Status Quo

So why is due diligence so important to foundations anyway? For MeHAF, the decision to fund a grant is based on a balance of strategic fit with its priorities and mission and an objective review process.  The challenge for all foundations is that we want to learn as much as we can about an applicant organization without asking for information we do not need or may not use. When reviewing an application, MeHAF considers whether or not the proposal corresponds with its guidelines and priorities, as well as the merits or value of the proposed activities. In addition, the proposal is evaluated for its qualities compared to the other proposals received.

Project Streamline is a collaborative effort of grantmakers and grantseekers studying application and reporting practices, their impact on both groups of stakeholders, and the implications for the field. The goal of Project Streamline is to create a set of standards to inform grantmakers' decisions about their application and reporting practices.[1]

Results from Project Streamline prompted MeHAF to take a look at its due diligence process. Doing due diligence well requires learning enough about the applicant organization so that the foundation feels confident in making a grant without putting a huge burden on the applicant. It can be difficult to tell if an applicant is a good fit based on just a written proposal. We also want to know more about the organization's mission and goals, its programs, leadership,staffing, and finances.

Because applicants have expressed that the due diligence process can be frustrating and confusing, MeHAF has developed a more streamlined approach which is more efficient and less burdensome for applicants. As a result of Project Streamline, MeHAF has implemented the following recommendations from the report.

  1. Examined our approach to gathering the information we need. When planning an application process, we ask ourselves the following: Do we really need it? Is there some other way we can get it?  Have we explained to our grantees why we need it?
  2. Developed streamlined applications and reporting forms for our discretionary grants, meeting support, and smaller grants to ensure that applicants are not spending more time and money on getting the grant than they receive in funding.
  3. Implemented an online application and reporting system to decrease the amount of time, money, and effort applicants and grantees spend on getting and managing grants.
  4. Simplified our process for requesting project and budget modifications.
  5. Use GuideStar's Charity Check to verify the public charity status of potential grantees instead of requiring a copy of the IRS Letter of Determination.

In recent years, both foundations and nonprofits have experienced increased scrutiny in regard to how they spend their money. Effective due diligence offers assurance that MeHAF's grants will deliver outcomes in order to fulfill its mission and serve Maine people.

[1] Drowning in Paperwork, Distracted from Purpose.


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