Nonprofit Accountability Rules 1 & 2
I noticed in Fundraising Success Advisor this summary of a well-done white paper, Accountability Matters: Without Public Trust, Nonprofits Wouldn't Exist.
The paper, downloadable here, was authored by Liz Marenakos at Blackbaud. It deals with the fundamentals of ethical financial management and reporting. To most Agitator readers this is probably pretty basic stuff — audit procedures, accurate donation recording, spending controls, written financial procedures, timely and transparent reporting, etc. Still, a good reference point to have around.
Honest and transparent financial management and reporting — meeting Rule #1 — is just the minimum requirement for nonprofits to satisfy as they seek to be fully accountable to donors and other stakeholders.
Far more challenging — and what should separate the above-average nonprofit from the pack — is meeting the test of actual performance against claims. That's the real substantive nub of nonprofit accountability. Let's call this meeting Rule #2.
Every nonprofit makes a claim — one that competes with thousands of others — on the finite pool of philanthropic dollars. One way or the other, that claim includes a simple assertion that, if you the donor give us your money, we will achieve X.
Not only does the donor believe that his or her gift will actually be applied to the specified goal (and we all know that many nonprofits play “fast and loose” with that one, especially groups funded via small gift direct response), but also that their favored nonprofit has an efficacious strategy and program for achieving the goal.
That sounds pretty straightforward.
But time after time we see nonprofits fail at meeting Rule #2, either in fact or in perception. There are many ways this can happen …
- Their efforts turn out to be less effective or successful than they “promised” their donors … an outcome the nonprofit is less than candid about. This can be a matter of over-promising or under-delivering, or both.
- Or the group is embarked on a risky strategy or a new experiment (neither necessarily to be faulted), but hasn't been quite forthright about the untested nature of its course.
- Or, the group fails to identify and measure appropriate metrics to substantiate its progress.
- Or the group simply fails to communicate effectively the successes it does achieve.
[I once paid a consultant to tell me: “It's the results, stupid!” That sounded at first like a big DUH! But when we looked hard at our communications, guess what? Our results were buried.]
So even if your financial management is beyond reproach, you can still let your donors down — fail to use their funds accountably — by over-claiming, by not being explicit about strategies (thus, they can't be examined), by not measuring, by not being candid, by not informing.
Not everything your organization attempts will be successful. That's not a sin. But dishonesty in whatever form about the progress you are making is a sin … a violation of Accountability Rule #2.
P.S. For more on nonprofit accountability, search our tag, Measuring Up.