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Transparency is a hot topic right now. From both the grass roots and the halls of power, everybody seems to want more of it. This call for increased transparency begs another question: how much transparency is enough? Rather, how much transparency is too much? At what point does threshing the wheat from the chaff become overly difficult and time-consuming?
Some have called for "radical transparency" on Wall Street. Noting that the current financial disclosure regulations failed to protect the people from the likes of AIG and Enron (among many others), proponents of change say that regulators (not to mention interested lay-people) are drowning in paper--transparency run amok.
But the volume of data obscures more than it reveals; financial reporting has become so transparent as to be invisible. Answering what should be simple questions—how secure is my cash account? How much of my bank's capital is tied up in risky debt obligations?—often seems to require a legal degree, as well as countless hours to dig through thousands of pages of documents. Undoubtedly, the warning signs of our current crisis—and the next one!—lie somewhere in all those filings, but good luck finding them.
I sympathize. Every so often, a thick sheaf of paper arrives in my mailbox bearing a Latin-esque title like “…prospectus.” I’m sorry to report that these prospecti (?) often end up in the recycling bin in the same pristine condition in which I found them. For me, this level of transparency produces more information than I can consume—at least for the time being.
Nonprofits also issue documents and reports in fulfillment of a contract—perhaps the social, not legal, variety. Annual reports, monthly newsletters, email updates, etc. These communications serve an important purpose. An October 2007 study co-conducted by the Charities Review Council (St. Paul, MN) found that:
Eight of 10 Minnesotans indicate that their trust in charities influences their giving decisions to support charities with time and money, according to the new study released by the Charities Review Council. Most Minnesotans also support oversight of charities. Three times as many people believe that charity watchdog groups should play a larger role than believe government should regulate more than it currently does.
The study also found that "distrust that donations will be well-spent" is the second leading obstacle to charitable giving. ("Donor financial situation" was number one.) Trust-building is a long-term process, to be sure. However, there are some easy, low cost first steps that organizations can take to become more transparent in governance and operation.
A recent report issued by Guidestar.org titled "The State of Nonprofit Transparency, 2008: Voluntary Disclosure Practices" highlights some of the ways in which nonprofits are using the Internet to level the informational playing field and building a stock of trust with the public--posting program descriptions and evaluations online, publishing annual reports and auditors findings electronically, etc.
Disclosure of information on the Internet is fundamental to our call for greater nonprofit transparency. Our experience has shown us that posting information on the Internet is the necessary step for making that information accessible to the public. Releasing documents only upon request often acts as an impediment to disclosure and frustrates meaningful transparency.
Even for the smallest, least tech-inclined nonprofits, organizations like Guidestar and Charities Review Council offer a forum for communicating this critical information electronically. In this way, organizations can make performance and accountability data available to the public not upon request, but as a matter of course.
The Charities Review Council study also found that among Minnesotans, three times as many respondents preferred that charity watchdog groups play a larger role than believed that greater governmental regulation is the answer. Is this attitude complementary to “citizen regulation” or a republican (small ‘r’) delegation (abdication?) of responsibility and power? Certainly, among the most highly-invested donors, individual research and personal relationships will always play a role in giving decisions. What, though, for the next tier of givers? Is it realistic to expect that a $100 donor will pore over financial reports and form 990s before putting the check in the mail? Perhaps not all, but some….
Via Wired.com: That's why it's not enough to simply give the SEC—or any of its sister regulators—more authority; we need to rethink our entire philosophy of regulation. Instead of assigning oversight responsibility to a finite group of bureaucrats, we should enable every investor to act as a citizen-regulator. We should tap into the massive parallel processing power of people around the world by giving everyone the tools to track, analyze, and publicize financial machinations. The result would be a wave of decentralized innovation that can keep pace with Wall Street and allow the market to regulate itself—naturally punishing companies and investments that don't measure up—more efficiently than the regulators ever could. [emphasis mine]
Given the fundamentally different nature of nonprofit organizations—not publically traded, not building wealth for shareholders, organized for a designated public purpose, not subject to the same market forces as for-profit corporations—do we need “radical transparency?” Is the public adequately interested?
How has your organization responded to calls for transparency?