The world is more giving today than at any time in history, in great part due to the awareness that has been raised by the internet and social media. This increase in awareness and giving allows huge opportunities for social outreach and growth for nonprofits.
In the same way that the information age has given visibility to global needs, it has also enabled potential donors to more carefully review organisations before donating. Most nonprofits are rated for their good, as well as bad, practices and ratings are exposed to the world at large.
Improved compliance – transparency and accountability – are vital today for securing donor loyalty.
Charity isn’t Immune to Corruption or Bad Management
Growth in the not-for-profit sector comes with a dark side, however. Not because more giving is a bad thing, but because of the crop of charlatans who have jumped into the space, in order to take advantage of people’s good-hearted nature. The widely circulated article last year on the 50 Worst Charities in America brought a lot of attention to this problem.
The “charities” on this list raised more than US$1.3 billion, while directing US$1 billion of those monies back into their own fundraising companies and solicitors. Few of these organisations broke the 10% mark in funds directed to actual cash aid and many fell below 2%, with an unbelievable 6 organisations which gave 0% in aid at all. Unfortunately, this is not the only problem when it comes to charitable donations reaching their intended targets.
There are numerous legitimate nonprofits that simply lack the efficiency level which is expected by donors. Unlike the notable 92+% efficiency of The American Red Cross, for example, there are more than a few well-known and reputable organisations which fall well below what many would consider to be a bottom-end threshold of 80%.
The necessary complexity inherent in growth is yet another issue which needs addressing. As locations, products and other factors evolve to meet the growth, governance and compliance has also grown in complexity, and NFP organisations need more efficient ways to manage that compliance.
Good Governance and Compliance Leads to Increased Donations
Even the most difficult of nonprofit situations, in terms of accountability, can be overcome with the proper systems in place, as we proved in Malawi a decade ago.
The Malawi Social Action Fund was established in 1995 by the Malawi government, in conjunction with the World Bank, to help combat poverty in the country through community-directed projects in education, health, water, and infrastructure such as roads. Operating in one of the world’s poorest countries, the Malawi Social Action Fund needed a system that would combat corruption, as well as ensure the proper implementation and administration of aid projects.
Using our Compliance Checkpoint software, chosen for its wide range of features and mobile auditing capability, MASAF was able to secure further funding from the World Bank of US$240 million over the following 12 years.
While the pay structures for CEOs and other administrative workers can give pause to those ready and willing to give, they don’t seem to play nearly as important a part as the ability to prove that the funds donated are in fact being delivered to the intended recipients and projects.
Showing that there is an acceptable level of transparency, through good governance directed by reliable compliance systems, is the surest way to avoid even the appearance of impropriety. And that leads to greater donations.