How to prepare for a funder's due diligence: a checklist for NGOs and SMEs

A strong application gets you to the shortlist. What happens next is quieter and decides more: the funder checks whether your organisation can be trusted with its money. This is due diligence. For a small foundation it may be one call and a few documents; for an international donor or an EU programme it can take weeks.

Every funder checks in its own way, so organisations often find out about their gaps only when the check has already started. The Grant Standards Association (GSA), an independent association that sets a standard of grant readiness, groups what funders look at into six domains. We use the same six domains with our clients, because they cover almost every question a funder will ask.

Start with a self-assessment

Before collecting documents, score your organisation in each domain from 0 to 3:

• 0 nothing exists;

• 1 it exists informally, in people's heads or in emails;

• 2 it is written down and approved;

• 3 it is written down, approved and you can show evidence that it works.

A score of 0 or 1 in any domain is where a funder will stop and ask questions.

The six domains and the documents behind them

1. Governance: who decides and who controls

• Statute or bylaws in the current version, extract from the state register.

• Organisational structure and a RACI matrix: who decides, who does the work, who is consulted and who is informed.

• Data on signatories: who can sign contracts and payments, and up to which amount.

• Code of conduct.

2. Compliance: ethics and integrity

• Conflict of interest policy and declarations from the people involved in the project.

• Anti-fraud, anti-corruption and anti-money-laundering (AML) policies.

• Whistleblowing procedure: how staff and partners can report a concern safely.

• Safeguarding and protection from sexual exploitation and abuse (PSEA) if you work with children, vulnerable adults or people in crisis.

• Personal data protection.

3. Finance: how you count money and whether you can prove it

• Financial manual: accounting, budgeting and cash management.

• Rules for direct and indirect costs, and a method for recording staff time (timesheets).

• An audit trail you can show: transaction, supporting document, approval.

• The latest audit or financial statements.

Funders look less at the size of your turnover and more at whether the numbers are consistent. If the budget in the application, the financial statements and the bank statements tell different stories, expect questions.

4. Delivery: how you run projects and buy things

• Standard operating procedures (SOPs) for preparing and running projects.

• Procurement policy: from what amount you collect several quotes, who approves the choice.

• Risk register with owners and mitigation measures.

• A calendar of deadlines for reports and payments.

5. Impact: how you measure change

• A monitoring, evaluation, accountability and learning (MEAL) plan.

• Indicators for each project, with baselines and targets.

• A way of collecting lessons learned and using them in the next project.

6. Partnerships: how reliable you are as a partner

• A map of current partners and the agreements with them.

• Templates for memoranda of understanding (MoU), letters of intent (LoI) and contracts with sub-grantees and suppliers.

• Your own due diligence procedure for partners, including sanctions screening.

Put it into one dossier

Collect everything in one place, with a simple evidence list: domain, document, status (exists / missing / needs changes), owner and a link to the file. This list becomes your navigator. When a funder sends its questionnaire, you answer from the dossier instead of searching through folders.

Close the gaps in 30, 60 and 90 days

Not every gap is equally urgent. For each one, estimate two things on a scale of 1 to 5: how much it affects funding and how hard it is to fix. Then sort:

• Must fix in 30 days: high impact on funding, for example a missing AML or conflict of interest policy.

• Next 60 days: procedures that exist in practice but are not written down.

• Within 90 days: improvements that strengthen the dossier, such as a risk register or a fuller MEAL plan.

A small organisation does not need thick manuals. One or two pages per policy, approved by the governing body and actually followed, are enough for most funders.

Common mistakes

• Sending documents in pieces, in different formats, over several weeks.

• Financial figures that differ between the application and the statements.

• Policies copied from another organisation and never adapted or approved.

• No clear answer to who signs, who approves payments and who checks them.

• Treating due diligence as a formality instead of the funder's first look at how you work.

Due diligence as an advantage

An organisation that has its dossier ready can explain its level of readiness to a funder or a board in a few minutes. The same dossier serves the next application, the next donor and the annual audit, and it shows consortium partners that you are a reliable lead or co-applicant. Organisations that want independent confirmation of their readiness can go further and certify it with GSA.

Synergy Development Consulting helps organisations prepare for funders' due diligence: we run the self-assessment across the six domains, build the dossier, close the gaps in policies and procedures and accompany the process until the grant agreement is signed. Learn about our consulting.

If you want to work through your own case with an expert and other members, bring it to a Mastermind session of Synergy AI Funding Club.