Due diligence is the structured process by which funders assess whether a grant applicant is credible, capable, and trustworthy before committing funds. It protects foundations from misuse of charitable resources, safeguards reputation, and — done well — helps funders make better grants to organisations that can actually deliver results.
Effective due diligence is proportionate: a $1,000 small grant doesn't warrant the same scrutiny as a $500,000 multi-year partnership. This checklist covers the key elements, which should be calibrated to grant size and risk level.
Charitable registration
Verify that the organisation holds valid charitable status:
- Charities Commission registration (New Zealand) or ACNC registration (Australia)
- Registration number and current status (active, not struck off)
- Consistent legal name and registered address
Legal structure
Understand what legal entity you're funding:
- Charitable trust, incorporated society, company limited by guarantee, iwi entity, or other structure
- Constitution or trust deed — does it permit the activities being funded?
- Who has legal authority to bind the organisation (trustees, board, directors)
Conflicts of interest
Are there any relationships between the applicant organisation and your foundation's trustees or staff? Document and manage any conflicts found.
Board composition and capability
A functioning board is one of the strongest indicators of organisational health:
- Board size — is it large enough to provide genuine oversight? (3+ members recommended)
- Board skills — does the board have relevant expertise (financial, sector, governance)?
- Board diversity — does the board reflect the communities served?
- Board meetings — are minutes kept? Does the board meet regularly?
Trustee/director conflicts
Does the board have a conflicts of interest policy? Are trustees appropriately independent from management?
Governance documentation
Financial statements
Request the most recent two years of financial statements:
- Are they audited or reviewed by an independent accountant? (Required for larger grants)
- What is the organisation's annual revenue and expenditure?
- Is the balance sheet healthy — positive net assets, adequate reserves?
- Are there significant liabilities or debts?
- Are there signs of financial distress (declining reserves, large deficits, overdue creditors)?
Reserves and sustainability
Budget for proposed project
Banking and financial controls
Track record
Theory of change
Capacity
Relationships and partnerships
Regulatory compliance
Child safety and safeguarding
For any organisation working with children or vulnerable populations:
- Does it have a child safety or safeguarding policy?
- Are relevant staff police-checked?
- Is the policy implemented in practice?
Health and safety
Does the organisation have appropriate H&S policies for its activities?
Insurance
Does the organisation hold appropriate insurance for its activities — public liability, professional indemnity, employer liability?
Prior grant performance
Site visit
For significant grants, a site visit is valuable due diligence:
- Meet the team in their operating environment
- Observe the organisation's culture and community relationships
- See the physical operation if relevant
Reference checks
Contact previous funders and key stakeholders:
- Did the organisation deliver as promised?
- Were there any issues with financial management or governance?
- Would the referee fund them again?
Due diligence should be proportionate to grant size and risk:
| Grant size | Minimum due diligence |
|---|---|
| Under $5,000 | Registration check, basic budget, bank account |
| $5,000–$50,000 | Registration, financial statements, board check, budget review |
| $50,000–$200,000 | Full financial review, governance documents, site visit or reference checks |
| Over $200,000 | Full due diligence including audited accounts, reference checks, site visit |
First-time applicants warrant more scrutiny than known, trusted grantees. Higher-risk activities (working with vulnerable populations, international operations, new programme areas) warrant additional checks.
Due diligence findings should be documented — not as bureaucracy but as institutional memory and accountability:
- Assessment summary noting what was reviewed and key findings
- Copies of key documents (financial statements, registration certificates)
- Risk assessment and any conditions applied to the grant
- Notes from reference checks or site visit
Good documentation protects the foundation and enables consistent decision-making across the grants portfolio.
Tahua's grants management platform supports foundation due diligence processes — with document management, applicant financial tracking, governance assessment tools, and the structured workflows that help foundations assess grant applicants systematically and efficiently.