How Nonprofits Benefit from Transparency

Transparency Builds Trust Especially For Philanthropic Organizations

philanthropic organizationsTransparency is a great way for your nonprofit and philanthropic organizations to really thrive. And new research backs this up. Not only do nonprofits that are transparent receive more in donations, but they also tend to be stronger organizations.

A recent study published in the Journal of Accounting, Auditing & Finance analyzed more than 6,300 nonprofits in the GuideStar database and what transparency meant for them. This study found that nonprofits that earned a GuideStar Seal of Transparency averaged 53 percent more in contributions. The study also looked at other explanations, such as organization size, fundraising expenses and ratings by third parties, however, in every case, the relationship with transparency still held as the reason for receiving a higher percent in contributions.

The authors of the study defined transparent by the amount of information made available to donors beyond what was released in the nonprofit’s annual IRS return. While earning a GuideStar Seal of Transparency is voluntary, it does require information beyond what is released in a tax return.

Not only did transparent organizations receive more in contributions, they were also found to have stronger performance across a range of governance, financial and operational dimensions. By being transparent, a nonprofit can indeed strengthen its organization on several levels.

While nothing beats the hard work of fundraising, being transparent certainly doesn’t hurt. It builds trust with donors, allowing them to see exactly where their money is going, giving them just one more reason to make a donation. By simply stating your work in a structured way, your nonprofit can tip the scales in its favor. In 2017, 78 percent of the nonprofits that received donations through GuideStar’s website had seals.

These findings coincide with a new “Donor Trust Report.” It found that a nonprofit’s accomplishments are the top factor in establishing donor trust. One of the best things a nonprofit can do is to share information about the organization.

Being transparent means communicating the nonprofit’s goal, operations, challenges, and successes to its donor community.  It means disclosing precisely where donations go. To improve the transparency of your nonprofit, it is crucial to share information about the organization’s work and financials.  Effective communication builds trust with donors and potential donors.

Some of the best ways to share your nonprofit’s accomplishments, goals and financials is to post that information on the nonprofit’s  website, on its social media profiles, in literature and on its GuideStar Nonprofit Profile.

So what does this all mean for nonprofits? It means that taking the time to provide information and being transparent pays off!