Due diligence in grantmaking is the process of verifying that an organisation is who it says it is, that it can deliver what it's proposing, and that the grant is a reasonable investment of philanthropic funds. Done well, it protects funders from making grants that fail, waste resources, or create reputational problems. Done poorly — or not at all — it leaves funders exposed to risk and grantees without the support they need to succeed.
This guide covers what due diligence looks like in practice, how to calibrate it to risk, and what a practical checklist should include.
Grantmakers are stewards of philanthropic funds. Those funds come with obligations — to donors, to communities, and to the charitable mission the funder exists to advance. Due diligence is how funders exercise that stewardship responsibly.
The risks that due diligence addresses:
Importantly, due diligence is not primarily about catching fraud — though it can. It's about making better grants to organisations that are ready to receive and use them well.
Due diligence should be proportionate. A $2,000 grant to an established community sports club needs less scrutiny than a $500,000 multi-year investment in a new organisation. Applying the same due diligence to every grant is inefficient and burdensome.
Factors that increase the appropriate level of due diligence:
- Larger grant amount
- Multi-year commitment
- New or unproven organisation
- Novel or complex programme model
- Limited track record with this funder
- Grants going to organisations overseas or outside the funder's network
Factors that may reduce required due diligence:
- Established relationship with the organisation
- Prior successful grants
- Small grant amount
- Well-known and publicly accountable organisation
Charitable registration
Confirm the organisation is registered with the relevant charity regulator — Charities Services in New Zealand, the Australian Charities and Not-for-profits Commission in Australia. Charity registers are publicly searchable.
Check:
- Registration status (active, not deregistered)
- Annual returns are up to date
- Stated purposes align with the proposed project
- No noted concerns or investigations on record
Company and trust registration
If the organisation is incorporated as a company or trust rather than (or as well as) a registered charity, check the Companies Office or equivalent register. Look for:
- Active status
- Directors or trustees named (check for disqualifications)
- No outstanding compliance obligations
IRD and tax
For significant grants, confirm the organisation has a valid IRD number and is in good standing with tax obligations. Some funders require a DIC (Donee Status) confirmation for tax receipt purposes.
Financial due diligence for grants involves reviewing the organisation's financial statements to assess viability.
What to look for in financial statements:
Red flags:
For small community organisations, financial statements may be simple and unaudited. That's normal — calibrate expectations to the organisation's size and capacity.
Governance quality is a significant predictor of organisational effectiveness. For larger grants, assess:
You don't need to audit governance — you need enough information to be confident that responsible oversight of the grant is in place.
Beyond governance and finance, assess whether the organisation has the operational capacity to deliver the proposed project.
Staff and management
Track record
Systems and infrastructure
For grants requiring specific systems (data management, financial reporting, compliance) check that the organisation has these in place or has a credible plan to develop them.
Before making a grant, funder staff and board members should declare any personal relationships or conflicts of interest with the applicant organisation. Most funders have a conflict of interest policy requiring declared conflicts to be managed (typically by recusing the conflicted person from the decision).
Beyond personal relationships, check whether the funder has any institutional conflicts — previous disputes, outstanding obligations, or significant reliance on the same funding pool.
Document your due diligence process and findings, even informally. This creates a record that:
- Supports the grant decision
- Is reviewable if questions arise later
- Builds institutional knowledge about grantees
A brief due diligence summary (1-2 pages for significant grants) covering registration, financial health, governance, and capacity is a reasonable standard.
For a mid-sized grant ($20,000-$100,000), a reasonable due diligence checklist includes:
Tahua's grants management platform supports structured due diligence — with document collection, assessment workflows, and the organisational history that makes repeat-grantee assessment faster and more consistent.