Transparent nonprofits received 53% more in contributions, were stronger organizations
Washington, DC—A new peer-reviewed study published by the Journal of Accounting, Auditing & Finance indicates that nonprofits that proactively shared information with the public received substantially more in contributions the following year than less transparent organizations.
“Determinants and Consequences of Nonprofit Transparency” was authored by Professors Erica Harris, Villanova University, and Dan Neely from University of Wisconsin-Milwaukee. Harris and Neely found that organizations that went from not being transparent to being transparent saw an increase of 53 percent in total contributions, one year later. Furthermore, organizations that elect to be more transparent had stronger performance across a range of governance, financial, and operational dimensions.
“My co-author and I defined transparent by the amount of information made available to donors beyond that released in an organization’s annual IRS return,” stated Erica Harris. “Because earning a GuideStar Seal of Transparency is completely voluntary and requires information beyond that available on IRS Form 990, we compared the total contributions of organizations that earned a Seal with those that did not. We hypothesized and found that the decision to be transparent is associated with greater future contributions.”
Professors Harris and Neely initially looked at more than 14,000 nonprofits in the GuideStar database, selecting more than 6,300 organizations from that group to examine more closely. The nonprofits represented a range of missions and programs. The researchers analyzed data from 2012 to 2013, comparing total contributions to those organizations from one year to the next. Even when the authors controlled for other explanatory factors such as organization size, fundraising expenses, governance, and ratings by third parties (e.g., Charity Navigator, Charity Watch, BBB Wise Giving Alliance), they still found transparency strongly related to increased contributions. Although Professors Harris and Neely obtained the raw data for their analysis from GuideStar, GuideStar was not involved in the data analysis or creation of the article.
“We have seen evidence over the years substantiating the importance of nonprofit transparency in general,” said Jacob Harold, president and CEO of GuideStar. “However, this peer-reviewed research is particularly exciting because it shows a specific impact associated with earning a GuideStar Seal of Transparency.”
About the Research
The findings discussed above are from Erica E. Harris and Daniel Neely, “Determinants and Consequences of Nonprofit Transparency,” published December 3, 2018 on the Journal of Accounting, Auditing & Finance website. Erica Harris is Andrew J. Melton Jr. ’42 Associate Professor, Accounting & Information Systems, at Villanova University. Daniel Neely is an associate professor of accounting in the Lubar School of Business at the University of Wisconsin—Milwaukee.
GuideStar, www.guidestar.org, helps people make better decisions about nonprofits and the work they do. Each year, more than 10 million donors, nonprofit leaders, grantmakers, government officials, academic researchers, and journalists use GuideStar data to make intelligent decisions about the social sector. GuideStar maintains profiles on 2.7 million currently and formerly IRS-recognized nonprofits. The profiles are populated with information from the IRS, directly from nonprofits, and via other partners in the nonprofit sector. In addition, users see GuideStar data on more than 200 philanthropic websites and applications. GuideStar is itself a 501(c)(3) public charity.
Jackie Enterline Fekeci