The potential donors is justifiable: according to Essential

Topics: BusinessAccountability


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Last updated: May 16, 2019

The non-profit sector today is worth an estimated $2 trillion worldwide, yet headlinesin recent times have seen the sector stumble between corruption scandals,gross inefficiencies, false expenses and misuse of funds such as the $187 millionmisappropriation to cancer charities by James T. Reynolds.

Recent high-profilescandals include donors of the Helpers Community Inc. raising concerns regardingthe misuse of donations and the Trump Foundation admitting to self-dealing. Inother cases, donors are mystified at the lack of results, like in the case of the RedCross’ failure to enable recovery in Haiti despite receiving $500 million in donationsfollowing the 2010 earthquake.The continuous decline in trust on the part of potential donors is justifiable: accordingto Essential Research 35% of US citizens have little or no trust in charitable institutions.

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Similarly, in the UK, figures are not promising, with trust in charities fallingfrom 6.7 out of 10 in 2014 to 5.7 in 2015, with 33% of those polled explaining thatthe primary reason for their reduction in donations stemmed from the impact ofrecent scandals on charities’ reputations.

Naturally, the consequences of donationsdecreasing is alarming; in the US, 52% of charities are not adequately funded andcannot match the distressing increase in demand for their services.Unsurprisingly, donor’s trust in charities has been declining1 steadily. In a 2015 poll,more than a third of those interviewed did not trust charities and nonprofits2.Donors are demanding more accountability and charities, with forerunners such asKiva and GiveDirectly, are looking at how to be more transparent and accountable.There are several methodologies organizations use to provide transparency totheir donors.• Self-reporting: On websites and in annual reports, agencies report on theirprogress and where donations are flowing. In many crowdfunded projects,the crowdfunding recipient is also executing the project, and they reportfrom the field.• Recipient reporting: Recipients of the aid report their own progress.

This ismost prominent on websites where organizations allow donors to give to aspecific person, cause or project.• Third-party reporting: Organizations such as GuideStar, Charity Navigatorand the Wise Giving Alliance provide oversight for charities, giving them aranking for their performance. However, the resources of these reports arelimited to public reporting from the charities.

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