New Report: Donors Need to Be Better Informed
The JDCA’s latest report, “How Do the Major Type 1 Non-Profits Rate on Corporate Governance Issues?,” investigates how well the four major non-profits share information with their donors about how the non-profit is run, what its goals are, and how it plans to meet those goals.
We looked at 4 important topics that cure-minded donors would want to know about, like how the non-profit is handling their money (“financial data”), who is making the big decisions (“enterprise governance”), where they intend to focus their energy in the future (“strategic direction”), and what kind of road map they have laid out to get to a cure (“cure progress”).
Then we asked how readily donors could find the information necessary to be well informed on these topics. Was the information clearly presented in easily accessible documents (“transparency”)? Did the information in one document match the information in another document (“consistency”)? Did the non-profit release reports with regular frequency and notify donors relatively soon after a major event (“timeliness”)? Did the non-profit present accurate data, and if so, did they explain what the data meant instead of just posting a bunch of numbers without context (“thoroughness”)?
Here is a snapshot of what we came up with:
5 = donor is fully informed on the topic
4 = donor is able to reach a conclusion with small gaps of information
3 = donor is able to reach a conclusion with large gaps of information
2 = donor has insufficient information to draw a conclusion
1 = donor has no information to evaluate the topic
Overall, the industry’s governance ratings are low and imply that donors and other stakeholders do not have the information necessary to fully evaluate many important matters.
Let’s consider the “Financial Data” ratings in terms of transparency, consistency, timeliness, and thoroughness. Raw financial data is generally well presented in the Financial Statements, which is good for transparency. But in order to obtain a complete financial picture of the organization, you need to see the numbers in conjunction with a thorough financial discussion. None of the organizations provide such accompanying analysis, so they lose points for thoroughness. All four organizations omit much of the data in the Financial Statements from the annual report, which shows a lack of consistency. Finally, only one of the four non-profits meets the SEC guidelines for filing timeliness of the Financial Statements, meaning that donors lack up-to-date information. So we reach an industry-wide rating in which donors looking to learn about the non-profits’ financial standing have enough information to draw some conclusion, but probably not a completely accurate conclusion.
In an upcoming blog post we will consider why it is important for donors to be more fully informed on these important topics.