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Nonprofits lag on transparency, accountability

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Robert A. Blumenthal

Robert A. Blumenthal

Robert A. Blumenthal

When considering a donation to a nonprofit, it is important to look at many factors, not least of which is the ability of the organization to deploy its resources in support of its mission.

To that end, a donor should want to know the current financial condition of the organization, and therefore should make a study of its most recent financial statements.

These will not reveal everything the donor might want to know but are an indispensable piece of the puzzle and should be examined.

One of the only easily accessible sources of financial information concerning nonprofits is Form 990 which can be obtained from GuideStar.org.

Unfortunately, the financial information contained in Form 990 is incomplete since it is missing key elements that are integral to a standard set of financial statements.

The other serious weakness of this reporting system is that the information is not current.

Often, a Form 990 is not posted to the site until almost two years after the conclusion of the fiscal year in question.

The nonprofit sector falls far short of the standards of transparency and accountability that are demanded from for-profit entities.

A donor who wishes to investigate the financial status of a nonprofit has a much more difficult time learning about the organization than does an investor who is contemplating the purchase of stock in a publicly traded company.

But it is not only donors who are affected by this lack of information.

The tax-exempt status enjoyed by nonprofit organizations, and the large amount of federal money that flows to many of them, means that all taxpayers are investors in
nonprofits, and therefore they should be able to obtain, quickly and easily, complete and current financial information on these organizations.

There is simply no reason why the public should not have the same access to financial information on nonprofits that it has with regard to publicly traded companies.

The government mandates this disclosure in the for-profit sector, but it has allowed too much to remain hidden in the nonprofit sector.

Just as the U.S. Securities and Exchange Commission posts the financial statements it collects from for-profit companies, so too should the federal government require the posting of complete and current financial statements of nonprofits.

The tax-exempt status enjoyed by nonprofits and the direct federal grants which many of these organizations receive are privileges that should carry certain responsibilities.

Among these responsibilities should be the requirement to provide to the public, in a timely fashion, the complete financial statements of the organization.

With this information, donors, public officials and the general public will be better able to evaluate the activities of these organizations.


Robert A. Blumenthal is a professor of mathematics at Oglethorpe University in Atlanta.

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