Transparency is more than a fad
You hear the word everywhere these days: transparency.
Generally, the term refers to the need for organizations to make their financial
statements more readily under standable, but it also suggests being open
about all aspects of operations.
Although it has become something of a buzzword,
the push for greater transparency is more than a fad. Enhanced disclosure
- in both the for-profit and not-forprofit sectors - is becoming the norm,
not the exception.
Revealing more about operations
As donors demand increased
transparency in the charitable world and federal and state lawmakers
explore ways to achieve this, you may wonder what you can do to be more forthcoming.
Here are some ways:
Post financial statements and Form 990 online. Lawmakers
have been mulling a proposal that would require exempt organizations
with Web sites to make all public documents available online, including financial
statements for the last five years. Also under consideration: a proposal
to add IRS Form 990-T, the Exempt Organization Business Income Tax Return,
to the list of public documents.
In anticipation of possible new requirements,
organizations that want to be proactive should adopt some or all of
these proposed disclosure standards.
At a minimum, put your Form 990 on your site - this is an easy way to provide
information to the public. Some organizations also make their audited financial
statements available online or give a number to call for a copy.
Help donors
understand financial data and other important information. Donors want to
know how their money is being spent. They expect this information to be clearly
conveyed before they give to an organization or continue to give support.
Tools that you can use include:
- Financial pie charts,
- Lists of frequently
asked questions and answers,
- Third-party testimonials, and
- Informational
inserts.
Review your mission and program disclosures in your annual
Form 990 and determine if you're providing information that will increase
the public's understanding of your financial position, operations and governance
process.
Have an independent audit performed each year. You and your
board have an obligation to be ethical and responsible stewards of your organization's
resources. For this reason, have a regular audit to assure stakeholders
that financial data is accurate, accounting practices are sound and safeguards
are in place to protect assets.
Consider a third-party evaluation. The
pressure on charities to use funds as efficiently as possible has created
a growth industry in watchdog groups that rate not-forprofits on their performance
and fiscal responsibility.
And whether one views these sometimes-controversial
groups as a boon or a bane, their influence continues to grow. Many
of their benchmarks are fast becoming industry standards and the public increasingly
looks to them for guidance about whether an organization is worthy
of support.
For these reasons, organizations committed to increasing transparency
may want to seek independent review of their practices from groups such
as the BBB Wise Giving Alliance.
Also, be responsive to inquiries from rating agencies such as Charity
Navigator and GuideStar, as well as the media.
Supporting your mission
Your not-for-profit will have to become increasingly transparent
if you want to continue earning support for your mission.
By accepting
this new reality - and the challenge to become more accountable
- you'll reap benefits such as increased credibility and perhaps
more donations.
These publications are distributed with the understanding
that the author, publisher and distributor are not rendering legal,
accounting or other professional advice or opinions on specific facts
or matters, and, accordingly, assume no liability whatsoever in connection
to its use.
