The Push for Transparency in NFPs

Blog
October 16, 2009

Over the last few years the non-profit industry has seen an increased amount of pressure to be transparent and make public the procedures in place to increase transparency. Many organizations have noted the increase in questions on the new Form 990 and asked for clarification on their purpose. Many of these are designed to make the organization consider their transparency and their procedures that ensure that.

Questions such as “Does the board review the 990 prior to its submission,” highlight that the IRS thinks this is probably a good idea to consider implementing. Having a board review would increase the level of board involvement and the level of monitoring activities in place. Having the board actively involved in the approval process of the 990 is one way of increasing transparency because there’s one more level of awareness and one less place to hide anything. The board’s job is in essence to protect the public trust. Transparency and accountability go hand in hand.

Documenting procedures that ensure transparency is not just a 990 consideration however. The 990 has just been deemed an appropriate place to make these procedures public and certainly it has had the effect of making organizations scrutinize their current procedures.

An area deeply affected by transparency and the public’s perception is fundraising. Fundraising ratio requirements are ripe for fraud and can increase incentives for dishonest reporting. It is exactly this kind of dishonestly that the push for transparency seeks to uncover. An out of whack ratio may make some donors turn away and a perception of dishonesty over that ratio would turn donors away in droves. It can murky territory that an organization wants to avoid by being as transparent as possible.

Zimmerman-Lehman, a fundraising consulting firm in San Francisco has come up with a helpful transparency quiz so that organizations can take to see how they measure up. There are 20 questions and the more ‘yes’ boxes you have, the higher your transparency. Questions include:

  • Does your organization periodically evaluate your programs and services to ensure they are effective at accomplishing their goals?
  • Does the Board review the prudence of overhead expenses (administration and fundraising expenses) and fundraising ratios?
  • Does your organization utilize recruitment strategies that create boards with diverse backgrounds, experience, and the organizational and financial skills necessary to advance the organization’s mission?
  • Does your organization have policies that ensure the independence of a substantial number of board members (free of conflicts of interest)?
  • Does your organization share information with the public about its Form 990?
  • Are your fundraising materials honest and do all funds raised support the programs they were given for?

It can be helpful to review a questionnaire such as this against your own organization’s policies because there are bound to be some suggestions that would not have come up without some ‘outside of the box’ thinking. Many of the questions posed suggest policies that would be fairly easy to implement and go a long way towards that goal of providing transparency. For the full quiz and to see how your organization stacks up, see http://www.zimmerman-lehman.com/transparency.htm