Impact transparency and audited outcomes statements

Transparency is generally thought to be one of the core values of the social sector. Executives and non-profit consultants go to great length to ensure agencies remain transparent.

Despite our obsession with transparency (some may argue because of it), nonprofit fraud is not widespread. One would of course hope that the social sector exists for more than just to not commit fraud. Are our standards really so low that a day free of governance maleficence is a day well spent?

Of course not. The social sector exists to create social value. That’s what donors expect of us, and that is what most of us expect from ourselves.

Charity watchdogs like Guidestar have begun moving beyond financial and governance issues, encouraging organizations to post evidence of impact on their websites. While the for-profit technology startup scene advocates the importance of “failing fast” in order to test ideas and iterate quickly to achieve effective offerings, the social sector seems petrified by the prospect of evaluation, lest an evaluative inquiry discover that an organization has failed to single handedly eradicate global poverty.

And yet without feedback, no program, for-profit or non-profit, can improve. Savvy donors understand that. In the new era of impact investing donors are more persuaded by an organization they believe has an honest approach more than an agency with a fantastical story.

My work centers on helping organizations improve program impact by learning from their evaluative metrics. I got into this business to help organizations help people better, but a natural consequence of better outcomes is strong fundraising prowess as well.

As the donor mindset shifts to that of the impact investor, I have begun to encourage the organizations I work with to learn (and fail) out loud. While many organizations have “impact” pages on their websites, the content of those pages tend to be a story of one amazing case or an enumeration of a select subset of program outputs. These pages tend to not be terribly informative, nor believable to the savvy donor.

But despite the plethora of shadowy claims of exceptional, unsubstantiated claims of impact on organizations’ websites, these same organizations will consider it a sign of organizational integrity to publicly post their third-party audited financial statements.

So, we consider it a value to publicly post our financials but not our impact? Frankly, I’m more interested in the results an organization produces than how it spends its money. Most donors are.

To help our clients better communicate their results (and more importantly their institutional learning) we developed a system that allows organizations to publicly share the reports we produce on their websites.

Just as there is value in hiring a third party auditor to examine an organization’s financial data, we believe the same is true for evaluative metrics. The public has grown to expect audited financial statements from non-profits. Audited impact statements are the logical next step if transparency is truly valuable to the social sector. Indeed, rrom a donor perspective, impact transparency might be the only kind of transparency that matters at all.