A couple weeks back the Chronicle of Philanthropy ran an article by Rebecca Koenig with the headline: Some Nonprofits Misuse Contracts to Hide Activities, Experts Say. The experts cited in the article include the president of CharityWatch (which provides information about the financial efficiency, accountability, governance, and fundraising of nonprofits), Senator Charles Grassley (who has long sought greater regulation and oversight of the nonprofit sector) and the president of Guidestar (which primarily collects and makes available for analysis financial data reported by nonprofits on IRS Form 990). The article is focused on challenges that the media faced in gathering information on the uses and beneficiaries of the $487 million raised by the Red Cross after the 2010 earthquake in Haiti. Koenig reports that while the Red Cross ultimately complied with a request from Senator Grassley to release the information, it did so while issuing the following statement:
… our contracts with the great majority of our partners, while permitting us to disclose this information to Congress, do not permit us to disclose the information to the media or donors.
It is this statement that the article investigates, asking whether nonprofits should enter into agreements with others that prohibit them from disclosing information. This article is only one of a spate of news items of late looking at secrecy around the flows of money into, or out of, nonprofits and NGOs.
Another high profile case was that of the Tate museum in London, which refused to release information on the amounts of sponsorship received by the controversial oil company, BP. As covered in this Guardian article, among many others, Tate was eventually forced to disclose the amount of funds when a Freedom of Information request was made by a group of campaigners who argued that the figures needed to be released so that “a properly informed debate [could] take place about whether BP is an appropriate sponsor of the art gallery and its work.” When the matter was brought before a tribunal, the Tate lost its case—which rested on the arguments that disclosing the annual amounts of funds would upset BP, deter future sponsorships, or lead to health and safety risks stemming from ongoing protests against the oil company. Evidently, in the tribunal’s estimation, the public’s right to know the facts and openly debate the matter trumped these other concerns.
The Chronicle of Philanthropy article raises or prompts several questions about the Red Cross case, which might be asked more generally about nonprofits and their various agreements with partners (particularly those that are not charities and, thus, subject to the same requirments regarding disclosure of information):
- Who’s driving the lack of disclosure (the nonprofit or its partner)?
- If the latter, is it appropriate for a partner to have undue influence on a nonprofit’s ability to disclose information to the public?
- In either case, is the information actually proprietary? Must it be kept confidential in order to protect the privacy of individuals; or does the nonprofit simply prefer not to share certain information?
- While there may be good reasons to keep some data private, should this be the exception rather than standard practice?
Anecdotally, I was far more troubled (from an ethical standpoint) by the refusal of Tate to comply with the request to disclose the amounts of its sponsorship than with any of the articles I have read over the past few decades suggesting that arts organizations have been getting into bed with unlikely partners in an effort to balance the books. This observation prompts me to pose two more questions:
- What happens to the trust between an institution and the general public when a nonprofit refuses to disclose information about its activities?
- How does lack of transparency affect the loyalty, morale, and (ethical) practices of those inside the organization (i.e., board members, staff, artists, and volunteers)?
Of course, the particular issue of contracts being used to limit the disclosure of information is related to more general issues around what types of information nonprofits reasonably ought to be expected to disclose upon request. US nonprofits with budgets greater than $25,000 are legally required to make their annual IRS filing (form 990) and articles of incorporation available for review. One could argue that making these mandatory documents available should be considered sufficient and that nonprofits have every right to refuse to make public additional details about their operations. On the other hand, one could make a pretty strong case that IRS form 990 has not kept pace with changes in the financial practices and activities of nonprofits and that it is quite possible for nonprofits to obfuscate activities that the general public (in the spirit of the law) has every right to request.
For the moment, I’m less interested in what nonprofits are (or are not) legally required to disclose to the public and more interested in understanding what motivates arts nonprofits to refuse to disclose certain types of information about the operations of the company and its finances, and whose interests are being served by doing so. I’m also curious whether this sort of thing is openly debated at the board level of nonprofits; or whether a couple staff members in the organization are generally determining what to share and what to withhold? If the latter, is this a good thing?
Perhaps questions like these could (should) be raised periodically with board, staff, and other trusted stakeholders?
- Is there information about our ongoing organizational operations (its finances, activities, partners, policies, etc.) that we feel uncomfortable sharing with others?
- If so, what causes our discomfort or what motivates us to try to keep this information out of the public spotlight?
- Is it legal for us to withhold this information from the public, if requested? If legal, is it ethical (based on our code of ethics and our core values)?
- Is there information about our organization that is not generally disclosed to the public that (legally or ethically) should be?
- Would you characterize this organization as ‘transparent’? If not, based on what past behaviors or policies?
What do you think? If you are working at a nonprofit would you want to tackle such questions? Or have you already? And what about the more general issue? What types of information should nonprofits reasonably be expected to disclose upon request (beyond the 990 and articles of incorporation)? What types seem out of bounds (beyond personnel records and the names of individual donors or beneficiaries, which are considered proprietary)? What are your arguments for or against disclosing information?