The public doesn’t pay much attention to the nonprofit sector until some disreputable person with access to donor dollars decides to use them to support their gambling habit or go on an extended vacation. Then the light shines bright, cruel and judgmentally on anyone who has ever held raised a dollar for good cause. Suddenly you have to justify your own modest salary and the expense of donuts you bought for a volunteer meeting.
Keeping everyone on the up and up has been a struggle for the non-profit sector. Greater government regulation to curtail and eliminate the bad apples in the charitable barrel is not likely. Periodically, the government says they are going to crack down misuse of charitable funds, but that energy usually fades away after a while until the next story of charitable corruption hits the media.
In general, transparency will ultimately increase public trust and confidence in the sector by making stakeholders more informed about the work of charities and making it more difficult for people to misuse donor dollars.
But that does not mean we should let up on making sure non-profits make it clear how donor dollars are spent. Millennials are showing a particular aversion to any suggestion of wasted donor dollars. Disclosure or transparency has become the most popular means of self-regulation, especially through the internet.
Accreditation that monitors many financial audits in a charity are one way a charity can prove they are being fair and accountable for its spending. But what must a non-profit disclose to the public in order to be considered transparent?
Besides supplying the government with all the information they require, non-profits can show the public transparency by:
- Be honest and clear in marketing materials about how donor gifts are being used.Adapt and adopt a conflict of interest policy with a disclosure statement that all board and staff review and abide by
- Adapt and adopt a conflict of interest policy with a disclosure statement that all board and staff review and abide by.
- Adapt and adopt an executive compensation policy to ensure the Board is fully aware of how the Executive Director/CEO is compensated.
- Adapt and adopt financial management policies with strict internal controls to ensure accountability.
- Adapt and adopt expense policies for travel, meals and other costs staff may bear.
- Be clear about who is on the Board of Directors and Senior Leadership Team, via website, print publications, etc.
- Make sure there are at least five years of financial reports on your website. For even greater clarity, post your articles of incorporation, bylaws, reserve policy on your website.
- On your website, have a link to CRA Charities Listing so people can verify that you are a registered charity. Or better yet, link them directly to your page on the CRA Charities site.
- If requesting restricted funds, make it clear what your organization will do with the money if the restricted funds cannot be used for the purpose for which they were raised.
- If you have a deficit or large reserve fund, explain how you plan to manage it.
In general, transparency will ultimately increase public trust and confidence in the sector by making stakeholders more informed about the work of charities and making it more difficult for people to misuse donor dollars.
