Transparency and the effectiveness of nonprofits and charitable organizations have been an important topic ever since they have been around.
It is important and no one denies that.
The question however is, what is transparency and what exactly are we looking to be transparent about?
Sorry about the last word being a preposition but it makes it for better readability.
Every time a donor makes a donation to a nonprofit, the questions looming in the back of their mind are:
That’s why donors have relied on external validators such as Charity Navigator or GuideStar. Some of the brave ones may ponder over the financial documents or the IRS Form 990 filed by the nonprofit, the bottom line is that understanding the effectiveness of the nonprofit is a hard task and measuring the impact of a single donation is even harder.
So what is transparency in Nonprofits and why is it important?
Well this is an easy one.
Transparency, as defined by Charity Navigator, is the ability of a nonprofit to share critical data with donors.
We interpret this as the ability of the nonprofit to show the impact of a donation and the overall value derived from it.
We engage in commerce all the time—from buying a small pack of gum to conducting large multi-billion dollar deals—and we are constantly looking for value and hoping to make good use of our money.
Donors are no different. Even though they may not be getting any service or tangible item in return, they need the satisfaction of knowing that they have made a difference and that they got a good value out of their donation.
That value can be delivered to donors in shape of a sincere thank you note, and more importantly by showing them how their donation was used.
The best form of gratitude is in being transparent.
What’s been happening in the Fundraising world so far?
We think that up until today the fundraising efforts have mostly been concentrated in the pre-giving phase where the donor is still deciding to donate.
The other phase, which we believe is equally important, is the post-giving phase in which the donor has already made the donation.
Most of the fundraising efforts focus on the pre-giving phase where a lot of marketing like activities take place with the intent of converting a contact into a donor. There is an abundance of technical tools that help nonprofits in managing donors, and making it easy for them to donate. So we are good there.
But once the donation has been made and we enter the post-giving phase, there isn’t much help available to nonprofits in terms of keeping donors informed on their donation status, or showing them how their donation would possibly be used.
We feel that the inability of nonprofits to share more information in the post-giving phase is the root cause behind a lot of issues such as donor fatigue, inability to attract and inspire donors, and retain donors. It can also have adverse organizational effects on nonprofits such as staff attrition especially among the fundraising development managers.
The Typical Scenario
In a typical scenario we have a nonprofit that solicits for donations, and a donor who makes a donation.
Once the donation has been made, the technology allows the nonprofit to send a few automated thank you notes and that’s about it.
There is no easy, organized and a personalized way for the nonprofit to share more information with the donor and therefore the process comes to a dead-end.
This creates a cycle where nonprofits keep soliciting for donations but donors don’t get anything in return, inducing a no end in sight, uninspiring, tiring, non-attractive situation for donors causing them to simply stop giving.
How can nonprofits achieve transparency?
Achieve Transparency is like Achieving Nirvana – the ultimate goal.
There has been a lot of literature online from various quarters advising nonprofits on how to be more transparent to their donors. While those suggestions are excellent and should continued to be practiced, they do operate at a higher level and require a lot of manual work on part of the nonprofit. Consider a situation where a major-donor inquires about the impact of their donation. This information would have to be collected and compiled manually and then presented after some time. A request like this from a non major-donor would almost be impossible.
So the method is to organize and build systems that go to these details and maintain this information.
The steps to achieving transparency are:
Let’s take a look at each of the steps individually.
Step 1: Pass Control to Donors
As a first step, nonprofits can spell out their needs in the shape of a simple budget that is visible to donors on the giving page.
The very act of defining a budget and then sharing it with donors kicks off the transparency process. This presents the big picture to the donors.
It allows them to see how the nonprofits will be spending their donation and essentially passes the control in their hands by allowing them to pick a category they want to donate to.
Step 2: Give Donors the Visibility
To keep donors engaged and interested in the post-giving phase, they should have the visibility and instant access to information that show them at what stage in the nonprofit’s workflow their donation has reached?
This is synonymous to tracking your shipping package with UPS or FedEx. You get to know exactly where the package is and when it is arriving.
In our system, Credibal, whenever a donation is made, it is assigned a unique tracking number. Using this number, donors can view a detailed report on the current stage of donation and how/when/if it has already been used or not.
The ability to track every single donation no matter how small or large in real-time and on-demand by donors through a dedicated donor-portal is a powerful transparency feature.
Step 3: Sharing the data
The final step is to share the data or as we like to call it, “the proof is in the sharing of the data”.
Now that the donor understands the needs of the nonprofit and is able to track the donation, comes the crucial part where nonprofits must and can share viable/tangible data that proves how the donation was actually used?
The proof comes in the shape of financial transactions as well as receipts, images, or any other documents and information that nonprofit can share with the donor.
Credibal goes above and beyond to show how the donations are spent by allowing nonprofits to share different types of data, including images, documents, receipts, and financial transactions, which are pulled directly from linked financial institutions such as credit card companies and banks.