What is Due Diligence?
Due diligence is a term that finds its roots in finance, where it is imperative for companies to perform a comprehensive due diligence analysis before undertaking major investment decisions.
This obligation ensures that they act in the best interests of their stakeholders by evaluating all relevant information related to the financial landscape, operational circumstances, and other critical factors associated with the investment opportunity.
It’s quite similar in the non-profit arena.
The reliability and trustworthiness of the nonprofit organizations emerge as a fundamental concern in the field of philanthropy. Companies typically want to ensure that an NGO is financially stable and has a trustworthy history before they spend Corporate Social Responsibility (CSR) funds.
It is essential for the company to ensure that the chosen NGO partner is financially viable, legally complied, having the necessary expertise, experience, resources to implement the project well and such other parameters.
Significance of NGO Due Diligence-
Due diligence assures the company that their Corporate Social Responsibility (CSR) funds will be utilized effectively and responsibly. This process will ensure that their commitment to social responsibility, in collaboration with a chosen NGO partner, is fulfilled. Furthermore, due diligence will enhance the confidence of both the company and the NGO, in reaffirming that they are progressing in the right direction.
The scope, parameters and length of Due Diligence process depends on company to company, such as the image and reputation of the NGO, its credentials, trustworthiness, experience and the funds requirement and funds deployed by the NGOs and many other factors. Generally, if the funding requirements by NGO is bigger, the Due Diligence process will be lengthy and in depth
Due Diligence should address the basics as follows:
- Does the NGO exist?
- It’s registered under which act and in compliance with applicable act and rules?
- Is NGO financially sound?
- Does NGO is having required experience and skills?
- Does NGO is having necessary capacity & resources to implement the project?
- What sort of assignments they have handled and implemented in the past
There are various ways to find and evaluate the NGOs for successful implementation of the project.
Increases opportunity of NGO to get the funds
Due Diligence is a good opportunity for NGOs to receive the funds, handle new assignments and work more efficiently. Co-operation and transparency during due diligence process can pave way for a long-lasting bond with a Company for regular flow of money as CSR funds
