For most grantmaking by funders in the United States, very little is legally required in terms of due diligence. There is no required paperwork, no process that must be followed, and no post-grant reporting required to make a grant to most domestic public charities.
Most organizations that file a 990 or 990EZ are 501(c)(3) organizations, with a 509(a)(1) or (a)(2) designation. For these organizations, a grantmaker could simply sit down with a checkbook, pen, envelopes, and stamps and be in perfect compliance with the tax code.
For these organizations—ones with 501(c)(3) status, and a 509(a)(1) or (a)(2) designation, all you need to do is verify that they do indeed have this status currently. This is best done by checking their status online, using the IRS Exempt Organization’s Select Check or GuideStar Charity Check (Exponent Philanthropy members are eligible for a GuideStar Charity Check discount). Once you record the status and the date you verified it, you could write your check—with no other paperwork!
For organizations that do not have the above status, additional levels of due diligence are required to verify tax status. Exponent Philanthropy members can see the following tear sheets for instructions: It’s Not Enough to Know Your Grantee is a 501(c)(3) and Supporting Organizations.
Of course, you may want other information about potential grantees. But the point is that the law requires very little. The key question to ask yourself is, “What do I truly need to make a grant decision?” Consider requiring only that information, and nothing else. You can reduce the paperwork burden on grantees, and increase your “net grants.”