Following a series of conversations and experiences he had over summer, the first Note of November sees our CEO Géraud de Ville talk us through the gruelling cycle of due diligence. Ahead of an important meeting about sharing due diligence processes between funders, he reflects on how and why we might get better at “doin’ the due” (credit to Betty Boo).
Before I set out for my summer cycling holiday in rain-battered North Wales (what a fantastic idea) I thought, what better moment than this one to get down some thoughts about due diligence? No, seriously, behind this somewhat dry term lies a very important question, one that I’ve been ruminating on long after I dried off:
“Why do funders carry out due diligence?”
I think that working to answer this has deep repercussions for the relationship between funders and investors, and their beneficiaries.
Due diligence, briefly, is taking steps to ensure that a person or organisation is who they are claiming to be. It occurs in many walks of life, usually when money is involved. On a day-to-day basis, it can be as simple as checking your plumber is licensed to carry out the work you need. In grant-making, it is seen as a way for funders to feel confident that the money they are distributing is less likely to be misspent. So question solved, right?
Earlier this year, I was invited to a thought-provoking dinner with a few other foundation leaders, to discuss the challenges of current grant-making practices. At BD Giving, we have long seen the value of using food to bring people together. Too often, as with many aspects of participatory work, this practice is seen as something that is fine to do with communities but not a practice for foundations to do among themselves. It was nice be at a dinner where the focus was on the burdens faced by grantees and how, as funders, we could collaborate to alleviate costs and be more equitable.
Civil society groups and organisations pay a staggering £900 million each year just to apply for funding. Even more worryingly, smaller organisations tend to spend up to 17% of their income on fundraising, as opposed to an average of 5% for larger organisations.
As a participatory funder, BD Giving has developed its own approach to due diligence, building a wide circle of accountability and cultivating trust, rather than aiming for control and predictability. In doing so, we are animated by exploring the following questions:
- What is the true value of due diligence? Do we, as funders have solid evidence that it has effectively contributed to our charitable aims? Or are we driven by the fear of reputational damage, overshadowing the genuine impact we can make?
- Considering whose risk it is: The current conversation predominantly focuses on risks faced by funders, but what about the risks grantees encounter? Are we fully acknowledging and addressing their concerns? It’s important to recognise that risk applies to both sides of the funding relationship.
- Can risk management and equity coexist harmoniously? Any endeavour that seeks to change the system, e.g. by building social justice is bound to be risky. It’s a journey that requires humility, empathy, and a genuine commitment to creating a more equitable system.
- Most funders require up-to-date safeguarding policies from applicants. The importance of safeguarding cannot be understated, however, having a policy in place doesn’t automatically translate to effective implementation. Merely demanding policy updates might make funders feel accomplished, but are we allocating enough resources to ensure these policies are truly embedded? How do we build true accountability rather than the illusion of responsibility when safeguarding issues arise?
Mindful of the future
The transformation that is needed in funding relationships goes beyond bureaucratic adjustments. It calls for a genuine shift in mindset — one that values relationships, shared goals, and humility. The current due diligence practices impose a a number of burdens on civil society. Unless we reduce these burdens, we’re going to increasingly find that the money we safeguard is doing nothing for the issues we claim it exists to alleviate.
As funders, I believe that we have a responsibility to question the status quo, embrace introspection, and make way for community groups to reshape grant-making practices for the better.