In the era of massive data collection and analysis, the subject of data transparency is often mentioned. ‘Data transparency’ refers to the practice of making inputs or data flows visible to donors, stakeholders, project partners, different departments, and possibly the public. In recent years, it has shifted from an abstract ideal to a necessary component of any successful social impact enterprise. In fact, nonprofit database Guidestar reported in 2019 that transparent nonprofits average 53% more in contributions and perform strongly across a range of dimensions. However, the benefits of transparency extend far beyond donor relations. Operational transparency can improve existing practices, connect organizations with partners in the same space, and maximize social impact by working hand in hand with partners and the community.

With more information distributed to multiple parties, decision-makers can make sound decisions about projects and respond to crises and emergencies more effectively. In general, humanitarian organizations recognize high-quality, reliable data as a “cornerstone” of effective advocacy and coordination around social issues.

In the era of COVID-19, communication and public participation are key to a good response plan. This requires that teams collaborate on projects that require multiple layers of approval and involve members and resources spanning multiple locations. Without providing open and accessible data, partners can be left in the dark--hampering the response effort.

Another example in the context of COVID-19 involves the global financing community. A collaboration between the World Health Organization, the UN Office for the Coordination of Humanitarian Affairs (UNOCHA), and the International Aid Transparency Initiative has produced standards for organizations to report their coronavirus-related spending in a coherent way. The information submitted by users is then usable by the international finance community, but its accuracy depends on user engagement.

By sharing data, organizations can both streamline projects run in coordination with other groups and utilize the information published by other groups for their work. For example, Kaggle’s predictive poverty analysis is impossible without the IDB’s household income data. Code for Africa relies on the Independent Electoral & Boundaries Commission’s voter registration data to create its tools. This addresses the crux of the argument for open data: it is “the key to creating social impact through data science”. 

Another example is the Inter-Agency Standing Committee’s Grand Bargain, a project aimed at identifying and implementing a shared open-data standard and common online platform for the international NGO community. This investment in data-driven transparency builds trust and accountability between donors and social service organizations, and allows them to tailor effective responses to social issues.

Strong partnerships and data sharing systems cultivated by social service organizations can help overcome challenges with managing contributions from multiple sources, including financial advisors, fundraising departments, program officers, donors, and other stakeholders. This trust is impossible without data, as it provides a unified and transparent view of operations and impact. 

Transparency is even more important when an organization’s revenue fluctuates. When financial data is produced in real time, organizations can identify problems and opportunities, make decisions, and find cost-effective solutions more effectively. Technology can provide a platform for foundations, nonprofits, and other groups to partner closely and achieve mutual goals together. It is also powering a shift in the ways foundations and governments approach grant application review, tracking program data and effectiveness. With transparency, funders can come together with grantees to collaborate on a deeper level, allowing donors the ability to provide real time inputs on the course of a project.

Staying transparent enhances social impact by bringing partners closer together, crowdsourcing information and raising its accuracy, and developing action plans with multiple inputs.

Right now, the nonprofit industry is experiencing trust issues with the public. The 2020 Edelman Trust Barometer reports that on average, NGOs are perceived as more ethical (compared to businesses, media, and government institutions), yet they are not viewed as competent in executing projects. In fact, an article by The Chronicle of Philanthropy in January echoes this sentiment, citing that “only 52 percent of Americans have faith that nonprofits will ‘do what is right.’” Fortunately, a study published in the Journal of Accounting, Auditing, and Finance finds that as non-profits’ level of public transparency increases, so do its contributions, with organizations with silver seals of transparency on Guidestar receiving 26% more contributions than those that only earned bronze seals. As a result, it is clear that transparency can remedy the public’s doubt in a non-profit's capabilities. 

When the public vets non-profit organizations as potential donors, they are searching to answer questions like:

1. How will my money be spent, and will it be spent wisely?
2. Is this organization reliable and capable of achieving their social impact goals?
3. What will be the outcome of my contribution, and who will my donation actually help?

To help potential donors answer these concerns, organizations should clearly communicate its mission, social impact, and objectives to the public. This can be achieved through external financial and social impact transparency.

Financial Transparency

First, organizations should provide easy access to financial information. While tax-exempt non-profits must present their three most recent IRS Form 990s and their applications for tax-exempt status upon request, by taking initiative and publishing these forms on one’s website for access by all, nonprofits can demonstrate a dedication to transparency. Beyond disclosing required financial information, a non-profit can reaffirm its commitment to transparency by providing additional financial data such as annual audits, budget plans, and clear breakdowns of donation usage. Being upfront with financial data will instill trust with the public that the organization will use donations wisely. Potential donors will therefore have high confidence that the non-profit is genuine in achieving social impact, and will not only be more inclined to donate, but may also donate more.

Social Impact Transparency 

Second, organizations should be actively releasing reports on the organization’s social impact and program outcomes. Publishing an annual report that includes project outcomes, financials, and client testimonials raises the organization’s legitimacy by making its social impacts tangible and quantifiable. Additionally, frequently updating websites and social media about project progress not only regularly display the organization’s impacts but also serve as constant reminders of the non-profit’s pledge towards transparency.

Data transparency can be achieved in many different forms, whether it be through internal, interagency, or external transparency. Internal and external transparency is critical for bolstering coordination, necessary for achieving project success. In providing convenient access to quality data, nonprofits can maximize their impact. Furthermore, by gaining public trust through external transparency, organizations can attract more donors and contributions. Together, data transparency is a powerful tool that is essential for nonprofit success. Transparency to the public can accomplish donor loyalty and trust, resulting in higher donor retention rates. As the non-profit landscape continues to shift, developing a trusting relationship between an organization and its partners is especially vital right now. 

If you’re interested in learning more about data transparency, please schedule a time with us below or reach out to our CEO, Anish Nagar (anish.nagar@mysocialimpactdata.com). Corecentra provides purpose-built digital solutions for socially conscious companies to improve their CSR performance with robust management, analysis, and reporting tools.