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The State of Nonprofit Transparency, 2008

When you think of GuideStar, what words come to mind? "Form 990"? "Database"? "Nonprofit information"? "Fabulous newsletter"?

Although all of those terms are appropriate (well, the first three certainly are), there's another that we hope occurs to you first: "Transparency."

GuideStar was founded to promote nonprofit transparency, to provide a central repository of nonprofit information that donors could use to guide their giving decisions. Although both our audience and the ways in which we deliver nonprofit information have expanded over the years, our belief in the importance of transparency has never wavered. In fact, transparency holds a key place in our mission statement: "To revolutionize philanthropy and nonprofit practice by providing information that advances transparency, enables users to make better decisions, and encourages charitable giving" (emphasis added).

That is why we are proud to announce the publication of The State of Nonprofit Transparency, 2008: Voluntary Disclosure Practices, the first-ever systematic review of the information nonprofits make available to the public on the Internet. We focused on disclosure via the Net because we believe it is the fundamental tool for achieving greater nonprofit transparency.

Findings and Recommendations

Last summer, four undergraduate interns combed more than 1,800 nonprofit Web sites for the organizations' annual reports, letters of determination, audited financial statements, and other sources of information about the nonprofits' leadership, activities, and finances. Their efforts revealed good news and bad news about the state of nonprofit transparency.

First, the good news: 93 percent of the nonprofits surveyed have embraced the Internet to disclose information about their programs and services.

Now the bad news: Only 43 percent posted their annual reports. A much smaller proportion (13 percent) posted their audited financial statements, and a miniscule number (3 percent) posted their letters of determination.

These findings led us to formulate five recommendations for increasing transparency in the sector. Although they are simple steps, we believe that they will greatly advance nonprofit transparency.

  1. Nonprofits should regularly update their Web sites with current, detailed program and evaluation information.
  2. In addition to posting board members' and key staff's names and titles, nonprofits should post brief biographic information for these important leaders.
  3. Every nonprofit that produces an annual report should post the report on its Web site.
  4. Every nonprofit that has an audited financial statement should post it on its Web site.
  5. Every nonprofit that has an IRS letter of determination should post it on its Web site.

Taking Transparency to the Next Level

We invite nonprofits to join us in taking transparency to the next level by becoming members of the GuideStar Star Exchange. All tax-exempt organizations registered with the IRS are eligible to participate in the Exchange, and there is no charge for Exchange membership.

Learn more about the GuideStar Exchange

The Future of Nonprofit Transparency

This summer, a new group of interns will repeat this research, and this time next year, we will release The State of Nonprofit Transparency, 2009. Our hope is that over the years, this report will inspire greater sharing of nonprofit information. We believe that making relevant and timely information available is essential to building and maintaining the public's trust in the sector.

Suzanne E. Coffman, April 2009
© 2009, GuideStar USA, Inc.

Suzanne Coffman is GuideStar's director of communications and editor of the Newsletter.
Topics: Nonprofit Leadership and Practice Finance