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Paper-Thin Transparency: March Question of the Month Results


The March Question of the Month asked Newsletter readers, "What documents does your organization use to demonstrate accountability and transparency to your donors and funders?" Transparency and accountability are crucial components for any nonprofit wanting to demonstrate its commitment to honest and responsible philanthropy.

Describing philanthropy that way must sound redundant. Honesty and responsibility are at the heart of all good philanthropic work. They are also, however, qualities that must be easily confirmed by those who generously donate their time and money to nonprofits.

This is where accountability and transparency come in. When an organization makes the effort to document its operations clearly and does so effectively and verifiably, it shows that it is fulfilling its half of the social contract—the good works half, for which it receives tax exemption.

There are a variety of documents and methods to help organizations demonstrate transparency and accountability. Figuring out the most effective—and most feasible—can vary from nonprofit to nonprofit, depending on each organization's structure and situation. In being transparent, a nonprofit helps to ensure that it will maintain accountability, as the details of its operations will be free and open for all to inspect.

As our survey participants told us, GuideStar Newsletter readers often use a combination of documents in their efforts towards achieving accountability and transparency.

What Readers Use to Demonstrate Accountability and Transparency

(Participants could choose more than one answer)
Annual audited financials

85%
Annual report 69%
Letter of determination or advance ruling 58%
Written conflict of interest policy 23%
Written document retention/destruction policy 15%
Written whistleblower policy 12%
Other 12%


Over 40 percent of survey participants said they use at least three documents.

We all know what it means to be held accountable, but with all of this talk of transparency, people might be confused as to just what the word means and just how important it is.

What Is Transparency?

At GuideStar, we think transparency means answering these questions for donors and funders:

  1. Is this a legitimate 501(c)(3) nonprofit?
  2. What social impact will my donation have?
  3. How fiscally responsible is this organization?
  4. What are this organization's goals and intentions?
Effective means that address these questions are to state publicly, clearly, and concisely your mission, annual accomplishments, ways you measure success, and goals. It is also vital to make readily available federally required public disclosure documents (for more information on what those documents are, click here) and to check your state's laws, which may include additional requirements (for a list of state charity offices, click here). GuideStar offers nonprofits a platform to demonstrate their transparency by updating the GuideStar Information Form and by uploading PDFs of required and substantiating documents to their GuideStar report.

From there, it's up to each individual nonprofit to weigh its options carefully and then determine the most efficient and effective approach to demonstrating accountability and transparency.

Why Are Accountability and Transparency So Important?

Although transparency is just one component of the social contract between nonprofit organizations and donors and funders, it is the foundation for the bond between them. It establishes the trust that is so essential to the relationship and shows everyone that the only agenda at work are the great philanthropic ideals that are at the heart of the nonprofit sector.

Transparency isn't just an expectation externally imposed upon organizations by a sometimes skeptical public. Its implementation can actually serve organizations themselves, as Karen Clark of H.E.L.P Animals, Inc. pointed out: "People like to see the actual bank statement. This openness that we have benefits our group. People like to see cash deposited from our donation jars, special events, yard sales and low cost pet shot clinics. All bills and reimbursements are paid by check; therefore we have an accurate paper trail."

Indeed, the more we know about both others and ourselves, the better we work, the better we feel about that work, and the better that work is.

Christopher Trent Kaplan, April 2007
© 2007, Philanthropic Research, Inc. (GuideStar)

Chris Kaplan is an undergraduate at the College of William and Mary and a communications/marketing intern at GuideStar.
Topics: Nonprofit Leadership and Practice
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