Before making a grant, most funders conduct some form of due diligence — an assessment of the applying organisation's capacity, governance, and financial health. Understanding what funders look for helps grant-seekers prepare stronger applications and present their organisation clearly. This guide explains the standard components of grant applicant due diligence.
Funders have obligations to their boards, donors, or government:
- Stewardship: Using funds for intended purposes
- Risk management: Avoiding grants to organisations that cannot deliver
- Compliance: Meeting legal obligations (AML, charity law, etc.)
- Reputation: Ensuring funded organisations reflect funder values
Due diligence is not a sign of distrust — it is standard practice for responsible grantmaking.
Funders assess governance to confirm the organisation is well-managed:
- Legal status: Is the organisation properly constituted (incorporated, registered charity)?
- Board composition: Active, qualified, and independent governance?
- Conflict of interest management: Does the board manage conflicts appropriately?
- Governance documents: Current constitution, rules, or trust deed?
- Board meetings: Regular meetings with minutes — evidence of active governance?
- Succession: Is governance sustainable, or dependent on one or two key people?
What funders want to see: An active, diverse board that provides real oversight — not a rubber stamp for management.
Financial health is a primary concern:
- Financial statements: Last 2–3 years of audited or reviewed accounts
- Financial sustainability: Is the organisation financially stable?
- Reserves: Does the organisation have sufficient reserves to manage cash flow?
- Diversification: Is income from multiple sources, or dangerously dependent on one funder?
- Deficit or surplus: Recurring deficits are a red flag; a managed deficit with a plan is different
- Cash flow: Can the organisation manage timing of grant payments vs. expenditure?
- Auditor: Is the auditor credible and independent?
Smaller organisations may have reviewed accounts rather than full audits — this is acceptable for most community grants.
Does the organisation have the capacity to deliver the project?
- Staff: Are there adequate qualified staff for the proposed project?
- Track record: Has the organisation delivered similar projects before?
- Systems: Does the organisation have financial management systems?
- Project management: Is there a clear project plan with realistic milestones?
- Reporting capability: Can the organisation produce the reporting the funder requires?
Red flags: First-time organisations with no track record proposing complex projects; key person dependency for critical roles.
Funders may conduct basic legal checks:
- Charity registration: Confirmed with Charities Services (NZ) or ACNC (Australia)
- IRD/ATO registration: Tax compliance — GST/BAS, PAYE
- Child protection: For organisations working with children — police checks, safeguarding policies
- AML/CFT compliance: For larger grants — Anti-Money Laundering assessment
- Employment compliance: Minimum wage, holiday pay, H&S
Some funders check publicly available information on Charities Services, Companies Office, or similar registries.
Funders assess risk to determine whether to proceed and what conditions to apply:
- Fiduciary risk: Risk that funds will not be used for intended purpose
- Delivery risk: Risk that the project will not be completed
- Reputational risk: Risk that the funded organisation's actions could embarrass the funder
- Regulatory risk: Risk of legal or regulatory breach
For higher-risk applicants, funders may:
- Require additional reporting or auditing
- Stage payments (milestone-based)
- Limit grant size
- Decline and suggest applicant builds capacity first
Funders assess alignment beyond technical capacity:
- Mission fit: Does the organisation's purpose align with the funder's strategy?
- Values alignment: Do the organisation's values and culture match the funder?
- Leadership character: References, reputation in the sector
- Conflict of interest: Is the funder's board connected to the applicant in ways that require disclosure?
Grant-seeking organisations should have ready:
- Current financial statements (audited or reviewed)
- Current constitution or trust deed
- Board list with meeting minutes for last 12 months
- Charity or incorporated society registration number
- Organisational chart (if complex)
- Key policies: Conflict of interest, child protection, financial delegations
- Track record: Annual reports, previous project reports
Having these materials ready shortens the due diligence process and presents the organisation as well-managed.
For major grants (typically $100,000+), funders may:
- Conduct a site visit
- Request a reference check with other funders
- Ask for a detailed project budget with supporting quotes
- Request a meeting with the CEO and/or board chair
- Commission an independent assessment
Tahua's grants management platform helps both funders and grant-seeking organisations manage the due diligence process — from document collection to risk assessment — making grantmaking more efficient and transparent.