A macro trend of the last 15 years is a steady decline in the trust placed in institutions, especially financial ones, ranging from banks to charitable organizations. It’s no surprise, considering, for Millennials and Gen Xers, the Great Recession still feels like a recent memory. And now SVB, seemingly minutes after FTX’s spectacular collapse, is the latest point of “public trauma” in society’s collective memory regarding institutions.
While many generations have already witnessed bank collapses, what made Silicon Valley Bank unique was the speed at which events unfolded. It has opened our eyes to the fact that the most established of institutions might be 48 hours away from collapse.
The sense of distrust across all of society generally is spilling to all other types of institutions, including nonprofits. Despite record years for total donations, key measures of trust in charitable organizations continue to drop. Most troubling, there’s been a simultaneous decline in giving participation. This is not helped by fund mismanagement, increased sensitivity to political agendas within charities, and general discussions of charitable overhead being so regularly in the news cycle.
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How does the charitable sector counter this trend? I believe an industrywide call to greater voluntary transparency is necessary. We should counter any narratives that nonprofits are not actively trying to earn trust with the public. Charities, by and large, are not trying to hide information. By proactively sharing more raw information with the public, charities can start to craft a broader story of trust and lead the way toward greater American trust in public institutions.
Specifically, there are three ways charitable organizations can distinguish themselves both with their donors and the public through transparency (I am working toward these in my own organization):
1. Show radical transparency with their operations.
Publish comprehensive lists of where dollars are being spent. A great example of this is the organization Watsi, which has published a transparent spreadsheet of each treatment it’s funded for the last 10 years.
2. Make external financial audit findings more public.
Most large charities make the summary of their external financial audits public. If charities were willing to share more of the detailed commentary of their external audits and their steps to improve themselves, that vulnerability would build deeper trust.
3. Make raw impact data more publicly accessible.
Many organizations track impact. Certainly, the best nonprofit organizations do. One thing that few organizations do is make their raw impact data publicly available in any way. They do the analysis and share summaries, primarily with their donors.
This is a fine service, but charities could earn even greater trust by making the raw impact data publicly available for people to do their own analysis. This creates risk that someone crafts an incomplete story based on some limited data, but if the organization is confident in its ability to show its impact is robust, it’s still a strong net benefit.
Do I believe many people will sift through detailed publicly available data? No. But putting it all “out there,” though, can shift sentiment from “default skepticism” back to “default trust.” Vulnerability through transparency can create that shift. If this would become a trend among nonprofits, it could change the macro public sentiment, too, and all nonprofit boats would rise.
As the Boomers transfer wealth over to the next generation, the importance of philanthropy is only growing. Yet public anxiety aims to threaten America’s charitable potential unless charities can counter it. Last year, our organization saw record donations despite the economic uncertainty. Philanthropy can thrive. But radical transparency will ensure its full potential in America.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
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