WE have a problem

Mark PetersenDue Diligence

Do you conduct due diligence on the charities you support? Recent news has reported on a spectacular failure that has put a celebrated charity on the front pages of Canadian papers. The federal government was prepared to invest over $900 million into WE Charity based in Toronto, but the deal fell apart. As I’ve read the astonishing reports (here and here) and as parliamentary committees unravel this mess, I can’t help but wonder what other givers can learn from this experience? And what happened to the discipline of due diligence by givers, in this case, by the government? With proper due diligence, the program would have never been contemplated.

Here are some questions that, if they had been asked, should have raised some red flags:

  1. When was the last transition on your board of directors, and why?
  2. Why do your most recent audited financial statements describe a breach of bank covenants? What has led to this situation and how do you plan to address it?
  3. Why have charitable funds from the public been channeled into a privately-held social enterprise?
  4. What is the relationship and accountability between the various entities under the charity umbrella?
  5. Who is your auditor and what experience do they have in performing charity audits?
  6. Are contributions to the charity in cash, or a mix of cash, volunteer hours, and goods?

Major donors have a responsibility to give well, and that includes undertaking basic due diligence of the charities they support before they give. Stronger Philanthropy offers due diligence as an optional service to our clients. Before you give, confirm that your donations will end up being used well by an organization that you can fully trust.