Today, more than ever, the public and government agencies are demanding nonprofits to be transparent. But concerns about having a realistic picture of internal operations, where money is going, and the effectiveness of the programs are countered by concerns of overburdened staff, increased administrative costs, and an invitation to singled-out and damaging criticism. Transparency is not a matter of two extremes – of all or nothing – and as a result, many nonprofits continue to struggle in addressing these concerns.

Share Keyboard ButtonWhen Guidestar released its report “The State of Nonprofit Transparency, 2008: Voluntary Disclosure Practices” in 2009, it suggested five simple steps for increasing transparency:

  1. Regularly update the organization’s website with current, detailed program and evaluation information, including information regarding strategy, evidence-based evaluation metrics, and the underlying theory of change;
  2. Post board and key staff members’ names, titles, and bios that highlight each person’s skills and contributions;
  3. Post the organization’s annual report on its website;
  4. Post any audited financial statements on its website;
  5. Post the organization’s IRS letter of determination on its website. 

This is a practical starting point for many nonprofits because it is consistent with the type of information they are required to make available for public inspection (e.g., federal requirements for Form 1023 and Form 990, and the California Nonprofit Integrity Act requirement for audits of annual financial statements). It also touches upon information that nonprofits should be regularly acquiring for proper governance and management.

However, today’s issue of transparency asks much more of nonprofits beyond legal compliance. For example, at this year’s Craigslist Foundation Bootcamp, nonprofit marketing and social media expert Beth Kanter highlighted the Indianapolis Museum of Art’s innovative transparency in her presentation, “Understanding the Networked Nonprofit: How being more transparent, connected and social can help you transform your neighborhood or community.” The Indianapolis Museum of Art website provides a dashboard that offers over 80 updates to its website visitors from IMA’s year to date endowment size to revenues from membership sales to electrical consumption per day; it even allows for an RSS feed to the dashboard. IMA is a modern example of going beyond minimum requirements in order to connect with its audience in a way that many nonprofits have not yet achieved.

This is not to suggest transparency is easy. Transparency does not happen overnight. The IMA dashboard, for example, has been a work in progress since at least 2007 and is the product of countless discussions over what information could or should be more transparent. Thus, movement towards greater transparency inevitably invites questions about what should remain confidential or what is required to remain confidential.
Where can a nonprofit begin to answer these questions? A good starting point is at the ground level in looking at its own rules and policies, and respective duties. For example:

  1. Ensuring contemplated disclosures are consistent with any confidentiality policy of the organization – e.g., policies regarding information about donors, clients, or members.
  2. Educating the board on matters considered “confidential” and thus not disclosed to the public – e.g., confidential board matters handled in an executive session (see Blue Avocado’s article, “Should the Board Hold Executive Sessions?”), trade secrets.
  3. Consulting with the nonprofit’s attorney about matters that should be considered confidential – e.g., certain information regarding pending litigation.

Additionally, there may be relevant rules which are state-specific or draw upon other areas of law such as contract or privacy law. Important inquiries may include:

  1. Reading the fine-print in contracts or grant awards – e.g., there may be a clause requiring confidentiality of the client or other obligations.
  2. Determining if there are special privacy rules related to releasing information about the type of client served – e.g., programs working with drug and abuse treatment, children, victims of violence, or health care patients.
  3. Understanding any disclosure rules regarding information about employees and other related considerations – e.g., performance reviews and salaries of certain staff members.
  4. Determining what is not required to be public and evaluating whether to disclose or keep private such information – e.g., California does not require meeting minutes to be publicly available.

Ultimately, transparency is not simply a matter of publicly releasing a box of documents or unimportant information. It can be a real tool for nonprofits to increase their impact by providing better self-assessment as well as engaging the public and attracting outside resources, leading to increased donations, volunteers, and positive press. Transparency is not a one-size-fits-all equation. What is comfortable, for example, for the IMA may not be comfortable or even realistic or appropriate for another nonprofit. The best transparency policy will be one guided by an organization’s mission, catered to its supporters and potential supporters, and considerate of the organization’s needs, policies, and legal issues.

Guidestar’s report “The State of Nonprofit Transparency, 2008: Voluntary Disclosure Practices” is available here.

Pro Bono Partnership’s article, “Can I disclose this? Complying with Confidentiality and Disclosure Requirements” is available here.

Beth Kanter’s presentation, “Understanding the Networked Nonprofit: How being more transparent, connected and social can help you transform your neighborhood or community,” from this year's Craigslist Foundation Bootcamp can be viewed here.

Rob Stein, Chief Information Officer of the Indianapolis Museum of Art, has a series of blog posts about the IMA’s experience using the dashboard to increase institutional transparency and tips for dashboard implementation which is available here.

A transcript from a 2006 ABA Forum discussion “Nonprofit Laws and Prescriptions for Transparency: The New York and California Attorneys General Offices of Charities Sound Off on Money, Secrets, and Justice” can be read here.