This is part 2 of a blog series for grant-makers conducting applicant due diligence checks

The evolution of Due Diligence

In the grant giving process, due diligence stands guarding the doors to ensure that precious funds are channelled wisely and responsibly. This gatekeeping function has always been vital, yet in the wake of unprecedented challenges brought forth by the Covid-19 pandemic, the landscape of fundraising and grant acquisition has shifted dramatically.

Charities that have been striving to diversify their income streams amidst a strained sector, are venturing into unchartered territories, engaging with grant-makers with whom they’ve had no prior relationships. This quest for new funding sources has ushered in a new era of oversubscribed grants and heightened scrutiny. It’s no longer sufficient to assess an organisation’s eligibility alone; the long-term viability and sustainability of a charity need to come under a sharper spotlight. In these challenging times, due diligence emerges as an indispensable ally.

The Institute for Voluntary Action Research (IVAR) references in Small Charities and Social Investment

“Smaller charities may make many applications to a wide range of small and large grant funders, on the basis of an identified need or deficit in their community. They may not have been questioned about their strategy for sustainability, the long-term viability of their charity or their capacity to trade and generate surpluses.“

In a world forever changed by the cost-of-living crisis that followed the pandemic, charitable organisations are now navigating a ‘new normal.’ The heightened scrutiny and accountability in grant application processes are here to stay. The crucial question is how to ensure due diligence doesn’t become a bottleneck, but rather a efficient, robust, and integral part of the grant-giving process.

The power of data

As part of Brevio’s mission to eliminate waste in the sector, our approach to due diligence extends beyond the conventional checklist. We aim to look holistically at the entire grant application process, seeking opportunities to streamline and simplify. The statistics are sobering - in a study conducted by the University of Bath, it was found that charities spend £1.1 billion annually on grant applications, with a staggering 66% of those applications met with rejection. This represents not only wasted resources but painstaking hours of work only to end in dashed hopes.

This is only the beginning of the waste in our sector. For charities, multi-stage applications, inefficient application methods and unclear eligibility criteria contribute to the growing waste each year. On the flip side for grant-makers, wading through application paperwork, often requiring more of the applicants time to send additional requests or documentation. The cumulative hours spent on both sides is astounding.

The crux of the matter comes down to data - the most precious resource in the grant-giving process. From a concise list of data points, applications can be filtered and shortlisted before the project scoring and due diligence commences. By capturing the data upfront, charities can be confident that they’ve provided everything needed for a grant-makers decision. Likewise, grant-makers have access to all the information required, reducing the need for extensive back-and-forth interactions.

Having the correct data at the right time isn’t just efficient; it’s a powerful tool that simplifies and streamlines the grant-giving process.

Capturing the right data

Now that we understand the importance of data, let’s delve into what specific data points and documents you should be capturing from applicants at the initial application stage. This comprehensive checklist will not only aid in conducting eligibility checks but also streamline due diligence assessments.

Data points:

1. Organisation registered name (The legal name under which the organisation is registered)
2. Applicant name (The name of the individual or representative submitting the application)
3. Contact information (email and phone number)
4. Registered address (The official address of the organisation)
5. Bank account for grant payment (This can also be used for verifying and validation)
6. Organisation type (The legal structure of the organisation)
7. Regulator registration number
8. Names of Trustees or Directors (if not publicly available via a regulator)
9. Governance document (A signed copy of the organisation’s document)
10. Most recent submitted accounts, or forecast accounts for newly formed organisations (if not available via the regulator)

Beyond these fundamental data points, additional information may be required based on your grant’s specific eligibility criteria.

Additional data points and documents:

1. Organisation description (a description of the organisation, it’s mission and activities)
2. Project overview (if applicable)
3. Income, expenditure, reserves and any supporting information (detailed financial information that can be checked against the latest submitted documentation)
4. Last impact or management report (Organisational highlights and management report as part of the last submitted accounts)
5. Safeguarding or specific policies (any other relevant policies)
6. Type of funding requested (core costs or project for example)
7. Amount of funding requested (If applicable)
8. Website (Owned website url)
9. Social Media accounts (Owned social media channels)

From this checklist provided, you’ll have everything necessary to perform both eligibility and due diligence checks within a single cycle. This approach ensures that you’re not burdening applicants with redundant data requests and greatly reduces the need for extensive applicant support throughout the process.

However, we recognise that each grant may have its unique eligibility requirements. While this checklist provides a solid foundation, it’s important to tailor the data collection to your grant, ensuring that you gather the necessary information to make well-informed decisions about applicants.

In essence, the aim is to create a streamlined, efficient and transparent process that benefits both grant-makers and applicants alike. By minimising data redundancy and maximising data relevance, you’re on a path to smarter, more informed grant-giving decisions.

The holistic approach

Due diligence has often been perceived as a mere checkbox exercise, typically conducted just before the grant awarding process. In some instances, grant-makers may have already earmarked a project for funding, mitigating risks without conducting thorough checks. While this approach may expedite the grant process, it can have adverse effects on applicant expectations, consistency of awards and public perceptions of the grant-maker.

Grant-giving organisations employ various methods and timelines for conducting due diligence, and we recognise that there isn’t a one-size-fits-all approach. In this landscape, the responsibility lies with the Trustees to establish a robust process that safeguards funds whilst ensuring efficiency.

To address this challenge, grant-makers can adopt a holistic perspective that integrates due diligence seamlessly into different stages of the grant administration framework. This approach prevents duplication of efforts and eliminates the need for applicants to repeatedly provide information throughout the process. Whether due diligence is managed in-house or outsourced to third parties, it is strongly recommended that data collection begins at the initial application stage.

NCVO recommends ‘It is common to have specialist financial and legal assistance for some or all of the due diligence exercise. Although this has a cost, there are advantages including: Framing and gathering the relevant responses and information. Interpreting the responses and information received. Identifying risks, liabilities or other issues. Taking steps to resolve such issues.”

Brevio’s due diligence service is tailored to support grant-makers in implementing this holistic approach. Discover how Brevio collaborates with grant-makers to design a process for them, continuously optimising the grant application and administration system. You can streamline your own operations to make more informed and secure grant-giving decisions, enhancing your impact on the philanthropic landscape.

Benefits for grant-makers

1. Time efficiency: Grant-makers experience a significant reduction in time spent on repetitive tasks such as checking, rechecking, and chasing answers or documentation from applicants. This newfound efficiency allows assessors to redirect their time and effort towards more valuable activities, such as conducting project visits and performing more monitoring and evaluation.
2. Enhanced risk mitigation: The amalgamation of comprehensive data enables grant-makers to swiftly identify ineligible or potentially fraudulent applications. Rather than examining fragmented information, the entirety of the data tells a cohesive story, facilitating a more robust risk assessment process.
3. Automated checks: Grant-makers gain the ability to perform more advanced and automated checks by harnessing the wealth of data right from the outset. This empowers them to shortlist applications of higher quality, aligning more closely with their specific criteria. ‍
4. Comprehensive assessments: Beyond project eligibility, grant-makers can delve into how well an organisation is being managed and whether funds are being utilised appropriately. This comprehensive evaluation ensures that resources are invested wisely and in organisations that demonstrate sound governance and fiscal responsibility.

Benefits for applicants

1. Streamlined application process: Applicants benefit from a streamlined application process that reduces the time spent on multiple stages. With data collection integrated seamlessly, they need only input the information once, freeing them from repetitive paperwork and enabling them to focus on their core mission.
2. Relationship building: Grant-makers will have more time available for personal interactions, such as project visits and monitoring and evaluation. This opens the door for stronger relationships to be forged between funders and grantees, fostering collaboration and a deeper understanding of project goals.
3. Constructive feedback: Even in cases where applicants are unsuccessful, receiving valuable feedback can help them understand the reason behind the decisions, ensuring transparency and offering opportunities for improvement. ‍
4. Recognition of quality: The integration of comprehensive data facilitates the selection of applicants of higher quality. This benefits applicants who meet administrative standards and demonstrates their capacity to execute projects effectively.

Conclusion

By harnessing the power of data, both grant-makers and applicants can realise a myriad of benefits. Data collection at the application stage serves as the cornerstone of this holistic approach, enabling both eligibility and due diligence assessments to be conducted seamlessly. Due diligence is not just a box to tick- it’s an integral part of grant-giving that deserves thoughtful consideration. Grant-makers have the power to reshape their grant administration process, optimise resource utilisation and elevate the impact of their philanthropic endeavours. By doing so, they not only safeguard important funds, but also strengthen their relationships with organisations they support, ultimately contributing to the greater good of society.

If you missed Part 1 in this blog series, read it here: Eligibility and Due Diligence: same or different?

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Blog sources

1. IVAR Small Charities and Social Investment
2. University of Bath: UK Third Sector grant making
3. NCVO: Due Diligence‍
4. Brevio- How due diligence works

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