Nonprofit benchmarks for due diligence in 2024

Fundraising is becoming more complex, and nonprofits must scrutinise gifts to avoid entering problematic donor relationships. While prospect development teams have always handled due diligence, they lacked nonprofit benchmarks to measure their progress. To address this gap, we partnered with BWF and Pyro.Solutions to survey 236 prospect development and fundraising teams spread across the UK, the US, and Australia. Our largest number of responses came from the Education sector, mostly Higher Education with some Independent Schools. The Medical sector was the second largest, followed by Environment and Arts & Culture. You can explore the full report for deeper insights here.

Nonprofit benchmarks at a glance

• 84% of organisations have a formal due diligence policy.
  
• 60% of organisations use thresholds to determine the level of due diligence.
  
• 52% of respondents feel confident in their due diligence process.
  
• 30% feel uncertain and 18% lack confidence entirely in the process.
  
• 30% of respondents start due diligence just before an ask is made.
  
• 48% of respondents say it takes 2-4 hours to create one report.
  
• 68% of respondents believe AI will enhance efficiency in due diligence.

Nonprofit benchmarks: How due diligence is perceived

Due diligence has become essential in fundraising and development, setting a new standard for managing donor relationships with complete awareness. But is this commitment reflected in practice?

We surveyed 236 nonprofit professionals to find out. While 60% believe their organisation genuinely prioritises due diligence, 26% remain neutral, and 16% disagree. It’s good to see that more nonprofits are focusing on whether they should accept a gift rather than whether they can.

However, 42% of respondents are still unsure if their organisation is doing enough due diligence. History really is the best teacher. Past donor scandals have taught us that failing to perform due diligence can seriously tarnish a nonprofit’s reputation and may take years, if not decades, to rebuild.

So how can organisations tackle this effectively? A strong starting point is implementing a formal due diligence policy. While 84% of organisations have one, the UK stands out with 90%. Among those UK organisations, 66% believe their due diligence is more robust simply because they have a documented process.

However, just having a policy isn’t enough—you need to feel confident in how it works. Our research found that only 52% of respondents feel confident about their due diligence practices, 30% are uncertain and 18% lack confidence entirely. It’s no wonder: many nonprofits are still dealing with a manual, fragmented approach, leaving teams worried about missing crucial red flags.

Nonprofit benchmarks: How due diligence is structured

Understanding the right level of due diligence for gift approvals is crucial. Sixty percent of organisations use financial thresholds to guide their due diligence, with a notable 64% of these being in the US, particularly among large enterprises generating over $100M.

In the UK, due diligence starts with amounts as low as £25,000, whereas in the US, thresholds can range from $100,000 to $1,000,000. On the higher end, 67% of UK organisations set their threshold at £100,000 and above. Conversely, US organisations cite thresholds spanning $100,000 to $1,000,000, revealing a concerning lack of consistency in the approach given the wide range.

When considering who greenlights a gift, one clear leader emerges from gift acceptance committees. Currently, 56% of organisations have a committee, with the highest adoption rates seen in the US at 64%. These committees play a critical role in decision-making: 26% of organisations rely on them for low-level donations, and 38% for high-level donations.

A common challenge our customers face is effectively managing their gift committees and defining their role in the decision-making process. One client found themselves bogged down by endless back-and-forth between their gift committee and the prospect development team. Committee members would conduct their own research and repeatedly request more information, leading to a drawn-out process. Meanwhile, prospects sat waiting in the pipeline.

So how can teams decide who should go to the committee without making things more complicated? Enter AI-driven “Initial Due Diligence”. Modern due diligence tools now make it easier to bridge the gap between initial screenings and deep reviews. This means you can quickly assess prospects and keep your pipeline moving. If no red flags come up, prospects can move forward without needing committee approval. However, high-risk or complex cases go straight to the gift committee. By setting these clear thresholds, you ensure only the most important decisions need committee input. 

Nonprofit benchmarks: How much time is spent on due diligence

Our nonprofit customers often express frustration over the lack of industry benchmarks for due diligence and annual reporting, leaving them uncertain about their performance.

We found 77% of prospect researchers are doing the bulk of due diligence. Meanwhile, fundraisers and directors are less involved, at just 7% each. The number of reports generated each year is also concerning. Most organisations produce fewer than 50 reports annually. Nonprofits in the US and Australia are notably under-reporting, with an average of just 1 to 9 reports per year, while UK organisations show more diligence, completing between 25 and 49 reports annually.

These figures give a snapshot of how much due diligence is being done. However, the number of reports can fluctuate based on your organisation’s specific thresholds and how your fundraising efforts stack up against others. Understanding these variations can help you better manage your due diligence process.

Organisations are rightly focusing on critical risk factors: court cases (97%), financial crime (97%), negative news (96%), and misalignment of values (84%). But how long does it actually take to produce a single report? Nearly half (48%) of respondents say it takes 2 to 4 hours, while 28% say it takes 5 to 8 hours. The UK and US average around 2 to 4 hours per report, whereas Australia leans towards the 5 to 8-hour range.

Nonprofit benchmarks: How organisations feel about AI

We often talk about how AI can help address the challenges identified in our survey. But what do our respondents actually think about AI? Thirty-four percent have strongly considered AI’s potential, while 24% have some level of consideration. The UK shows the highest interest at 42%, followed by the US at 30%, and Australia with the lowest at 20%.

With that in mind, we asked respondents how AI might impact due diligence research. 68% say enhanced efficiency, while 22% haven’t considered it. Could this be an untapped opportunity? Thirty per cent are already going to embed AI into their due diligence process, 20% are undecided, and 32% are unlikely. Only 16% haven’t considered AI yet. The US leads with 34% likely to adopt AI, followed by the UK at 28%, and Australia at 24%.

At Xapien, we believe in harnessing technology to free up humans for what they do best. According to a Third Sector poll, over half of NGOs struggle with finding talent, and retention rates often lag behind those in the private sector. In fact, more than a third of UK charities have seen turnover rates of 10% to 20% in the past three years.

By letting technology handle the repetitive, mundane tasks and allowing human teams to focus on work that demands judgment and nuance, we can significantly boost job satisfaction. This approach not only enhances employee engagement but also reduces turnover, creating a more fulfilled and stable workforce among nonprofits.

Additional benchmarks: Looking beyond donor prospects

It’s worth noting that reputational damage doesn’t end with philanthropic relationships. We asked respondents how far their due diligence resources extend beyond donor prospects. The three leading areas of additional due diligence were Corporate Partnerships at 57%, Leadership Volunteers at 54%, and Honorary Degrees at 35%. Interestingly, the UK and Australia are more likely to conduct due diligence on Corporate Partnerships than the US.

Remember, you can read more stats in the full report here.

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