Guidance

Due diligence and civil society organisations

Our pre-grant due diligence procedures aim to ensure value for money by identifying potential risks and capacity-building opportunities.

Documents

Details

We contracted KPMG in February 2011 to conduct pre-grant due diligence on all civil society organisations (CSOs) selected to receive funding through the Global Poverty Action Fund, Civil Society Challenge Fund and Programme Partnership Arrangements.

Areas assessed include, but are not restricted to:

  • governance
  • finance
  • capacity within the partner CSOs to manage the proposed project

Pre-grant due diligence helps to reduce the risk of diverted funding and establishes an environment of accountability and transparency. Due diligence is important to enable FCDO to make an informed decision on whether to award funding.

These pre-grant due diligence procedures aim to ensure value for money by identifying potential risks and capacity-building opportunities around governance, management and capacity within the partner CSOs. Pre-grant due diligence helps to reduce the risk of diverted funding and establishes an environment of accountability and transparency.

The pre-grant due diligence assesses capacity to manage the proposed level of FCDO support. Pre-grant due diligence guidance will be provided by KPMG in advance of site visits.

Governance

The focus on governance considers how the CSO is administered, its risk management processes and its ability to comply with legislation such as the Bribery Act 2010. Primary policies and procedures are also assessed, including those covering child protection, environmental risk management and conflict of interests.

Financial capacity

The financial focus includes assessing the financial position and stability of the organisation and its ability to effectively and efficiently manage the proposed level of support.

Operational capacity

The operational capacity considers whether the organisation has the resources and systems in place to deliver the proposed outcomes.

Value for money and results

In addition, the due diligence process assesses the organisation’s approach to value for money and its ability to measure and report the results of FCDO’s grant.

Due diligence is required before any money can be disbursed. Organisations need to be prepared for the process within a month of being told that their application is successful. The due diligence site visit typically takes approximately 2 days.

Due diligence is an important part of FCDO’s commitment to demonstrating accountability and transparency in the development sector and ensuring the effective use of public funds. FCDO uses the findings from these due diligence processes primarily to assess the capacity of CSOs to effectively manage provisionally awarded grants. The reports also help to identify areas of good practice and potential risks that may require specific provisions to be built into FCDOs grant agreements or memorandums of understanding with an organisation.

KPMG has conducted over 150 pre-grant due diligence assessments on our behalf since February 2011, providing an important opportunity to learn from Good practice. It also looks at ways organisations are addressing the challenges they face. FCDO’s assessment is that this process is generating some important lessons for individual organisations, as well as for FCDOs work with CSOs.

Published 21 March 2013