Nonprofit organizations are essential in tackling social, environmental and humanitarian issues. In the 1990s, the media's focus on scandals in the nonprofit sector sparked a discussion about regulation, self-regulation and transparency. St. Louis, Missouri is no exception to this, as charity leaders understand that financial transparency will help maintain the trust of community members and donors in a nonprofit organization.
Stakeholders can review financial records to evaluate an organization's effectiveness in achieving its mission and to hold it accountable for its financial decisions. This helps guarantee that resources are used efficiently to reach the organization's goals. For instance, when the St. Louis Post-Dispatch asked for details on spending on crime prevention, the organization provided only a one-page budget summary and refused to further analyze the request.
In 1998, 16 attorneys general issued a preliminary report and held a public hearing on issues related to the use of the good name of charities in the marketing of corporate products and services. They were concerned that the public, particularly donors, would lose faith in charitable organizations. Rebecca Carr reported for the Cox News Service that, in recent years, the IRS had only conducted a “superficial review” of nonprofit organizations and had reduced the number of nonprofit audits. The number of IRS staff dedicated to regulating nonprofit organizations had decreased, while the IRS budget for this activity had not increased in a decade.
By examining an organization's financial records, stakeholders can determine if it is progressing towards its objectives and if it is using its resources effectively. Responsible and transparent conduct earns employee trust and creates a positive work culture. Ultimately, this helps ensure that resources are used efficiently to achieve the organization's mission.