*NOTE: This is an article written by Sarah Todd. Sarah Todd is executive director of Girls on the Run of Coastal Georgia and the founder of Change Pioneers, an information resource on change leadership. She can be reached at (912) 224-2120 or toddsar@gmail.com.

Newer nonprofits may not understand the degree of financial muscle their organization will need to successfully obtain significant grants. A quick education can be gained by understanding the due diligence process that foundations and other major donors undertake in considering a grant.

What exactly is due diligence? It’s the examination and analysis of an organization that the careful investor or potential business partner undertakes before engaging in a business relationship. With the increased competition for grants today, more and more foundations and corporations are delving deeper into these questions before making grants to nonprofits.

The bottom line question in due diligence is whether the organization under review is liable to go out of business. Are there enough assets? Is the organization routinely audited and are the audits positive in nature? What liabilities is the organization carrying? What is its track record over the last five or more years?

Planning the steps required to reach a positive result to these key questions will over time help the smaller nonprofit build a favorable grantee position.

While undertaking that, expect your grants to come from local philanthropists who are more interested in
supporting new community nonprofits’ growth, through grant partnerships with more established nonprofits, from fresh, imaginative fundraising events and from small donations that if managed well can become consistent revenue stream.

Effective use of social networking can raise your small donations audience to significant numbers if you know how to and are prepared to capture their interest.

While there are many resources for building nonprofit financial health, a good source specific to grants has been provided by La Piana Consulting and Grantmakers for Effective Organizations — a free guide about effective due diligence for grant makers.

An advance understanding of grant makers’ thought processes will help your nonprofit better understand the grant making landscape and where you are positioned as a competitor for grants.

The type and the size of a grant you are seeking can affect the focus of the due diligence process. As you build your infrastructure and financial strength over time, remember to also prepare your staff and volunteer leadership to be able to respond to questions.

When you are under consideration for a grant, there should be no surprises in the types of information or questions that may be required of you. And the best way to do that is to do your own homework rather than waiting to be asked.

Interestingly, the grantmaker community has been grappling with how to conduct adequate due diligence without placing onerous burdens on nonprofits.

They also recognize that just looking at nonprofit documentation may not communicate the entire story of a nonprofit’s value and strength. This newer version of the white paper by these two organizations reflects some changes in the process recommended to help nonprofits through the process.

Always stay focused on the long term relationship development possibilities with a grant maker. Take advantage of what you learn during the process to do it better next time and demonstrate that willingness.

If your nonprofit has a mission the funder considers of high value, they may be interested in watching and at some point nurturing your development. If your nonprofit is young and still gaining a firm financial footing, strong leadership can go a long way toward compensating for that with some grant makers.

Think about that when you are recruiting for new board positions.

The 22 page Due Diligence Well Done: A Guide for Grantmakers can be downloaded free of charge at the website of Grantmakers for Effective Organizations, http://www.geofunders.org/public-geo-resources.

For more on grants and grant writing, visit Grant Pros.


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