For families who give generously, choosing where to direct charitable dollars can involve more than identifying a compelling cause. Philanthropy is an investment in an organization’s ability to create change, and responsible giving requires understanding what that investment is likely to support. Due diligence provides a framework for making those decisions with greater clarity.
Meaningful due diligence combines financial information with an understanding of leadership, organizational effectiveness, community relationships, and the fit between a nonprofit’s approach and a family’s philanthropic priorities.
Looking Beyond the Balance Sheet
Financial health is an important starting point, but due diligence encompasses more factors. Families evaluating a potential nonprofit partner can examine several years of revenue and expenses to identify meaningful trends. It’s crucial to look at an organization’s financial information over multiple years rather than relying on a single snapshot.
Revenue sources deserve particular attention. An organization that depends heavily on one grant or funding stream may face a different set of risks from one with more diversified support. Families may also want to understand whether the organization maintains adequate reserves and whether its current financial position supports the programs it hopes to sustain.
Context matters, too. A deficit does not necessarily indicate poor management, just as a large reserve does not automatically demonstrate organizational strength. The Center for Effective Philanthropy’s 2026 research found that 66 percent of nonprofit CEOs surveyed had concerns about their organization’s financial stability, while 39 percent reported that their organizations had operated at a deficit in the previous fiscal year. Current financial pressures therefore need to be considered alongside the broader environment in which a nonprofit operates.
For philanthropists such as Charles Nabit, who has supported charitable efforts through the Nabit Family Foundation, this broader perspective can help distinguish between short-term financial pressures and deeper concerns about an organization’s sustainability.
Evaluating Leadership and Governance
Financial statements cannot reveal everything about an organization. Leadership and governance can have an equally significant influence on whether a nonprofit can carry out its mission effectively.
Families conducting due diligence can review the experience of senior leaders, the composition and engagement of the board, and whether the organization has appropriate systems for oversight. Conversations with nonprofit leaders can be particularly informative. Rather than simply asking whether an organization is successful, donors can ask how it defines success, what challenges it has encountered, and what it has changed in response.
The quality of those conversations can reveal something important: whether an organization is willing to acknowledge uncertainty and learn from experience. Strong organizations may not have an answer for every challenge, but they should be able to explain how they make decisions and evaluate their work.
Asking How Impact Is Defined
Impact is another area where due diligence requires more than checking a box. A nonprofit may report the number of people served or programs delivered, but those figures do not necessarily demonstrate meaningful outcomes.
Families can ask how an organization connects its activities to the changes it hopes to create. What evidence does it collect? How does it know whether its approach is working? Does it adjust its strategy when the evidence suggests something needs to change?
A better way to conduct an organizational assessment is to identify specific outcomes, rather than relying only on broad mission statements. For donors, this can provide a more useful picture of how a prospective gift could contribute to the organization’s work.
Listening to the Community
Perhaps the most overlooked part of philanthropic due diligence is understanding the relationship between an organization and the people it serves.
A nonprofit can have strong finances and impressive credentials while still misunderstanding the needs of its community. Families may therefore want to learn how an organization gathers feedback from the people affected by its programs and how that feedback influences decisions.
This is particularly important for donors who are not personally familiar with the issue or community they hope to support. Effective philanthropy requires humility as well as analysis. The people closest to a problem may have insights that do not appear in financial reports or annual reports.
Considering Mission and Approach
Finally, due diligence should answer a question that no rating system can answer for a family: Is this organization the right fit for what we are trying to accomplish?
Two nonprofits may address the same issue while using very different strategies. One family might prioritize direct services, while another may place greater emphasis on research, advocacy, or long-term systems change. Neither approach is inherently appropriate for every donor.
A family can clarify its own objectives before evaluating potential partners, then examine whether an organization’s strategy, geographic focus, and intended outcomes align with those objectives. This kind of alignment can be especially relevant for families such as Charles Nabit’s and the Nabit Family Foundation, where charitable giving can reflect interests that extend across multiple areas of community need.
Making Due Diligence Part of the Relationship
Thoughtful due diligence gives families a clearer understanding of where their resources are going and creates a foundation for productive conversations with nonprofit leaders. It can also help donors recognize when an organization needs flexibility rather than additional oversight.
Social problems are complex, and charitable investments inevitably involve some degree of risk. Good due diligence helps families understand that risk, ask better questions, and make decisions that reflect both their philanthropic goals and the realities facing the organizations and communities they hope to support.