This is called due diligence research and it’s essential to protecting the reputation of the nonprofit. What the organization is doing is ensuring that there are no legal reasons why the gift may be contested or clawed back later. Or worse.
A nonprofit’s reputation is obviously important – if an organization becomes allied with …a despot, say, it risks years of damage and decreased support of every kind. They become that scarlet-lettered nonprofit that everyone remembers for being the de facto money-launderer for the drug ring. Not too many volunteer and trustee types (or donors)(or talented employees) want to be affiliated with that kind of organization.
Most organizations in the UK and Europe have a policy to do due diligence research at a relatively modest level (at least by major donor giving progam standards). The amount under consideration can be as low as £1,000 or €1,000.
Of course, we do due diligence research on this side of the Atlantic, too, but we are more likely to back into it. By that I mean that we’re not usually specifically looking for negative information to see if we want to be allied with a donor from the get-go. Many times the person or company or foundation has already been a donor at a certain level for many years, but now is interested in making a very large or transformational gift of some sort.
Sometimes the news just falls in our lap in the course of our usual prospect research. Like the time I discovered…well, never mind. Suffice it to say it was a yikes-bullet-dodged moment and the organization I worked for decided to let that relationship gently fade away into the night.
But let’s say you do need to do reputational research on a prospective donor. Where are the best places for you to go?
Some organizations decide to hire an outside firm that specializes in due diligence research. It can be expensive, but of course the avoidance of reputational damage is frequently worth the money.
Others ask their prospect research department (or HBG) to take a first crack at it to see if any immediate red flags appear. They can then decide how to move forward if worrisome details start to emerge, by either running the request up the flag to a due diligence firm or by deciding not to ask for the donation to begin with.
If you want to tackle the due diligence research yourself, here is a list of a few of our team’s favorite sources:
- Better Business Bureau
- Business press (Crain’s, American City Business Journals,)
- Datocapital – a database of 12.5 million directors of privately-held companies in 8 European countries
- ICIJ offshore database
- Lexis Nexis – there’s a specific area in LNDP just for this.
- Opensecrets.org – Donor database, nonprofit database
- Secretary of State’s business lookup database in the state a company is registered (MA provided here as an example)
- Social media – Twitter, Facebook, LinkedIn, Instagram, etc. (we use Mention.com to monitor these)
You’ll find tons more resources on our HBG Research Links page. What are some of your favorite sources for due diligence research?