Why is due diligence important in philanthropy as well?

Have you ever considered how charitable organizations use your donations? Through your act of kindness, you expect your money to be put into good hands, and to be able to reach those in need. However, out of the numerous charitable organizations, some are not transparent enough with their use of donation funds.

Before investing in a company, you would evaluate and examine until you are satisfied with the return on investment, the same should be done with social investments. No one wants their money flushed down the drain, we want to make sure that our social dollar can be multiplied and have optimal impact.

These wise words from our Managing Director, Bobby Tse, perfectly explains the need for us to do our due diligence towards our potential partners. At Sowers Exchange, we believe in the importance of vetting small to medium-sized social purpose organizations (SPOs) before we begin our partnership. Only be ensuring partnering SPOs hold the same values with Sowers Exchange we will be able to add value to our corporate clients and individual donors through projects that help achieve targeted environmental and social goals.

We evaluate each and every one of our SPOs according to 6 standards:

  1. Public Benefit Goals. To partner with us, the SPO should share common goals with us. They must also have a clear and consistent missions which is compatible with our visions and values.
  2. Experience and Capabilities. The SPO must have a well assessed social development plan to reflect its mission statement. Their track record and past social investment projects should have successfully implemented change in the communities. The SPO should also have a clear measurement model to assess their previous projects’ impact towards the communities. To enrich employees and volunteers’ knowledge and capabilities, regular training should be provide to them by the SPO as well.
  3. Measurement of Effectiveness. SPOs partnering with us must have relevant impact metrics to measure the effectiveness and performance of its projects. These impact records and progress reports should be shared with us as well as our corporate clients and individual donors. The SPO should also have a feedback mechanism to allow adjustments towards constant improvements.
  4. Financial Reporting and Responsibility. Audited financial statements must be provided to us and other partners by the SPO. For relevant projects, the SPO must also provide a copy of its budget and update us on a regular basis of its status of each project.
  5. Governance and Accountability. The SPO’s Board of Directors should have a minimum of 4 members to ensure sufficient accountability. To minimize conflict of interest, the SPO must have at least half of the Board of Directors as independent and not receive compensation. We will conduct on-site due diligence either at the inception or through the course of the partnership.
  6. Strategy and Future Plans. The SPO should have a clear strategy to achieve their mid-term and long-term plans on area of focus, challenges, sustainability etc. The SPO should also be able to identify potential risks and have clear strategies to mitigate them.

Only by making sure our SPOs abide to the 6 standards, can we ensure our services add value to our corporate clients and individual donors. Instead of blindly investing your money into charities without knowing where they going, we strongly advise you to wisely use your social dollar on accountable charities that will help you reach out to those in need.