Grassroots organizations - such as community groups, emerging NGOs and social movements - play a critical role in reaching communities that are underserved, marginalized, or excluded from formal systems. Their proximity to lived realities, trust within communities, and ability to respond quickly to local needs frequently make them indispensable actors in social change.

At the same time, many of these organizations often operate with limited formal structures. It is not uncommon for grassroots groups to lack legal registration, independent bank accounts, formal boards of directors, or documented policies—elements that typically form the baseline of standard due-diligence frameworks used by foundations and wealth managers.

This creates a structural tension: the organizations closest to the problem are often those least able to meet conventional institutional requirements.

From a due-diligence perspective, the absence of formal structures does not necessarily indicate poor governance or misuse of funds. More often, it reflects barriers related to scale, resources, legal environments, or the historical exclusion of grassroots actors from formal funding systems.

However, these gaps do introduce real and legitimate risks, including:

For advisors and intermediaries, these risks also translate into fiduciary, reputational, and regulatory considerations that cannot be ignored. But while ignoring these risks is not responsible, applying conventional due-diligence standards without adaptation is often ineffective.

A frequently recommended solution is for grassroots groups to partner with a more established organization that already meets institutional requirements. In many cases, this arrangement—often referred to as fiscal sponsorship or intermediary funding—can be appropriate and effective.

Such partnerships can provide legal and financial accountability, reduce compliance risks for donors, enable grassroots groups to access funding they would otherwise be excluded from. However, this model is not without limitations. Poorly designed partnerships can dilute grassroots autonomy, create dependency, or introduce power imbalances that undermine the very community leadership that makes these organizations effective.

Rather than treating grassroots organizations as “non-compliant,” due diligence should adapt to assess different forms of legitimacy and capacity.

Key considerations include:

Due diligence in this context becomes less about documentation and more about informed judgment, triangulation, and contextual understanding.

Advisory practice benefits from moving beyond a binary choice between “fund” and “do not fund.” Instead, wealth managers and philanthropic advisors can consider graduated approaches, such as:

These approaches allow donors to support grassroots impact responsibly without forcing premature institutionalization. In practice, many of the most effective grassroots funding strategies are neither fully informal nor fully institutional.

Grassroots organizations are often essential to achieving meaningful and equitable impact. The challenge for wealth managers and philanthropic advisors is not to lower standards, but to apply them intelligently and proportionately.