Requests for due diligence can be onerous and time consuming. If your organization does not already have a due
diligence policy, this toolkit will help you formulate your own. Additionally, if your organization already has a
due diligence policy, this toolkit could suggest some improvements to your current policy and/or your current due
diligence process.
Credits: This due diligence toolkit was initially drafted on June 1, 2020, by Apra's Ethics and Compliance
Committee's subcommittee members Elizabeth Goodman, Lori Hood Lawson, Erin Osborn, Laura Owen, and Vern Rink.
Special thanks to Lexis Nexis, University of California Irvine, and The University of Edinburgh for their permission
to include and share their policies and search strategies and Tom Jirat and Oliver Taylor at the University of
Manchester for their insight and help with search terms.
Due Diligence
Prospect development professionals are tasked with mitigating risk to their nonprofit organization
through a variety of tasks, one of which is due diligence, also known as “vetting” or
“screening.” Due diligence in this context is the analysis of available data to identify risks
to a nonprofit organization’s reputation posed by advancing the relationship with a prospective, current,
and/or lapsed donor. While prospect development activities, including prospect research, can come across some of
this information, due diligence is the specific information analysis through the lens of ethical concerns the
prospective, current, or lapsed donor presents, either through former, current, or anticipated actions or those
of connected persons or organizations. These concerns can range from criminal and legal issues to questionable
sources of wealth. While prospect development professionals rarely make the final decision regarding whether to
move forward with a prospective or current donor, due diligence activities better inform the nonprofit
organization when making that decision.
Some reasons to perform due diligence research and risks associated with engaging supporters and/or income from
donations are listed below:
- Legal risk - Could advancing the relationship with a supporter or accepting a donation
expose the organization to legal or regulatory challenge? Check that the donation or the supporter
isn’t linked to illegal or criminal activity.
- Financial risk – Could engaging with the supporter or accepting the donation
jeopardize your organization’s reputation or ability to raise money in the future?
- Reputational risk – Could engaging with the supporter or accepting the donation be
perceived as inappropriate or unethical by your organization’s stakeholders? Controversial business
activities or products that do not align with your organization’s mission, e.g. children-related
organizations may not wish to engage with prospects that made their wealth via alcohol manufacturing
businesses.
- Dependency risk – Could engaging with the supporter or accepting the donation give
the donor an undue level of influence over a charity, its staff, and its trustees.
The actual process of performing due diligence can include the following (NOTE: review the Search Terms for Due
Diligence Research located herein.):
- Review your organization’s current policies. (For example, its gift acceptance policy)
- Research peer organizations or other reputable organizations and their relationships with the supporter(s)
in question. If possible, reach out directly to peer organizations if and when appropriate.
- Run a criminal background check.
- Search court records for any lawsuits.
- Search the sexual offender registry.
- Run a negative news search for the prospect, the prospect’s’ business(es), the prospect’s
source of wealth, family members, and other connections.
- Research environmental, social, and governance issues regarding prospect (if a business or a
prospect’s company).
Included in this due diligence toolkit are real examples of nonprofit organizations’ due diligence,
vetting, and screening policies. What follows are steps for you to build your own policy. These steps are also
applicable for due diligence processes for supporter engagement.
(1) Step One: Find and read your gift acceptance policy and/or process. If your organization does not have one,
you should begin that separate process/policy, as that should inform and further guide your due diligence policy
and process. Elements of a gift acceptance policy should include at a minimum the following:
- A statement on the organisation’s mission and purpose of the gift policies.
- The types of gifts that can be accepted on behalf of the organisation by development staff.
- The types of gifts that require approval from senior management, such as the gift acceptance committee,
board of trustees, board of directors, the chief executive, or chief financial officer for gifts over a
certain amount or from a sector considered sensitive by the organisation.
- An outline of the types of gifts the organisation will and will not accept and under what circumstances and
the organization’s legal obligations around gift acceptance and refusal.
- Description of the gift acceptance process, i.e. which committee decides this and what roles are involved.
- Schedule for policy review (annually, quarterly, etc.).
(2) Step Two: Describe the issue (due diligence) and the affected stakeholders.
(3) Step Three: Detail the due diligence process, applicable resources, and staff responsibilities.
(4) Step Four: Identify the owner of the due diligence policy with communication details and policy review
schedule
(5) Step Five: Introduce your draft due diligence policy to your colleagues and supervisors to get buy in and
sign off. Make adjustments as necessary. Include legal counsel review as necessary/required by your
organization.
This best practices document, which includes a detailed policy at the
end, was created and is available through a partnership between Apra and aasp.
The following policies are shared with permission from University of California Irvine and The University of
Edinburgh:
Apra Board Member Lindsey Nadeau authored an article regarding the vetting process. The full article may be read
here. Additionally, the following infographics accompany the article:
Procedure Matrix Template
|
Level of Potential Donation
|
Procedure
|
Outcome
|
Risk Template
|
|
Principal Gift Range
|
Full due diligence, including completion of risk template
|
Refer to gift acceptance committee before further cultivation/solicitation
|
Required |
|
Major Gift Range
|
Full due diligence, including completion of risk template
|
If risk score is low: proceed with
cultivation/solicitation
If risk score is medium or high: refer to gift
acceptance committee before further cultivation/solicitation
|
Required
|
|
High Annual Giving Range
|
Internet search to identify issues that may pose reputational risk
|
No risk found: proceed with cultivation/solicitation
Some risk/potential risk found: Complete risk template;
Refer to gift acceptance committee if there are outstanding issues/disagreements about best course of
action.
|
Not required
d
d
Required
|
Checklist Template for Focus and Sources for Full Due
Diligence Research Process
Risk Assessment Scoring Template
A risk assessment score helps your organization develop a consistent,
objective, and transparent approach to scoring your due diligence and helps to aid decision making. You may
also wish to assign a numeric value for each incident discovered at certain levels.
|
Risk Level
|
Financial
|
Legal and Regulatory
|
Reputational
|
Operational/
Dependency
|
|
High
|
Evidence of money laundering, fraud, funds misappropriation and financial irregularities.
|
Substantial and/or repeated evidence of flouting regulations and laws e.g. criminal convictions and
large fines etc.
|
Substantial and/or repeated evidence of serious criticism from other organizations, peers and
stakeholders; and/or evidence of practices and behaviors that undermine the organization’s
public profile, e.g. conflicts with organization’s donation acceptance policy
|
Substantial evidence that the partnership could undermine the organization’s program work i.e.
the acceptance of the partnership could lead to significant changes to the program strategy
|
|
Medium
|
Not applicable
|
Evidence of minor flouting of regulations and laws and/or allegations of bad practice
|
Significant evidence of negative media coverage from other organizations, stakeholders or peers;
and/or evidence of practices and behaviors that undermine the organization’s public profile
|
Significant evidence and/or historical evidence that the partnership could undermine the
organization’s program work i.e. the acceptance of the partnership could lead to minor changes
to the program strategy
|
|
Low
|
Not applicable
|
No evidence or allegations of legal and regulatory bad practices
|
No or minimal negative media coverage on the organization or individual
|
No or minimal evidence that the partnership could undermine the organization’s program work
|
Below are suggested terms to use while conducting due diligence research, whether
through a general internet search or via online news sources, such as a newspaper or magazine. These terms
should be used with Boolean terms (e.g., and, not, or or) and connectors (e.g., “”, W/n, etc.)
for more exhaustive query results. Additionally, when appropriate and able to do so, use wildcard characters
(e.g., !, ?, or *) to expand on the root of a search term (e.g., indict! would also return instances of
indicting and indictment and indictments). Boolean search tutorials can be viewed here:
The following is from Lexis Nexis and shared with permission:
How do I find news articles about an individual's criminal
activity?
john w/3 doe and doe w/10 abus! or accus! or alleg! or arraign! or arrest! or
assault! or attack! or bail or beat! or bond or brib! or charg! or cartel or convict! or corrupt! or court!
or conspir! or co-conspir! or crime or criminal! or deceiv! or decept! or defendant or defraud! or denied or
deny or disorderly conduct or driving under influence or driving while intoxicated or drug or drunk! or dui
or d u i or d.u.i. or dwi or d w i or d.w.i. or embezz! or extort! or felon! or fraud! or guilt! or harass!
or illegal! or incriminat! or indict! or investigat! or jail! or kill! or larcen! or launder! or lawbreaker
or misappropriat! or misconduct or misdeme! or murder! or narcot! or negligen! or offen! or outlaw or parol!
or prison! or probat! or prosecut! or revocation or revoke* or robber! or sabotag! or sanction! or scam! or
scandal! or shoplift! or stab or stabbed or stabbing or steal! or stole* or suspen! or terroris! or theft or
thief or thiev! or threat! or trespass! or unlawful! or verdict or violat! or violen! or weapon
How do I find news articles about an individual's civil
proceedings?
john w/3 doe and doe w/10 abus! or accus! or alleg! or attack! or acquit! or
arraign! or arrest! or bankrupt! or breach! or brib! or ( chapter pre/1 7 or 11 or 13 ) or charg! or
corrupt! or conspir! or co-conspir! or court! or critici! or deceiv! or decept! or defendant or defraud! or
denied or deny or disciplin! or discrim! or dissolut! or distort! or divorc! or embattled or foreclos! or
fraud! or guilt! or harass! or indecen! or insolv! or investigat! or judgement or judgment or lawsuit or
libel! or liquidat! or litigat! or misappropriat! or misconduct or mismanag! or misrepresent! or narcot! or
negligen! or offen! or racketeer! or revocation or revoke* or risk! or sabotag! or sanction! or scam! or
scandal! or separat! or slander! or sued or suing or suit or suspen! or terroris! or threat! or trespass! or
verdict or violat! or warrant
How do I find negative information about a company?
Intel w/10 abus! or accus! or alleg! or arraign! or arrest! or assault! or attack!
or bankrupt! or beat! or breach! or brib! or ( chapter pre/1 7 or 11 ) or charg! or conspir! or co-conspir!
or convict! or corrupt! or court! or crime or criminal! or critici! or deceiv! or decept! or defendant or
defraud! or denied or deny or disciplin! or discrim! or distort! or embattled or fraud! or guilt! or harass!
or illegal! or incriminat! or indict! or inside! info! or insolv! or investigat! or judgement or judgment or
launder! or liquidat! or litigat! or manipul! or misappropriat! or misconduct or misdeme! or mismanag! or
misrepresent! or negligen! or offen! or probat! or prosecut! or racketeer! or revocation or revoke* or risk!
or sabotag! or sanction! or scam! or scandal! or separat! or steal! or stole* or sued or suing or suspen! or
terroris! or theft or threat! or unlawful! or verdict or violat! or violen!