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Donor due diligence:

Where Xapien fits into your gift acceptance process

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Beca Daniel, Philanthropy Account Manager • May 23 2024

Nonprofits face a broad and complex set of decisions when deciding whether to accept a donation. The first step is to gather enough information about the prospect and the intended purpose of the donation. Understanding the complete story behind a donor and the potential implications of accepting their gift allows an organization to proceed with clarity.

However, situations aren’t always that clear-cut. Sometimes, philanthropic contributions fall into a grey area and need input from others in the organization so the right decision is made. 

It’s important to note that there’s no definitive “right or wrong” answer for charitable giving policies. What might be a risk to one organization might not be for another.

Having a robust policy and a well-documented decision-making process is essential, though. Not only to demonstrate how the organization arrives at a decision but to reinforce its commitment to protecting its reputation and where it ultimately draws the line.

What informs the gift decision-making process?

Manual web searches

Internet searches to gather preliminary information about a prospective donor, often using a person or company name followed by a specific search string. This includes looking up news articles, social media profiles, public records, and other online content that might provide insights into the donor’s activities and reputation. Although, there’s often a page limit to how many search results a researcher can review.

Deep dive into specific areas

Once initial searches are completed, researchers analyze and cross-reference the collected data. This involves scrutinizing various aspects of the donor’s background, including their professional history, philanthropic activities, political affiliations, and potential controversies. The goal is to identify any red flags that might pose a risk to the nonprofit’s reputation.

Synthesize the findings

After a thorough examination, researchers compile their findings into a report. This report highlights the potential risks and benefits associated with accepting the donation. The report is then reviewed by the nonprofit’s decision-makers, who assess whether to proceed with the gift. Based on the report, the nonprofit’s board or a designated committee decides whether to accept the donation, request further information, or decline.

What does that process look like in practice?

For a smaller organization… 

Initial research is normally first conducted to categorize donations as either no-go, high-risk, or low-risk. No-go donations are immediately rejected, while low-risk donations are accepted outright. High-risk donations undergo full due diligence. The due diligence findings are summarized in a report, which includes details about the donor, the opportunity, and the associated risks. This document is shared with different divisions for internal input. The final assessment is assigned to a decision-maker based on the donation’s value.

For a medium to large organization…

A risk-based approach is commonly used with varying levels:

Level one: Focuses on low-value donations where local ethical checks are conducted. A single decision-maker oversees this level.

Level two: Medium-risk donations are escalated, while high-risk ones are either rejected if initial research supports that decision or forwarded to the second level for initial due diligence. Donations surpassing a specific threshold, like £50,000, automatically move to the second level. Similar to level one, a designated decision-maker at this level is responsible for ethical oversight.

Level three: Involves full due diligence, with certain donations, such as those over £10M, automatically assigned to this level. Here, a chair acts as the decision-maker.

Level four: Involves enhanced due diligence, delving deeper into specific areas and seeking approval from its committee.

Where does Xapien fit into the gift acceptance process?

Initial due diligence (level 1-2)

Xapien gives an upfront view of which prospects need further review with summarized sections on personal connections, career history, philanthropy, wealth and more. It takes a broad risk lens, looking at political exposure, sanctions exposure, ESG, and crime and controversy. If it’s clear there’s little risk, the Xapien report can be filed and forwarded to senior leadership for review.   

Deep due diligence (level 3-4)

If concerns are raised from the preliminary due diligence report, researchers will need to go deeper into the report’s risk inspector and filter through the different categories to read the articles that flagged potential risks. Each sentence in the report is traced back to its original source so users can verify it themselves.

How Xapien customers use AI for gift acceptance  

Dartmouth

Dartmouth College initially adopted Xapien to complement its research process but soon replaced all their tools and methods to centralize the reputational risk function. Analysts at Dartmouth used to spend 8 hours on due diligence reports which Xapien now produces in 8 minutes. The reports are delivered in a summarized and shareable format that contains everything the analysts or decision-makers need to know at a glance. 

University of Liverpool

The University of Liverpool built due diligence into prospect research with Xapien. Instead of holding up gifts at the end due to manual research, Xapien surfaces all relevant information about a prospect in under 15 minutes. This means due diligence can be done upfront, without holding up the gift acceptance process. Combining the two processes early on also helps the fundraising team focus their efforts on the right donors to speed up the gift acceptance process.

Sightsavers

When the Prospect Research Manager receives a new due diligence request, they can provide the fundraiser with an Xapien report and an instant decision. These decisions are recorded on an in-house template, categorized as either ‘low risk’ and approved, or escalated for resolution at an appropriate level. This has resulted in better relationships with donors as they’re not left waiting for a decision.

How does Xapien work for donor due diligence?

A gift acceptance process that takes nine months versus three months yields a very different outcome. The key is where due diligence happens (hint: right at the start).

Prospects move through the pipeline faster. Why? Less time is spent on manual research. The gap between nurturing the relationship and accepting the gift shrinks because due diligence is done upfront. But only technology makes initial due diligence possible — organizations don’t have the time or resources to manually dive deep into each potential donor. 

Xapien is a research and due diligence tool, purpose-built and powerful. With 20 AI models, a proprietary disambiguation engine, and anti-hallucination technology, it integrates critical data sets like compliance information and the entire live indexed internet. Pre-trained models answer key questions consistently to uncover personal connections, career history, and philanthropic activities. It also looks at potential risks like political or sanctions exposure, ESG history, crime, and controversy.

All Xapien needs is a name and a piece of context to deliver a comprehensive due diligence report that’s traceable down to the sentence level. Find out how Xapien can fit into your process by speaking with our team here.

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