The Importance of Transparency and Visibility for Nonprofits

Trust is a precious commodity in the nonprofit sector – are you doing all you can to keep it?
Restrictions around the use of government grants continue to rise, and private foundations and corporations are asking organizations for specific measurable outcomes resulting from grant awards. Pressure is continually added by tightening federal regulations. There are talks of a possible requirement to add performance measures to the IRS Form 990, along with the chance of federal funding becoming subject to comply with OMB Circular A-133, thus requiring annual audits.

Compounded with stories of the misuse of funding grabbing headlines, the temperament of the donor community, although positive, is more cautious than in yester years. Not only is being accountable in aspects of your organization’s financial and program management an absolute necessity, but it is imperative now more than ever.

Accountability is not just the responsibility of the CFO or the Executive Director, but of all staff and board members who are involved in the financial management, fundraising, and program planning and implementation. Make sure money raised is being used for the purposes you outlined in your solicitations, and communicate it clearly and often to your donors. This can be as simple as sharing success stories in your donor newsletters or making your annual report available on your Web site, but also as complex as reporting on fulfilling grant restrictions, program outcomes, matching requirements, and the impact or difference made by your organization. At the end of the day, however, tangible proof, such as clear tracking of donor restrictions and funds spent from the finance office, will underscore the organization’s accountability and transparency, and will help to build a case for continuing and future support.

Accountability also means keeping the lines of communication open with your supporters through the good and the bad. During an AFP Meet the Funders workshop, grant-makers and donors expressed the desire for communication—especially when plans go awry. “It’s not an opportunity to take the support away,” said one participant. “It is an opportunity to learn what roadblocks the program or project is facing, and figure out how we can work together to overcome it.”

It is no secret that donors and the grant-making community network and talk. Your actions and communications can reinforce their decision to give to your organization and may help them bring others to the table. On the other hand, your actions and communications, or lack thereof, can create a divide that is hard to overcome. A study published by the Public Agenda found “once an organization became tainted in [donors’] minds, they never gave to that particular organization again.”

Part of being accountable is also to have the right infrastructure in place to assist with the reporting, tracking, and communications. Annual audits are a must, and being able to give auditors, grantors, and stakeholders a clear trail to verify the accuracy of financial statements and donor intention is critical. As you look for ways to satisfy the demands of outcome measurements, be sure that your accounting system not only tracks and reports outcome measurements on financial statements, but that it can also be used to budget outcome measurements for accurate forecasting. In terms of your organization’s effectiveness, information on outcome measurements can be factored into financial data and presented to external and internal constituents, showing a powerful snapshot of your accountability and program performance with the funds you are receiving.

Likewise, keeping donor information in a comprehensive system allows for acknowledgement of donations in a timely manner, storage of communication histories, usage of donor profiling, creation of reminders for following-up, and the personalization of communications with the programs and projects that energize your giving community.

At the end of the day, it’s the people in your organization, who are dedicated to your mission, that use these tools to demonstrate the accountability, transparency, and stewardship needed to keep the organization’s integrity intact—and keep your donors and grantors contributing to your cause.