How to Vet Overseas Partners, A Due Diligence Checklist for Charities

Here's a scenario that plays out too often. An Australian charity finds a promising partner, sends them funding, and hopes for the best. Months later, they discover the funds weren't used as intended, or worse, they can't show the ACNC where the money went at all.

This "set and forget" approach doesn't just put your charitable purpose at risk. It fails to meet the ACNC's External Conduct Standards, which require reasonable oversight of overseas activities, including work delivered through partners.

Effective due diligence isn't about bureaucracy. It is about building genuine partnerships where both sides understand what is expected and can show it is working.

What "reasonable" means here

The ACNC does not expect a charity with two staff to run the same due diligence as a large international NGO. It expects a proportionate process. Written agreements that set out how funds will be used, ongoing monitoring to check funds are spent as intended, and documentation of all of it.

Before you partner, work through this

Legal status. Is the organisation legally registered where it operates, and can they show you the paperwork? Unregistered or informal groups can still be legitimate partners, they just need closer oversight.

Track record. How long have they operated, what is their reputation locally, and can they give you references from other funders? Past performance is the best available signal of future reliability.

Financial capability. Do they have a bank account in the organisation's name, basic budgeting and accounting systems, and separation between who approves and who pays? A partner who cannot manage their own finances will not manage yours well either.

Governance. Who makes decisions, is there a board with real oversight, and are there undisclosed conflicts of interest, family members in multiple key roles, for example?

Operational capacity. Do they have the staff, expertise and infrastructure to actually deliver what you are funding, and can they report on it?

Safeguarding. Do they have a child protection or safeguarding policy, background checks for staff working with vulnerable people, and a complaints channel beneficiaries can actually use? ECS Standard 4 requires you to extend this protection through your partners, not just your own staff.

Sanctions. Check key individuals against the DFAT Consolidated Sanctions List, and consider whether the organisation operates in an area controlled by sanctioned entities.

Put it in writing

Once you have decided to proceed, a written agreement does not need to be a complex legal contract, a clear memorandum of understanding usually covers it. Set out the purpose and scope of the funding, the payment schedule and currency, what reports you need and how often, what funds can and cannot be spent on, your compliance expectations (safeguarding, anti-fraud, Australian law), how you will monitor and verify activities, and how either side can exit the arrangement.

Given ECS Standard 4, specifically address the partner's safeguarding commitments and your right to terminate if there is a failure.

Keep monitoring after you sign

Due diligence does not end at the signature. ECS Standard 2 requires ongoing monitoring, financial and narrative reports (monthly for new partners, quarterly once established), spot checks that receipts match what was reported, and a site visit when it is practical and worth the cost. Regular contact also builds the relationship, not just the compliance file, so you catch problems early and understand the context that shapes delivery.

Watch for these

A partner who cannot produce receipts, has unexplained budget variances, or resists financial reporting is a financial red flag. One person making every decision, family members in multiple roles, or resistance to audit is a governance red flag. Repeated delays, reports that do not match other information, or refusing site visits is an operational red flag. No safeguarding policy, resistance to staff screening, or unfollowed beneficiary complaints is a safeguarding red flag.

If something goes wrong

For minor issues like a late report, raise it, understand the cause, and agree a fix with a timeline. For bigger concerns, unexplained spending or governance failures, request a formal explanation, consider withholding further payments, and get independent advice if needed. For serious misconduct, fraud, safeguarding failures or terrorism links, stop funding immediately, preserve everything, get legal advice, and report to the ACNC if required.

Where to go for help

See the ACNC's governance toolkit on working with partners directly.

Building a due diligence process that is proportionate to your size, not copied from an NGO ten times your budget, is exactly the kind of thing we help with. Explore our services or get in touch.