Three Fundamental Practices to Restore Trust and Attract Donation Income

To restore the public’s trust and attract donation inflows NFPs should adopts three practices, writes Dr. Ushi Ghoorah from Western Sydney University.

Not-for-profit (NFP) organisations play a significant role in the Australian economy and society.

There are around 600,000 NFP organisations operating in Australia and last year, these organisations received more than $142 billion in annual revenue. Australian NFP organisations employ approximately 1.2 million staff and 3 million volunteers as well as cater for the needy across a range of sub-sectors (such as social services, culture and recreation, and health).

Further, the Australian NFP sector has an economic contribution which outreaches that of the state of Tasmania and of sub-sectors like “agricultural, forestry and fishing industries” and “information, media and telecommunications and media industries”.

Yet, headlines constantly raise questions about the number of cents in each donated dollar that a NFP allocates to its social mission as well as about the administration, the fundraising and the salary expenses of NFP organisations.

Such negative coverage has an adverse influence on people’s trust in the operations of NFP organisations and may explain the decline in donation flows to Australian NFP organisations within the past few years.

Also, a recent report by AUSTRAC and ACNC highlighted the vulnerability of Australian NFP organisations to money laundering and terrorism financing, with many of these organisations operating internationally, in “conflict zones and unstable regions” – places where the risk of money being channelled to support terrorism is heightened.

Given the lack of information about the use of resources by NFP organisations in Australia, donors are often confused and cannot differentiate NFP organisations that are doing the right thing from those which exploit people’s generosity.

To restore public’s trust in its operations and attract donation inflows, it is advised a NFP organisation adopts the following three practices:

Things to do:

Signal it is a legitimate organisation

A NFP organisation could do so by providing information which highlights it is on public registers, namely the ACNC register, the Australian Business register, and/or the ASIC register of companies and organisations, to mention a few.

Maintain a website

A website which constantly update information about the board of directors, activities, achievements/success stories of a NFP organisation.

Such a website is a great tool for constantly reminding donors of the great work done by the organisation.

Demonstrate transparency about the use of donor’s fund

An authoritative way of demonstrating transparency is by publishing financial statements (preferably audited statements) which break down the income and expenses, assets and liabilities, and cash inflows and outflows of the organisation.

The basis of trust in the NFP sector is transparency. By demonstrating its legitimacy, maintaining a website and being transparent about its use of donors’ fund, a NFP organisation will create greater trust around its brand and may eventually attract greater donation income.

About the author: Dr. Ushi Ghoorah is an associate lecturer in accounting at Western Sydney University. Her main research interests encompass financial statement disclosures, transparency, accountability and governance in the not-for-profit context. Ushi has presented her research at international conferences and research seminars held at Australian universities.