Wednesday, July 1, 2009

Do Audits Help Build Public Trust? - Financial Transparency standard

We’ve made it to the last standard of the Public Disclosure section, the Financial Transparency standard.

At the Council we often talk about the importance of public trust. Without trust in a nonprofit, donors are much more unlikely to support it with time or money. This isn’t just common-sense, but has been supported by empirical analysis, including a study done by the Independent Sector that showed donors who have high confidence in charities give approximately 50% more annually than do donors who express low confidence. A key tool in building this public trust is yearly audited financials or, for smaller organizations, a board-approved Form 990, hence the focus on these two documents in the standard.

While we were testing the preliminary Accountability Standards in the focus groups, we heard a need to include education for smaller nonprofits about the value of an audit. We’re committed to building some resource into the Accountability Wizard to help with this, but we’d be curious to hear from smaller nonprofits about whether or not they choose to have a yearly audit, even if it isn’t required.

Next up: Board Meetings

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