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Due Diligence: Greater Effectiveness & More Success

The Opportunity - and the Challenge:

• A foundation wanted to refine and strengthen its due diligence process to ensure that its program and grants administration staff clearly understood their roles and responsibilities.
• The foundation found that many existing "off the shelf" resources for financial due diligence presented exhaustive checklists of limited use.
• It wanted to begin with strengthening its financial due diligence, an area where the program staff wanted the most help.

"As an institution we needed to communicate clearly what is expected of our program staff in this important role."

- Chief Executive Officer

The Expertise - KrasnePlows:

• Tested several financial indicators, using publicly available data from a cross-section of the foundation's grantees, and determined that using two indicators in combination were good predictors of financial health;
• Developed a three-tier rating system that distinguished financially healthy organizations from those of concern or in serious trouble, and prepared follow-up questions to assess the weaker organizations in greater depth;
• Drew on internal and outside experts’ experiences to identify key programmatic and leadership strength indicators, coupled again with the three-tier rating system;
• Clarified leadership, program, and grants management' due diligence roles and responsibilities, including action steps for weak organization's grant;
• Trained staff in the due diligence process and created a user-friendly, web-based due diligence manual.

"KrasnePlows kept asking us how the answer to this or that question affected whether we would give the grant. If it didn’t change our decision, we dropped the question."

- Chief Operating Officer

The Result:

• A resource efficient due diligence process that used:
• An enterprise-wide assessment of the three key factors in grantee success - program, money, and leadership;
• A short list of targeted indicators of grantee health; and
• A three-tiered rating system to easily differentiate among weak and healthy grantees.
• Program staff with the skills and confidence to focus on the risks that would affect their grant-making decision and how to increase a grantee's success; and
• Ongoing discussions among leadership and staff across program areas that further enriched people’s understanding and have become a part of the foundations' culture.

"The biggest benefit for us was the shift to looking at the grantee as an enterprise. Before we were concerned about getting the grantee through our due diligence process. Now, we focus on the grantee and what it needs to be successful."

- Chief Executive Officer

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