Achieving Appropriate Transparency


Facing an insatiable desire for transparency, trusted ministries find the balance between being appropriately transparent while measuring privacy concerns and administrative burdens

 

by Dan Busby

 

Honesty and transparency
make you vulnerable.
Be honest and transparent
anyway.
Mother Teresa

In Acts 6:1, we read, “[A]s the disciples were increasing in numbers by leaps and bounds, hard feelings developed among the Greek-speaking believers—‘Hellenists’—toward the Hebrew-speaking believers because their widows were being discriminated against in the daily food lines.” Rather than sweep the problem under the rug, they brought it into the light and appointed Spirit-filled, faithful men to address it. What happened? “The Word of God prospered. The number of disciples in Jerusalem increased dramatically” (Acts 6:7). They understood appropriate transparency.

 Check the dictionaries, and you will find that something transparent is “fine or sheer enough to be seen through, free from pretense or deceit, easily detected or seen through, readily understood, and characterized by visibility or accessibility of information especially concerning business practices.”[1]

“Another way of saying it is that transparency is the process of permitting people to see what you’re doing, and disclosure is the process of affirmatively telling them what you’re doing. Real disclosure depends on transparency.”[2]

Find the "sweet spot"
between absolute
transparency and
no transparency—
it's called appropriate
transparency—where
trust is maximized with
minimal disruption or
risk to the ministry.

In today’s world there is a seemingly insatiable desire for more and more information. In the current media climate—secular and religious—there is a desire for absolute transparency—bringing everything into the light and then analyzing it under a microscope.

Appropriate transparency by ministries is an important factor to enhance trust. The question is often which kind of transparency is appropriate.

Many types of disclosures fall under the umbrella of transparency. Few suggest standing on the extreme edges of this issue—absolute transparency or the complete absence of transparency. Let me illustrate.

On one side of the continuum is absolute or 100 percent transparency. With absolute transparency, nothing is confidential. Transparency at this level is generally beyond the pale.

 

The Transparency Continuum

    Absolute ____________________________________________ No       Transparency                                                                             Transparency

 

Absolute transparency might earn some kudos from transparency purists. But consider the resulting havoc caused by sharing confidential, employment-related discussions and actions, the names of givers and the amount they gave, and more.

The other side of the continuum is no transparency. Everything is secret. This fuels negative perceptions. Nothing will rain on a ministry’s parade more than the perception that something shady is going on with the finances. If givers don’t have high confidence that their gifts are being stewarded with wisdom and in ways that tangibly support mission, they may understandably dial back their giving.[3] While the complete lack of transparency may work for a while, it rarely is positive in the long-term.

Certain disclosures are required; some are voluntary. Let me distinguish:

  1. Disclosures required by federal law. The following disclosures are required under federal law:
  • Form 990. Most ministries other than churches are required to annually file Form 990 with the Internal Revenue Service (IRS). If a ministry is required to file Form 990, the ministry must disclose the Form 990 upon request. While the Form 990 reflects compen­sation of key leaders, contribution data should be redacted. When a ministry files Form 990 with the IRS, the document is soon released on the Internet to the public at GuideStar.org.
  • Form 1023. Most ministries are required to file IRS Form 1023 in applying for tax-exempt status. If a ministry has filed Form 1023, this form and related correspondence with the IRS must also be disclosed upon request.

Many ministries go beyond federal disclosure require­ments and post their Form 1023 and Form 990 on their own websites.

  1. Disclosures required in addition to what is required by federal law. ECFA requires accredited ministries to make the following disclosures not required by law (even ministries not accredited by ECFA should consider making these disclosures):
  • Financial statements. ECFA requires an accredited ministry to provide a copy of its most recent year-end financial statements prepared by independent certified public accountants to anyone upon request.
The Christian way to
approach transparency
is to realize our
candidness should be
motivated by a desire
to have a pure heart
before God and others.
David Kinnaman

ECFA does not require ministries to comply with a request for a copy of its financial statements if they are posted on the ministry’s website, the ministry is subject to a harassment campaign, or the request is part of a broad, general data-gathering request.

  • Reports on projects funded by giver-restricted gifts. ECFA requires accredited ministries to provide reports, upon request, on restricted projects which a giver has supported.
  1. Other disclosures. A ministry may disclose additional information, if it is legal to do so.

There are many other challenging transparency issues. Here are five areas of possible contention over transparency:

  1. Board meetings. Meetings of the ministry’s board are usually held in confidential settings. Ministries are generally not subject to open meeting laws. In other words, the board may decide if non-board members are invited to attend board meetings. This is appropriate transparency.
  2. Board minutes. Access to board minutes is usually restricted to board members and the top leadership team. In some instances, sensitive issues are redacted from minutes so they may be shared with others—usually inside the ministry. This is appropriate transparency.
  3. Salary data. There are often requests for salary data—especially of top leaders of a ministry. Other than salary data required for ministries filing Form 990 and certain state filings, the sharing of salary information is at the discretion of the ministry. This is appropriate transparency.
  4. Financial records. Other than the disclosure of annual financial statements and project reports for designated gifts, the sharing of other financial data is at the discretion of the ministry. This is appropriate transparency.
  5. Giver data. High confidentiality is generally afforded donation records. There is no requirement to disclose giving data outside of the ministry. Givers may give their permission to publicize gifts to provide an incentive to other givers. This is appropriate transparency.

Appropriate transparency builds trust and elevates Kingdom outcomes—just as it did in Acts 1:7 when “The Word of God prospered. The number of disciples in Jerusalem increased dramatically.”

The trust generated by a ministry will be significantly impacted by whether or not there is a commitment to appropriate transparency.

 

  Questions   for reflection

 

  1. Is the ministry you serve appropriately transparent?
  2. In what areas could transparency be improved?

 

 

[1] “Transparent.” Merriam-Webster: http://www.merriam-webster.com/dictionary/transparent.

[2] Doug White, The Nonprofit Challenge: Integrating Ethics into the Purpose and Promise of Our Nation’s Charities (New York: Palgrave Macmillan, 2010), 159.

[3] Jack Connell, “The Power of the Ask,” Leadership Journal (Spring 2013), 52.

 

From TRUST: The Firm Foundation for Kingdom Fruitfulness, ECFAPress, 2015, www.ECFA.org/KnowledgeCenter.


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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