The preferred implementing partner has completed grant due diligence, and the assessment has identified weaknesses in governance, internal controls and management capacity.
None appears serious enough on its own to disqualify the organisation.
But taken together, are they manageable conditions or reasons not to proceed?
This is one of the more difficult judgements in grant due diligence. Identifying a weakness is one thing; determining what that weakness means for a particular award is another.
Due diligence findings need to be considered in the context of the proposed programme, the responsibilities of the implementing partner and the potential consequences if identified risks are not adequately addressed.
The following five questions can help make that distinction.
1. Does the Finding Directly Affect the Organisation’s Ability to Deliver This Award?
Start with materiality.
In any grant due diligence assessment, the significance of a finding should be considered in relation to the specific award being contemplated.
Consider the size, duration and complexity of the programme, as well as the responsibilities assigned to the implementing partner. A weakness can be genuine without being material to the particular award.
A gap in a policy or process, for example, may require attention without preventing delivery.
A weakness affecting financial management, safeguarding, regulatory compliance or oversight may carry greater significance.
The important consideration is therefore not simply whether a weakness exists, but whether it has a meaningful bearing on the organisation’s ability to deliver the specific award.
A finding that may be acceptable in one funding context could be considerably more significant in another.
This is why grant due diligence findings should always be assessed in context, rather than treated as automatic reasons to approve or reject a prospective partner.
2. Can the Risk Be Reduced Before Funding Is Committed?
If the finding is material, consider whether stronger controls, corrective action, additional evidence or specific pre-award conditions could reduce the exposure.
Any proposed action should be practical, proportionate and capable of being completed within a reasonable timeframe.
This is an important part of grant risk management. A mitigation measure should do more than demonstrate that the issue has been acknowledged. It should provide reasonable confidence that the underlying risk has actually been reduced.
For example, an implementing partner may be required to strengthen a financial control, update a policy, provide additional documentation or introduce a specific oversight mechanism before funding is committed.
The purpose of grant due diligence is not simply to identify weaknesses. It is also to help determine whether those weaknesses can reasonably be addressed.
If the weakness cannot reasonably be addressed before the award, consider whether the remaining exposure can be managed during implementation.
That distinction matters.
Some findings may justify conditions before funding is committed. Others may require continued oversight after the award. And some may indicate that proceeding is not appropriate.
3. Can the Remaining Risk Be Monitored During Implementation?
A commitment from the partner to improve is not enough.
Who will monitor the risk?
What evidence will demonstrate improvement?
How quickly would the funder know if the mitigation were not working?
These questions are central to effective grant due diligence and ongoing risk management.
If the organisation is expected to strengthen a particular control, there should be clarity on what improvement looks like and how it will be demonstrated.
There should also be clarity about who is responsible for monitoring progress and what happens if the expected improvement does not occur.
For funders, monitoring should not become a substitute for proper assessment before an award is made. Rather, it should complement the initial grant due diligence process where residual risks are considered manageable.
If these questions cannot be answered, the mitigation may provide more comfort than control.
4. What Happens If the Mitigation Fails?
Monitoring alone does not make a risk acceptable.
The emerging consequences matter too.
Consider the potential effect on:
- Programme delivery
- Donor funds
- Beneficiaries
- Compliance
- Organisational reputation
- The funder’s reputation
The greater the potential consequence, the less tolerance there should be for uncertainty.
A reasonable mitigation plan may still be insufficient where failure could result in serious financial loss, harm to beneficiaries or significant non-compliance.
This is particularly important where the implementing partner will have substantial responsibility for financial resources, vulnerable beneficiaries, sensitive information or regulatory obligations.
A grant due diligence assessment should therefore consider not only the likelihood of a risk occurring, but also what could happen if the risk materialises.
The question is not simply whether a risk can be monitored.
It is whether the consequences of that risk materialising are acceptable if the mitigation does not work.
5. Would We Still Make This Award If We Had Known About the Finding Earlier?
Finally, test the decision itself.
By the time grant due diligence is completed, considerable time and organisational commitment may already sit behind the preferred partner.
That investment can make reconsidering the decision difficult.
There may already have been discussions with programme teams, negotiations with the partner, internal approvals and expectations around the award.
Would the finding have affected the organisation’s selection if it had been known earlier?
Its significance should not change simply because reconsidering the decision has become inconvenient.
This is an important test of grant award decisions.
Due diligence is intended to inform the decision to fund. It should not simply become a process for documenting concerns after the preferred partner has effectively already been selected.
From Due Diligence Findings to a Funding Decision
The challenge in grant due diligence is rarely identifying that a weakness exists.
The harder question is deciding what the finding means.
Not every weakness should stop an award. Equally, several individually manageable weaknesses may, when considered together, create a level of risk that is no longer reasonable to accept.
This is where due diligence findings need to be translated into a clear funding decision.
A useful assessment considers:
| Question | What it helps determine |
|---|---|
| Does the finding affect delivery? | The materiality of the risk |
| Can the risk be reduced before funding? | Whether pre-award action is possible |
| Can the remaining risk be monitored? | Whether implementation controls are sufficient |
| What happens if mitigation fails? | The potential consequences |
| Would the decision have been different earlier? | Whether the finding should affect the award decision |
This does not necessarily lead to a simple “approve” or “reject” outcome.
Depending on the circumstances, the appropriate response may be to:
- Proceed with the award;
- Proceed subject to specific conditions;
- Require corrective action before funding;
- Strengthen monitoring during implementation;
- Delay the award pending further evidence; or
- Decide not to proceed.
The appropriate response depends on the nature and materiality of the findings, the effectiveness of proposed mitigation and the consequences of the remaining exposure.
Why Grant Due Diligence Matters Before an Award
Effective grant due diligence gives funders an opportunity to examine the risks associated with an implementing partner before resources are committed.
It provides a structured basis for considering governance, financial management, internal controls, management capacity and other areas relevant to the proposed award.
However, due diligence should not be viewed as a checklist where every finding produces the same response.
The purpose is to understand the risk, determine its relevance to the award and establish whether appropriate mitigation is possible.
This allows funding decisions to be based on evidence rather than assumptions, relationships or the momentum of an existing selection process.
Conclusion
Due diligence findings should not automatically stop an award.
But neither should the momentum behind a funding decision make difficult findings easier to dismiss.
The real test is whether the identified risks are material, manageable and capable of being appropriately controlled in the context of the proposed award.
A weakness may be manageable on its own. Several weaknesses together may tell a different story.
For funders and grant-making organisations, the discipline lies in making that distinction carefully: assessing the finding in context, testing the proposed mitigation, considering what happens if it fails, and being willing to reconsider the award where the evidence warrants it.
Ultimately, good grant due diligence is not about finding perfect organisations.
It is about making informed funding decisions with a clear understanding of the risks involved—and being prepared to act when those risks cannot reasonably be managed.
For organisations involved in grant-making, implementing partnerships and development programmes, a strong grant due diligence process can help ensure that funding decisions are proportionate, evidence-based and aligned with responsible risk management.
Written by Ep Martins Advisory
