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Impact Calls: A New Practice That Promotes Transparency for Nonprofits

Nonprofit organizations are corporations. While these organizations are mission driven and not required to generate profits, some nonprofits are borrowing an interesting and effective practice from its for-profit brethren. Based on earning calls done by for-profits, nonprofits are now doing impact calls.

An earnings call is usually a conference call (or possibly a webinar) between the management of a public company, financial analysts, investors and the media to discuss the financial results during a given reporting period. Earnings calls are usually preceded by an earnings report, which contains summary information on financial performance for the period to be discussed. Large public corporations like Facebook and Google hold quarterly earnings calls. The outcome of those calls may have a large impact on stock price and the overall health andwellness of the financial markets on the day those results are released.

As reported by Vanessa Small in The Washington Post in March 2014, GuideStar held its inaugural impact call to disseminate information about its 2013 financial results as well as illustrate its goals and impact over the previous fiscal year. GuideStar's stated mission is to provide information that advances transparency, enables users to make better decisions, and encourages charitable giving. They meet this goal by publishing financial reports of nearly two million nonprofits. As an organization that encourages transparency, it believed this impact call was an opportunity to provide clear reporting to its stakeholders. More than 480 people logged on to the call to hear GuideStar's 2013 financial results, its upcoming goals and impact on the nonprofit sector. The call also highlighted increases in its website visits and social media followers.

The Internal Revenue Service (IRS) asks on the Form 990, the annual tax return filed by nonprofit organizations, for a great deal of financial disclosure. The 990 asks:

  • Were the organization's financial statements prepared by an independent accountant?

  • Does the organization have an audit committee that is responsible for the selection of the independent accountant?

  • Does the audit committee oversee the work of the independent accountant in conducting the audit, review, or compilation of the organization's financial statements?

  • Did the organization's governing body review the Form 990 before it was filed and what procedures did it follow to review the Form 990?

The IRS revised the Form 990 eight years ago, its first major revision in 30 years, in order to "enhance transparency, promote tax compliance, and minimize burden" for nonprofit organizations. This was a move to bring the nonprofit compliance standards closer to their counterparts in the for-profit world. Nonprofit boards are expected by law to ensure the financial stability of their organizations. Additionally, donors and grant makers expect nonprofits to follow good governance principles and for nonprofit boards to exercise strong oversight over the financial affairs of their organizations. The advent of the nonprofit impact call is another sign of nonprofit organizations borrowing from the private sector.

As Rebecca Thomas, Vice President of the Nonprofit Finance Fund, mentioned in The Washington Post article, "The field is definitely moving in the direction of collecting more data but we tend to shy away from publicizing and presenting it in a public format. It's important to be clear about the linkages between strategic goals, financial results and social outcomes and have the confidence to talk about them."

While many nonprofits are tasked with reporting to funders at quarterly intervals about how dollars are spent and how programs are being managed, the impact call gives organizations an opportunity to speak directly to donors and constituents about the impact of the work they are doing. The size of the organization, focus, location and constituency are all factors that may make the implementation of the impact call a bit of a challenge. It may make more sense as an in-person meeting, a webinar or even a post on an organization's website. No matter the format, increasing transparency and highlighting sound financial management strategies more times during the year should be an important part of a nonprofit's strategic plan.