4 Ways to Let the Sunshine In

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For some people, that headline might evoke the late 60’s musical Hair or a more recent comedy starring Steve Carell. Others might associate it with the old adage about how to ensure good government: “Sunshine is said to be the best of disinfectants.” But for us all, the summer is a good time to review how open and transparent our nonprofits are for the public to see. Transparency is already a hallmark of the nonprofit community, but are you doing all you can? Let’s explore.

1. Follow federal law

Charitable nonprofits already make a wide variety of information available about their operations through multiple forms that we file with governments and share with the public. For instance, every year we must complete and file IRS Form 990 (with the exception of many religious groups, some of which choose to do so anyway). Every charitable nonprofit registered for tax-exempt status with the IRS must file one of three types of Form 990, depending on the amount of its gross receipts and total assets. Each version of Form 990 has escalating disclosure requirements: Form 990-N (the “e‑Postcard”), the Form-EZ (the “short form”), and the full Form 990 (requiring hundreds of entries and with multiple schedules). Nonprofits are required to make these forms (and most of the schedules) available to the public. The IRS also makes them available to the public.

But federal law sets the minimum of what must be disclosed. Many nonprofits go even further, sharing more details about their operations with people who are deciding whether to support our missions as volunteers, board members, staffers, or donors – and other stakeholders.

2. Ensure your online profiles are up-to-date

Your nonprofit’s website isn’t the only place people will go to do research before deciding to support your mission. As important as it is to have up-to-date “about us” information and a compelling description of your mission and work on your website, you also should be sure people can find vital statistics about your work in other places. Research shows that it makes people more likely to donate.

The first spot to update is GuideStar (now part of Candid). That’s the place that most people turn (other than a nonprofit’s website) to look up information about individual nonprofits. It’s certainly a resource used widely by the media, so people may go there first. Portions of your nonprofit’s GuideStar profile are visible to many donors through their donor advised fund portal or other giving sites. As an added benefit, the more information you share with GuideStar, the more prestigious the “Seal of Transparency” your nonprofit will earn for its profile – which is then something you can reflect on your organization’s website. You might also want to share information at GreatNonprofits, which operates as a sort of Yelp for nonprofits. You can also encourage your constituents to provide reviews of your organization.

3. Highlight your administrative/indirect/overhead costs

Back in June, we wrote an article about the need for all nonprofits to break the bad habit of reporting unrealistic overhead ratios. Thankfully, that’s a habit many in the nonprofit community have already broken. We need to go one step further and embrace those costs – costs that are fundamental for nonprofits to have efficient and effective operations. We need to celebrate those costs and what those investments in our organizations mean for service delivery. As we said back in June, “Connect the dots for your donors and board members and celebrate with them that their gifts supporting infrastructure may seem mundane but, in fact, enable your nonprofit’s employees to be more efficient, effective, and energized when working to advance your nonprofit’s mission.”

4. Close the feedback loop

Many of us conduct surveys of our constituents, whether they are members, donors, or the people we serve. But how often do we share back what we learn? Or how those survey results helped guide decisions about the future? In one good example, Colorado Nonprofit Association recently shared what they learned from their members and how they plan to use that information in the future. Reporting back makes your constituents feel heard – and can help improve the response rate on future surveys.

Avoid Sunburn of Being Overly Open

The purpose of transparency is to earn the public’s trust every day. That’s what Supreme Court Justice Louis Brandeis had in mind when he wrote that “Sunshine is said to be the best of disinfectants.” His quote was more directly about government, saying that the prescription for good government required keeping government open to the public’s view to first expose and then thwart corruption. But Brandeis also wrote authoritatively about the right to privacy. Therefore, nonprofits need to keep an informed balance.

Indeed, just like being overexposed to sunlight can burn your skin and eyes, there are reasonable limits to nonprofit openness and transparency. Federal and state laws require that medical records (such as for clients and employees of a nonprofit) and other information (such as credit card numbers of donors) be protected from disclosure. Nonprofits need to appreciate that the choices are not binary ones, of “everything is open” or “everything is closed.” Rather, it’s more nuanced. For some items, the law says nonprofits must keep them open to the public, and other times the law says nonprofits must protect the privacy rights of others. For everything else, apply the rule of reason.

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