Cultivating a Culture of Accountability and Transparency

How Can a Nonprofit Cultivate a Culture of Transparency and Accountability?

Accountability and transparency can be demonstrated by a variety practices, including:

• Being honest in solicitation materials and truthful and clear in communications with donors about how their gifts will be or have been used; (Read about accountability practices in fundraising.)
• Being transparent about who is accountable for the nonprofit’s expenditures; adopting expense policies, such as a travel expense reimbursement policy, requiring prior approval and limiting expenditures to what is reasonable and necessary;
• Posting financial information about the nonprofit on the nonprofit's website;
• Having a conflict of interest policy that all board and staff are aware of and review regularly;
• Adopting an executive compensation policy to ensure that the full board is aware of and approves the compensation of the executive director/CEO;
• Publishing financial information on a nonprofit’s website, such as a copy of the organization’s application for tax-exemption, IRS Form 990, audited financial statements and annual reports, as applicable;
• Ensuring the regular review by the board of current financial statements;
• Adopting internal controls, to ensure accountability;
• Responding appropriately to requests for copies of financial reports, as required by the IRS.
  • Read more about the requirement to share copies of certain documents with the public when asked. This is referred to as the “public disclosure” requirement.
  • Use an on-line tutorial from the IRS to teach your board or staff about the IRS public disclosure regulations
  • FAQs about IRS public disclosure requirements

Other important aspects of creating a culture of transparency and accountability include adopting an internal complaint procedure for staff and volunteers, a whistleblower policy and a retention and destruction schedule for documents, including email messages, in accordance with state laws for whistleblower protection and document retention.

Read about other governance policies.

More Resources on Nonprofit Accountability and Transparency

• What are the ‘best practices’ for transparency? Read the practices and principles developed by 14 State Associations for the nonprofits in their states.
  • The principles for accountability and transparency developed by the Minnesota Council of Nonprofits are very helpful when considering the role that transparency plays in the relationships between nonprofits and their stakeholders.
• Learn more about what documents a nonprofit must make available to the public.
• Finding the Right Transparency posted in the Nonprofit Law Blog goes beyond legal requirements and explores ideas for using social media and the internet as transparency tools, and also shares several other helpful resources on transparency.
• Read a report from Guidestar that describes how nonprofits engage in transparent practices via their websites.
• Review this memo for guidance on public disclosure and a sample public disclosure policy from the Public Counsel Law Center.

Transparency for foundations:

• Learn about Glasspockets.org, a project of the Foundation Center, launched in early 2010, to encourage transparency in foundation operations in the digital age.