Building Windows in Philanthropy: 4 Benefits of a Culture of Transparency

August 2, 2018 Marissa Luckie

“You’d make a better door than window,” my father said as I once again positioned my 7-year-old self squarely in front of the television. While it was meant to be funny, his remark was a call to action: become transparent or move aside.

Today, philanthropies are at a similar impasse, but the call for transparency isn’t a completely new phenomenon. Recognizing that taxpayers had a right to know how their dollars were being spent, the federal government took its first steps toward greater transparency in 1966 with the Freedom of Information Act.

Now, the Federal Funding Accountability and Transparency Act of 2006 (FFATA), Digital Accountability and Transparency Act (DATA) of 2017, and Grant Reporting Efficiency and Agreements Transparency (GREAT) Act (H.R. 4887) are calling for unprecedented levels of transparency from government agencies, grantmaking institutions, and grant-funded organizations alike.

FFATA requires federal grant recipients to report data points about executive compensation and the top 10 vendor DUNS numbers to the federal government, a completely unheard-of standard at the time of its release.

In 2017, transparency in government spending was taken even further when the DATA Act was fully implemented. The DATA Act has led to the tracking of nearly $4 trillion dollars in annual federal spending on grants, contracts, fixed costs and personnel from top to bottom for the first time.

So, there is this kind of transparency: the kind that is mandated. But there is also another kind of transparency: the kind that emerges from a cultural shift.

 

“Every Minute, Every Hour”

In 1994, IBM launched the first phone with a touchscreen. Its name was Simon, and it’s now considered to be the first ever smart phone. At the time, we were just beginning the journey down the information superhighway that would inevitably hurl us into an era marked by rapid technological advancements.

Now, from the 24-hour news cycle to the ever-pervasive presence of social media in daily life, we are practically saturated with ideas and information from around the world. Constant access to information is the new norm, and nonprofits and their stakeholders are not exempt from this cultural shift.

On one hand, this is great news for nonprofits. Philanthropies can use social media to connect and interact directly with constituents. This is beneficial for getting real time feedback and making people feel more involved and invested in your cause. It’s also an inexpensive way to reach a wide audience, especially if you get lucky enough to create something that goes viral.

But there’s a flipside that isn’t as pretty. Make a mistake, and you’ll have very little time to take corrective measures or develop a thoughtful response before it becomes widespread news. Just as quickly as a viral video can garner support from people worldwide, one negative story can be detrimental to fundraising efforts and undermine your entire organization.

At this point though—whether you like it, love it, or hate it—it seems like a moot point to try to resist transparency. However, if your organization welcomes transparency with open arms, it can get ahead of the curve building trust with donors.

 

4 Benefits of a Culture of Transparency

In the Blackbaud Institute’s Financial Management Toolkit: Your Guide to Connecting Finance and Development for Strategic Partnership, industry experts delivered strategies that organizations can employ to create a culture of collaboration by using open communication and transparency to:

1. Act as an incentive to give. A recent study found that two of the primary reasons donors give are because they are committed to an organization’s mission and want to know that their contribution is making an important impact. Clearly articulating to donors how their contributions are being used and how that fits into the bigger picture can help to show donors that they’re an important part of the team.

2. Improve donor stewardship. Donor statements are a great way to build trust with those who support your mission. Although it is not required for nonprofits to disclose to private donors how their contributions are spent, building relationships with donors through open communication goes a long way in terms of retaining ongoing support.

“Donor impact statements help take us from the primary psychological motivations for charitable giving to keeping [donors] informed on exactly what’s been funded with their dollars. As a result, organizations that share donor statements leave no doubt in the minds of donors about the difference they’re making.”—Pamela Gignac and Jeff Gignac, JMG Solutions, Financial Management Toolkit

3. Lead to better accountability. For one, it recommends that organizations work on developing strong processes to deter and prevent misappropriation of funds. Now more than ever this should be a priority. It’s better to make sure mistakes don’t happen in the first place than to be forced to do damage control when the blunder inevitably gets sniffed out by donors, the media or the general public.

4. Encourage collaboration. By giving a window into your organization, you are opening yourself up to fresh ideas and allowing people who may want to move in the same direction to join forces. In situations where you are working with a grant office, open communication can help to ensure that important resources are being allocated efficiently. But this doesn’t just apply to external communications.

If departments within your organization try to be transparent about the goals they are trying to achieve and how they are working to achieve them, it can help the organization work more cohesively, reducing redundancy of efforts and positioning itself to share diverse expertise.

All in all, while becoming a window was impossible for 7-year-old me, transparency in our public and social sectors is necessary to collectively become better at efficiently delivering greater outcomes. Transparency is an opportunity to invite more people to be engaged and garner more ideas and support.

And be creative. This is a chance to restructure, expand communication efforts, and innovate. My company recently moved into an office with floor to ceiling windows, and let me tell you, the light is beautiful.

nonprofit financial management

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