How Financial Transparency Could Revolutionize Giving
I went to a workshop about the new accounting laws for nonprofits (I’m very fun at parties). The instructor informed us that according to the new standards, organizations are now going to have to list not only their total assets but the restrictions on those funds so that at the bottom there’s a total of what is actually left for general operating.
In his discussion of this, the instructor kept saying - this is a huge deal. You’re not going to want to do it; your Board isn’t going to want to do it. It’s going to make your finances look bad. Funders are going to panic. This is huge (and this is bad).
Which is all true. But maybe it’s about time people realized just how bad it is.
It is truly scary and vulnerable to be honest about just how shoe-string your budget is. To admit you’re barely making payroll because of the restrictions funders and donors and the world at large have put on how you spend your money. But it’s also the reality that nonprofits have been working within for decades. Organizations have been contorting themselves, purportedly to appear stronger than they are and therefore be worthy of funds, for decades. It’s a fallacy that we’ve all known and rolled our eyes at/yelled about behind closed doors: funders want stability and sustainability but don’t want to fund stably or sustainably. And so we mask the hardship by making the numbers look good on the proposal and annual report and 990, then calling our friends and saying, “I don’t know if I can pay myself this week.”
But - imagine with me for a minute - what if these new federal guidelines forces us to have honest conversations with funders about money. What if this is the excuse we all get to stand up and say, this isn’t working.
There is the very real (and, honestly, almost inevitable) chance that the initial response to be a full-on panic by everyone and for funders and organizations alike to go into self-preservation mode. But we people who have worked at nonprofits all know that it’s not an anomaly or indicator that our work is bad. There is, as the old cliche goes, power in numbers and at some point - the hundredth, thousandth, millionth grant proposal application where it’s clear that the $450,000 submitting organization actually only has $14,000 of unrestricted funds on hand at any time - everyone is going to have to admit that something isn’t working. And then we’ll start having real, expansive conversations about general operating funds, about long-term investments, about change. And then maybe, just maybe, we can stop fighting for money and just do the work.