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Research shows nonprofit transparency matters

By Jacob Harold
June 24, 2020

We’re republishing some of the most-read posts from the GuideStar Blog, a Candid Blog predecessor, here in the Candid Blog.

Academic research supports what we at GuideStar (and now Candid) have long believed: (1) donors give more to transparent nonprofits and (2) transparent organizations tend to be stronger organizations.

The research, published in December 2018 in the Journal of Accounting, Auditing & Finance, offers nonprofit leaders a powerful set of insights. Professors Erica Harris of Villanova University and Dan Neely of the University of Wisconsin-Milwaukee analyzed more than 6,300 nonprofits in the GuideStar database. (They selected these organizations from an initial set of 14,000.) They found that as a group, nonprofits that earned a GuideStar Seal of Transparency averaged 53 percent more in contributions the following year compared to organizations that didn’t earn a Seal.

Professors Harris and Neely looked for other explanations and used a set of sophisticated statistical techniques to control for other factors—such as organization size, fundraising expenses, governance, and ratings by third parties (e.g., Charity Navigator or BBB Wise Giving Alliance). In every case, the relationship with transparency still held.

The research didn’t just show an increase in contributions for organizations that earned a Seal. Harris and Neely’s analysis also suggests that these organizations had stronger performance across a range of governance, financial, and operational dimensions.

What this research means for nonprofits

The effort of earning a Seal of Transparency literally paid off for thousands of organizations. Of course, there’s no guarantee that a nonprofit that earns a Seal will receive more contributions. That takes the hard work of fundraising. But this research strongly suggests that nonprofits can put a “finger on the scale” of raising money to meet their missions ... simply by telling the world about their work in a structured way on their GuideStar Nonprofit Profiles.

The Harris and Neely research aligns with GuideStar’s own—more modest—analysis:

  • GuideStar Nonprofit Profiles with a Gold or Platinum Seal of Transparency get twice the amount of views as profiles without Seals.
  • In 2017, 78 percent of the nonprofits that received donations through GuideStar’s website had Seals.
  • Also in 2017, contributions to nonprofits with Gold or Platinum Seals were 11 percent larger than those to organizations with Bronze or Silver Seals.

These findings also mesh with a Give.org “Donor Trust Report,” which shows that a nonprofit’s accomplishments are the number one factor in establishing donor trust.

We encourage nonprofits to share information about their work through their websites, literature, social media, and, of course, their GuideStar Nonprofit Profiles. Updating your profile on GuideStar is free. It allows your organization to reach GuideStar’s 10 million visitors a year and the millions of people who use more than 200 sites and applications that are powered by GuideStar data.

Every study ends with a call for more research. This one is no exception, and we have much more to learn. But this study is also an affirmation: openness matters.

About the research

These findings are from Erica E. Harris and Daniel Neely, “Determinants and Consequences of Nonprofit Transparency,” Journal of Accounting, Auditing & Finance website. Erica Harris is a professor at Villanova University. Daniel Neely is a professor at the University of Wisconsin—Milwaukee. The Journal of Accounting, Auditing & Finance is a peer-reviewed academic journal.

Professors Harris and Neely initially looked at more than 14,000 organizations in the GuideStar database and selected more than 6,300 to examine more closely. These nonprofits represented a range of missions and programs. The researchers defined transparent as sharing information beyond the 990 with the public. Because nonprofits voluntarily provide information beyond the 990 to earn GuideStar Seals of Transparency, they compared nonprofits that earned a Seal in 2012 or 2013 to those that did not.

Although Professors Harris and Neely obtained the raw data for this research from GuideStar, GuideStar was not involved in the data analysis, conclusions drawn from it, or preparation of the journal article.

Tags: Transparency; Candid