Due diligence research helps your organisation make informed decisions about major gifts. It protects your organisation, your reputation and your donors.
Due diligence is not the same as prospect research
Prospect research helps you understand your supporters better. It generally answers: who is this person? What’s their capacity to give? And what are they motivated by?
Due diligence exists to answer a different question: what risks could arise from entering a relationship with this person? Those risks may relate to:
- Finances
- Legal or regulatory issues
- Reputation
- Operations
The scope of research undertaken should always be proportional to the potential relationship or gift.
Step 1: Start with your organisation’s framework
Before researching the donor, establish the criteria you’re assessing them against:
- Gift acceptance/refusal/return policy.
- Relevant organisational values and charitable objectives.
- Excluded sectors or activities.
- Geographic considerations.
- Gift-value thresholds.
Higher-value gifts, unclear sources of wealth or business interests in higher-risk jurisdictions may justify additional or independent due diligence. This doesn’t necessarily need to come from an external organisation; someone internally who is not close to the relationship can conduct or critically review the research.
Don’t collect every piece of negative information you can find; focus on what’s relevant to the decision you’re trying to make.
Step 2: Establish the source of wealth and funds
Questions to explore:
- How was the individual’s wealth created?
- What businesses do they own or control?
- Is the wealth estimate plausible?
- Where is the proposed donation actually coming from?
Potential sources and tools that can aid your research include Companies House, OpenCorporates, the Charity Commission and ICIJ databases where appropriate.
Source of wealth and source of funds are related, but they aren’t the same thing. Source of wealth looks at how someone accumulated their overall wealth. For example, you might establish that a donor founded and later sold a technology company.
Source of funds looks specifically at where the proposed donation comes from. A donor may have built their wealth through that technology business but make their gift through a family trust, foundation or investment vehicle. You need to understand both.
Step 3: Check sanctions, political exposure and regulatory issues
Check for legal, political or regulatory issues that may require further investigation, including sanctions, political exposure, director disqualifications and regulatory action.
Tools such as OpenSanctions, the EU Sanctions List, the Electoral Commission and Companies House can help.
If a Google search result suggests someone is sanctioned, check the relevant official sanctions list and make sure you have identified the correct person.
Step 4: Investigate reputational risk
Once you’ve established who the donor is and where their wealth comes from, look for credible reporting about issues that could create a risk for your organisation. These could include criminal activity, fraud or corruption, employment practices, environmental or human rights concerns and significant litigation.
Google can make this research more targeted. Quotation marks can search for an exact name, a minus sign can remove irrelevant results, and site: can search within a particular website. If you’re researching a common name, combining these techniques can help separate your donor from someone else with the same name.
Step 5: Look beyond the individual
The risk associated with a gift doesn’t always sit with the donor. Where relevant, investigate companies they own or control, business partners, trusts or foundations involved in the donation, and countries and territories in which their businesses operate.
Keep this proportionate. You don’t need to investigate every person a donor has ever worked with. Follow connections where they are relevant to the source of wealth, source of funds or a risk identified during your research.
Step 6: Verify and assess what you find
Always prioritise primary and reputable sources and corroborate significant findings where possible.
If a newspaper reports that a donor’s company is under investigation, look for the original regulator, court filing or company statement where available. Check whether other reputable sources have reported the same issue and whether the donor or company has responded.
For each significant finding, ask:
- What is the original source?
- Can the information be independently verified?
- Is this an allegation or established fact?
- Has the donor or organisation responded?
Also consider how recent and relevant the information is and whether you’re looking at an isolated incident or a wider pattern. Record mitigating information too. If a company was investigated but subsequently cleared, for example, that context should form part of your assessment.
Your due diligence report should help the organisation make a decision, not simply present a collection of negative search results. Consider how serious and relevant each issue is, its potential impact on your organisation and any mitigating factors.
Step 7: Document your research and decision
Keep a clear record of the research undertaken, the sources used and why your organisation ultimately decided to accept, refuse or escalate a gift.
If information changes and concerns about a donor emerge after you accept their gift, a clear record can demonstrate what information was available when the original decision was made, what checks you carried out and why the decision was reasonable at the time.
We know that one size doesn’t fit all
What’s right for one charity might not be right for you. Due diligence should be proportionate to the size, nature and risk of a gift, while reflecting your mission, vision, values and objectives.
That’s why we tailor our due diligence support to your organisation, considering how you work alongside external factors such as the potential impact of a gift on your reputation.
Whether you need independent scrutiny of your research or don’t have the time or resources to carry out due diligence checks in-house, we can help.