Donor due diligence:

Steps for effective due diligence


Donor due diligence – part 2

The age of hyper transparency presents a double challenge for due diligence departments. Institutions are exposed to higher levels of public scrutiny than ever, and the cluttered information space is a major obstacle to finding and assessing reputational threats. Here’s how to break it down:

Make a plan

Most searches start with online search engines, but even picking one of those can be a challenge. Which search engine should you choose? Would you be more likely to find information about your subject on a Russian search engine than an English or American one for example?

How many pages of each search engine should you check? It is essential to focus your research from the outset, or you will quickly be overwhelmed. Don’t get lost on page 300 of Google. Answer the three questions below before you start.

1) What are you looking for?

In our last post we listed some essential questions that need to be answered from a donor due diligence perspective. Keep this checklist of questions you need to answer front and centre throughout your research process enabling you to focus.

Depending on the size of the donation, your requirements will differ in scale. It is important to have systems in place that don’t slow up the process of receiving these generous gifts. This might mean limiting your onward checks once initial internal questions have been asked and a few searches run. This should be clearly set out in your organisation’s policies. 

Answering some of these questions is not easy. Dig down into them and think about sub questions that you need to answer in order to really assess the potential regulatory or reputational risks posed by your subject.  

2) Where will you find it?

Some of this information can be found internally, so your due diligence team must have relationships with relevant people from other departments (often prospectors, development, and alumni teams) so that they can gain quick access to any institutional information already held about the potential donor. 

But for major donations, where the reputational risk factors are higher, wider searches and donor research tools are essential.

Start with search. Using a geographically relevant search engine for your subject, and ideally a mixture of search engines, head online. Gather data from the media, news articles, professional networking sites, corporate records and commercial data providers. 

This should include PEP and sanctions databases.

Consider the credibility of your sources. Different media outlets have differing editorial standards. A blog post might contain some highly controversial content, but is that necessarily a red flag? Don’t disregard this, but cross reference it against other, more credible, outlets.

3) Who is your audience?

Presentation is critical. The information you gather might get shared right up to the Vice Chancellor of the university when dealing with major donations. It is essential that it is presented in a coherent, concise and clearly prioritised way.

This is where report writing skills are key. Make time for it. 

In order to be confident that you have checked all the risks associated with accepting a major gift, you might be trawling through vast amounts of information. The tricky part is figuring out what is relevant and what is not. 

What does the person who is looking to make a final decision on this donation really need to know? Will your report enable them to justify that decision? 

This is where you can go back to your list of questions and organise your information in a way that answers all of those. 

Xapien’s helpful checklist of donation due diligence

The takeaway

Plan. Set target questions. Search, and then search again until all of those questions have been adequately answered with well-sourced and cross-referenced information.

This can be a difficult, expensive, and time-consuming process, but as you will see in our next article, there are ways to optimise the process in a way that positively builds your institution’s profile.

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