Funder Due Diligence Guide: Assessing Grant Applications and Organisations

Due diligence — the process of assessing an organisation's capacity, credibility, and fitness to deliver a funded project — is essential for responsible grantmaking. Yet due diligence is often either too superficial (the funder just reads the application) or too onerous (the funder demands months of documentation from small community organisations). Proportionate due diligence — scaled to grant size, risk, and relationship — protects funder interests without creating unnecessary administrative burden for applicants.

What due diligence assesses

Organisational legitimacy

  • Is the organisation legally constituted?
  • Does it have the legal form required for grant funding?
  • Is it registered with relevant authorities (ACNC, Companies Office, etc.)?

Financial health

  • Can the organisation manage a grant of this size?
  • Is the organisation financially stable?
  • Does it have appropriate financial controls?
  • Is there evidence of financial mismanagement?

Track record and credibility

  • Has the organisation delivered similar work before?
  • What is its track record with previous grants?
  • Do referees and stakeholders speak well of it?

Organisational capacity

  • Does the organisation have the staff, skills, and systems to deliver?
  • Is the leadership competent and stable?
  • Does it have governance structures appropriate to its size?

Project viability

  • Is the proposed project achievable within budget and timeframe?
  • Is the budget realistic and justified?
  • Have similar projects worked elsewhere?

Risks

  • Reputational risks (controversial positions, leadership issues)
  • Financial risks (under-capitalised, unrealistic budget)
  • Delivery risks (insufficient capacity, over-ambitious scope)

Proportionate due diligence

Due diligence should be proportionate to:

Grant size

  • Small grants (<$10,000): basic eligibility check, financial statements review
  • Medium grants ($10,000-$100,000): detailed application assessment, referees, financial statements
  • Large grants (>$100,000): site visit, audited accounts, governance review, reference checks

Grant type

  • Core funding or multi-year: more extensive due diligence (long-term commitment)
  • Project funding: proportionate to grant size and project complexity
  • Emergency or quick-response grants: rapid due diligence with follow-up

Risk level

  • New applicant: more due diligence
  • Known grantee with strong track record: lighter due diligence
  • First Nations or community-controlled: proportionate to avoid over-burdening under-resourced organisations

Relationship history

  • First grant: standard due diligence
  • Long-term grantee: relationship-based assessment, not fresh due diligence each time

Due diligence tools

ACNC Charity Register (Australia)

Free, public check of:
- Charity registration status
- Charity size (income band)
- AIS (Annual Information Statement) data
- Financial statements (for medium and large charities)
- Governance documents

Companies Office or ASIC

Legal constitution, directors, and financial filings.

Previous grant records

Your own system: previous applications, grants, reports, relationships.

Reference checks

Speaking with referees, partner organisations, or others who know the applicant.

Site visits

Visiting the organisation to see operations firsthand.

Third-party searches

Media search, Google, LinkedIn — to surface reputational issues.

Financial due diligence

What to review

  • Most recent financial statements (audited or reviewed, where available)
  • Cash position and reserves
  • Revenue diversification (reliance on single funder is a risk)
  • Outstanding liabilities
  • Previous year grant acquittals (if available)

Red flags

  • Qualified audit opinion
  • Significant deficit or deteriorating financial position
  • Very limited cash reserves
  • Large unexplained liabilities
  • Pattern of late or incomplete acquittals

Proportionate approach

  • Small grants: request management accounts or prior year statements
  • Large grants: require audited financial statements
  • Don't request audited accounts from organisations too small to have them

Governance due diligence

What to review

  • Constitution or rules
  • Board composition (size, diversity, conflicts of interest policy)
  • Board meeting regularity and quorum
  • Separation of board and management roles

Red flags

  • No board (single director/trustee for a significant organisation)
  • Long-serving, unchanging board
  • Family domination of board
  • Confusion between board and management roles
  • No conflict of interest policy

First Nations organisations: a specific consideration

Due diligence for Aboriginal and Torres Strait Islander or Māori organisations requires additional consideration:
- Community-controlled organisations may have governance structures that differ from Western nonprofit models (consensus decision-making, elder leadership)
- Smaller organisations may not have the administrative capacity to meet standard due diligence requirements
- Culturally appropriate due diligence should involve understanding community governance
- Relationship-based assessment may be more appropriate than document-heavy due diligence

Requiring standard corporate due diligence from First Nations community organisations can be culturally inappropriate and creates unnecessary barriers.

Documenting due diligence

Due diligence without documentation is at risk of being inconsistently applied:
- Record what was reviewed and what was found
- Note any red flags and how they were addressed
- Document any conversations or site visits
- Ensure the decision-maker has access to all due diligence material

Good grants management systems maintain due diligence records alongside applications, making it easy to review history and ensure consistency.

Due diligence and equity

Standard due diligence requirements can disadvantage:
- Newer organisations (less track record)
- Smaller organisations (less administrative capacity)
- Community-controlled organisations (different governance models)
- Organisations serving marginalised communities (often under-resourced)

Equity-aware due diligence considers:
- Whether requirements are proportionate to the organisation's size and stage
- Whether the process creates structural advantages for well-resourced organisations
- Whether alternative evidence can substitute for standard documentation
- Whether capacity building support is offered alongside due diligence expectations

Tahua's grants management platform supports proportionate due diligence — with built-in checks against charity registers, document storage for due diligence materials, and assessment workflows that ensure consistent application of due diligence standards across your grants programme.

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