What does it take to be even more transparent?
Unless you’ve been on an island enjoying a media-free summer holiday for several months, you’ve heard lots of stories in the press about leaks of confidential information and the balance between national security and an open society. Unfortunately you may also have seen several articles about charitable nonprofits that are not open or transparent with information about their finances.
Rather than call for yet more layers of regulations, we approach the transparency mandate from the perspective of shining the light on existing legal requirements and proven voluntary practices. Our approach is to ask: “What will it take to build the capacity of the charitable nonprofit community to be even more mindful of the need for transparency?” We need your help. Whether you are a board member, staff member, or funder of a charitable nonprofit, we urge you to be an ambassador for transparency.
Many people don’t realize that tax-exempt charitable nonprofits are already among the most transparent “business” operations in our country. Consider, for instance, the detailed financial disclosures in the IRS Form 990 that are freely available through GuideStar, plus all of the various state charitable registration and annual corporate forms that are available for public inspection. Piled on top are the charitable nonprofit community’s additional efforts to earn and keep their donors’ trust and respect. So there is a generous amount of information available to the public about individual charitable nonprofits.
Still, nonprofit board and staff members need to poke ourselves from time to time to make sure that our charitable nonprofit is operating in the open, with “glass pockets.” The theme of transparency is a dominant one in all the “principles and practices” and Standards for Excellence© promoted by state associations of nonprofits around the country. Importantly, these principles stress that transparency goes deeper than the disclosure of financial reports, or state filings that are required by law.
Transparency is not only about “glass pockets” but also about accurate, truthful, and accessible information that is shared with the public. As explained by the Minnesota Council of Nonprofits: “Nonprofits have an ethical obligation to their constituents and the public to conduct their activities with accountability and transparency. Nonprofits should regularly and openly convey information to the public about their mission, activities, accomplishments and decision-making processes. Information from a nonprofit organization should be easily accessible to the public and should create external visibility, public understanding and trust in the organization.” We’re going to be on the lookout for stellar examples of transparency in the charitable nonprofit community. We’d love to shine the light on your nonprofit! Please tell us your story.
Trust and respect – How can we help our donors keep the faith?
Guest author: Mazarine Treyz, author of The Wild Woman's Guide to Fundraising
Nonprofit donors are such cynical creatures these days. Give them just one nonprofit scandal and they're ready to tar the whole sector with that brush! Even my own grandmother says, “All nonprofits are scams!” What's a nonprofit professional to do?
Why do donors believe one scandal is indicative of the entire sector?
In two words, confirmation bias. What is confirmation bias? It is the simple concept that you have a theory and you look information to make that theory true. Information counter to that theory is discarded.
Belief is powerful. You believe most nonprofits are scams, so you seek out stories of nonprofit scams, discounting the hundreds of thousands of nonprofits that are NOT scams.
What can you do to counter this skepticism? How can you help your donors keep the faith? The worst thing to do is keep silent. Here's how you should respond.
Juice up your financial transparency. How?
- Use a pie chart or an infographic to illustrate where the money goes, and include it at the bottom of your website, and on each ‘thank you’ note to donors.
- Under the “About Us” section on your website, have a page titled, “Where does the money go?” with 990s, your annual reports, and audited financials, and enough detail to satisfy even the fussiest accountant. This would be a good place to link to your Annual Report, if you have one, or your “impact report” if you call it that.
Use the phone
- Call your complainer donors. That's right. You heard me. Actually pick up the phone and ask people why they are upset, and how you can make it better. I know the prospect of talking to people like this is enough to send us running to bed to put the pillows over our heads, but think about this. They wouldn't complain if they didn't care.
- Have a quarterly conference call for your enewsletter subscribers, donors, and funders, like Givewell.org does. Put the recordings of this call, and transcripts on your website as well, for everyone to see. This will allow people to have the chance to ask you questions, live and in person. It takes away some of the “faceless nonprofit” they would otherwise know.
Talk about your mistakes on your website.
- Givewell.org does this very well. They even have a section of their website navigation devoted to their mistakes. That is how committed they are to transparency. They know that if they admit their mistakes, people will believe that they are confident, smart and truly transparent. After all, mistakes are how we learn.
- Create an FAQ. How? Survey your detractors and skeptics. Find out exactly what the myths about your nonprofit or its mission are. If they have fears or concerns about your nonprofit, add your measured responses to these concerns in an FAQ about your organization. They are probably saying what many other people are only thinking, and this is your opportunity to nip the rumor in the bud, before it becomes a full grown invasive, and takes over your back garden! (Blackberries, I'm looking at you!)
Ultimately, it's our responsibility to be better communicators, with our donors, staff, and the whole community. Take the crisis of a scandal and turn it into an opportunity to communicate and be even more transparent. You'll be pleasantly surprised at the results!
If you've enjoyed this article, run over to http://wildwomanfundraising.com/free-stuff/tips and get a free e-book, 50 Ways to Grow Your Donor's Love For Your Nonprofit, and get a free 10 page pdf download of tips for you to strengthen your donor communications and create a tighter connection with your supporters.
Give some love to your IRS Form 990
“We love our Form 990!” Would any nonprofit organization ever make that statement? Loving it might be a lot to ask. We at least need to get to the point where we can say, “Our Form 990 represents our nonprofit very well, and we are proud of its contents.” In a guest column for the GuideStar blog, Tish Mogan, Pennsylvania Association of Nonprofit Organizations, weighs in on how the IRS Form 990 is a communications tool that nonprofits can use to promote their own transparency.
What is the board’s role in promoting transparency?
Our friends at BoardSource have identified 5 concrete ways that board members contribute to a transparent culture at a nonprofit. One is to adopt a whistleblower policy. If your nonprofit hasn’t adopted one yet, your State Association may have a sample to share with you, or you can find whistleblower policy guidance, as well as sample policies, on the Council of Nonprofits’ website. Five things your board can do to lead with accountability and transparency.
How transparent do laws require charitable nonprofits to be?
Internal Revenue Service regulations require tax-exempt organizations to file a Form 990 return each year and also to make that return available to the public on request. (The same regulations also require disclosure of the organization’s application for tax-exemption and impose penalties when nonprofits do not comply.) The rules are explained in an interactive tutorial that explains the “public disclosure” requirements. Why not share the tutorial with staff and board members during on-boarding orientations? (For instance, some may not know that the law does not require a charitable nonprofit to disclose its list of donors. Why? Because charitable nonprofits should respect those donors’ desires to remain anonymous.)
For more details about what charitable nonprofits must disclose, to whom, and how, IRS guidance answers frequently asked questions.