In philanthropy, trust is everything – yet more than 60% of people worldwide doubt that nonprofits can fulfil their missions. Of course, when seeking private funding, there are fewer people to convince, but the stakes are much higher in each case.
Maintaining relationships with philanthropic funders depends on credibility and openness; on being clear, accountable, and communicative about the grant process, how funds are managed, and what impact they achieve. Research has even shown that organisations demonstrating greater degrees of transparency receive more donations.
In this article, we'll consider what transparency looks like in-action and how organisations can manage grants in a way that builds lasting trust.
Let’s look deeper into the reasons that nonprofits should prioritise trust and transparency today.
Transparency in grant management refers to the clear, open, and accessible communication of key information throughout the grant lifecycle. For grantees, it includes regular and timely financial and impact reporting, and public disclosure. It includes openly sharing with funders your important decisions and the rationale behind them. All of this is easier when you have consistent internal documentation and processes.
We mentioned that there’s a link between increased transparency and increased funding. Well, as discussed by Fast Company, a study from Villanova University and the University of Wisconsin looked at how different organisations were ranked in terms of transparency, according to the nonprofit, GuideStar.
Charities that were awarded a ‘seal of transparency’ by GuideStar got 53% more contributions within the next year. There was also a correlation between how transparent you are and how much more you receive. Organisations received transparency ratings according to the degrees of public disclosure they exhibited – bronze, silver, gold and platinum. Organisations rated as silver got 26% more donations that those rated as bronze. So, being transparent literally pays off.
When nonprofits clearly communicate their requirements, timelines, obstacles, use of funds, etc., funders are more likely to consider them as reliable partners and be invested in their success. On the other hand, secrecy or vague reporting leads to scepticism.
Unlike institutional grant makers with formal application processes and published strategies, many private philanthropists base their decisions on personal values, legacy goals, or lived experiences. Being clear about your nonprofit’s values, leadership, history, and approach helps donors assess cultural and philosophical alignment. If there’s a clear values match, funders are more likely to view the relationship as a shared mission and not just a transaction.
Various studies show that with charities, ‘congruence’ between a donor’s core values and those of the charity affects that individual’s trust in the charity.
One of the pillars of transparency is clear and honest communication. This means keeping dialogue open across the full grant lifecycle. Set the tone of transparency early – be up front about what your organisation can and cannot do and be honest about project challenges and needs.
Both parties should be proactive here – donors should make it known that nonprofits can ask questions or express concerns without fear.
In fact, the Trust-Based Philanthropy initiative encourages funders themselves to model vulnerability and openness, noting that when funders are transparent, “it helps build relationships rooted in trust and mutual accountability” – and that when the power dynamics are acknowledged, a more balanced relationship can be created.
Invite funders to ask questions and provide feedback, and respond to them in a timely, thoughtful manner. This shows that you prioritise the partnership.
Grantees who keep funders updated regularly (rather than only reporting at the end or at mandatory intervals) help prevent surprises.
Aligning on goals from the outset and revisiting that alignment throughout the grant is essential for building trust. Start by discussing and agreeing on the big picture: What does success look like for this grant? What outcomes matter most to the donor, and how do they overlap with the nonprofit’s mission?
In practical terms, aligning on goals could mean agreeing on a set of success metrics together, or having donors endorse multi-year, unrestricted support that lets nonprofits pursue their mission strategically rather than focusing only on specific grant programs.
When unrestricted grants are awarded, it’s as important as ever to be rigorous in managing the funds, monitoring their use, monitoring impact, and so on. (Research has shown that this rigour is one of several key factors present when unrestricted grants are successful, along with capacity building and reduced stress among leaders due to reduced financial restrictions.)
Regular check-ins are important for maintaining alignment. Circumstances and priorities can change on both sides, so plan times to discuss progress and any adjustments needed.
Private philanthropic funders often don’t require formal reporting structures, but this doesn’t mean that detailed reporting is any less important. In fact, it makes proactive transparency even more valuable. Nonprofits should openly ask funders how they prefer to receive updates and adapt accordingly.
Staying transparent can be challenging without the right systems in place. Grant management solutions like Flexigrant streamline processes, simplify the tracking, sharing, and reporting of information, making it easier for organisations to be open and accountable to their funders. Here are some of the tools available within Flexigrant that make it possible.
Our cloud based grant management software provides built-in dashboards and tracking features that lets each grant administrator monitor progress and financial activity in real-time, and generate reports. Having data stored centrally also means there’s a single source of truth, allowing for accurate, robust reporting as everyone will be working with the same data.
Good grant management systems automatically capture important data and streamline administrative tasks. For example, Flexigrant’s form fields can automatically collect data needed for reports, reducing redundant manual entry.
Flexigrant has several collaboration tools, including a built-in Customer Relationship Management (CRM) system for maintaining communication with stakeholders in one place. Instead of hunting through email threads, all updates, and document exchanges can happen through the platform.
Grant management software also typically includes financial management tools or integrations with accounting systems. This ensures that budgets, expenditures, and payments are tracked clearly, with zero guesswork involved.
Users can see financial reports or even transaction-level details of how grant money is spent, and having these audit trails in place helps prevent any confusion or mistrust. It demonstrates that grant funds are being used as intended and that the organisation is diligent about financial accountability.
Essentially, organisations can use grant management systems to standardise and operationalise transparency. Instead of relying on ad-hoc, manual processes – like working with spreadsheets and sending emails back and forth with updated versions – a dedicated grant management system creates a shared workspace for the grant. Everything can live in one accessible platform, providing the ultimate visibility.
Transparency is foundational to successful philanthropic outcomes – and despite the possible lack of formal reporting procedures you’ll find among institutional funders, the need to be meticulous when tracking expenditures and other data still stands.
Funders are far more likely to stick around (and even increase their support) when they're confident in how their money is managed and they know the impact it creates.
Communicating clearly, aligning on shared goals, and using tools to provide visibility helps nonprofits to turn private donors into true partners. While transparency requires effort and, sometimes, vulnerability, it pays off in the end.
Flexigrant is used by the prominent funders and grantees across the UK and beyond. To learn more about how it can save time, ensure transparency and ultimately, help you fulfil your mission, contact us today.