Public trust in nonprofits: What boards need to know

Nonprofit organizations play a pivotal role in addressing a multitude of societal challenges, from championing environmental conservation and healthcare accessibility to advocating for human rights and education equality. However, as we find ourselves in an age of skepticism and information overload, the question of public trust in nonprofits has taken on a new level of complexity.

For our latest infographic, we researched public trust in nonprofit organizations. Explore the current state of public trust in nonprofits and examine what those numbers mean for the future of mission-driven organizations.

Download our infographic in shareable formats here: PDF, JPEG and PPT.

What drives trust in nonprofits

In her book “The Psychology of Trust,” Martha Peaslee Levine presents five key mechanisms associated with the public’s trust in nonprofit organizations:

1. Promise of Mission and Values
2. Organizational Reputation
3. Transparency and Accountability
4. Performance and Social impact
5. Use of Contributions.

Levine proposes that two recent trends — nonprofit branding and accountability — have the power to enhance these mechanisms to successfully improve public trust. Nonprofit managers may be able to sustainably improve trust among the general public by focusing on the organization’s branding and accountability strategies.

The state of public trust in nonprofits

New research delivers some interesting statistics on public trust in nonprofit and charitable organizations. Morning Consult’s Most Trusted Brands 2022 Report shows that well over half (57%) of Americans say they trust nonprofits, while the Give.org Donor Trust Report 2002 shows that 20% of those surveyed highly trust charities.

On the other hand, according to Morning Consult, 43% say they have experienced a loss of trust with a nonprofit, and those who report a loss in trust are generally unforgiving. Only 8% of those who lost trust in a nonprofit continued to give to that organization.

Quote: “Only when organizations are trusted for their good behavior and respected for their lasting impact will they receive the support they need to carry out the work they were created to do. They earn trust through ethical behavior and gain respect by achieving real results, then communicating those qualities to be accountable.” – Ken Phillips, Civil Society Strategist, Consultant, Mentor and Author

Outcomes from lack of public trust

Lack of public trust and transparency can pose significant risks for nonprofits, jeopardizing their reputation, donor relationships, and overall effectiveness. Here’s an outline of the risks associated with a reduction in trust:

• Decreased donor confidence: Without public trust, donors may become hesitant to contribute funds to the organization. Donors want assurance that their donations will be used responsibly and effectively.
• Reduced funding: A lack of trust can lead to decreased funding opportunities from individual donors, foundations, corporations, and government agencies. This can hamper the organization’s financial stability and ability to carry out its mission.
• Negative public perception: Nonprofits rely on their reputation to attract support. If public trust erodes, negative perceptions can spread, damaging the organization’s image and credibility within the community.
• Diminished board trustee and volunteer engagement: Volunteers often dedicate their time to organizations they believe in. If trust is lacking, volunteers may become disengaged or reluctant to contribute their time and skills.
• Difficulties in partnering: Collaborations with other nonprofits, government agencies, and businesses are essential for expanding impact. Lack of trust can hinder partnerships and collaborative efforts.
• Legal and regulatory scrutiny: Nonprofits facing public trust issues may attract attention from regulatory authorities or legal entities, leading to investigations or audits that consume resources and further damage the organization’s reputation.
• Reduced advocacy ompact: Nonprofits often advocate for policy changes or societal improvements. Public trust is crucial for influencing public opinion and policymakers effectively.
• Donor skepticism: When organizations aren’t transparent about their financials and how they use funds, donors may question whether their contributions are being put to good use.
• Suspicions of mismanagement: Lack of transparency can lead to suspicions of mismanagement, financial irregularities, or unethical practices. This can have severe consequences for an organization’s credibility.
• Difficulties in attracting talent: Skilled trustees and employees are more likely to join organizations with transparent practices. Lack of transparency may deter potential employees who are concerned about the organization’s ethical standards.
• Inaccurate reporting and misinformation: Without transparent reporting, misinformation and inaccurate information can circulate, harming the organization’s reputation and causing confusion.
• Stakeholder distrust: Beneficiaries, volunteers, partners, and community members may lose faith in an organization that doesn’t communicate openly. This can lead to decreased stakeholder engagement and support.
• Missed opportunities for improvement: Transparency provides valuable feedback that can help nonprofits identify areas for improvement. Without this feedback loop, organizations may miss opportunities to enhance their operations.
• Legal and ethical issues: Lack of transparency can lead to legal challenges, regulatory violations, and breaches of ethical standards, which can damage the organization’s standing and result in legal consequences.

Nonprofits that lack public trust and transparency face a range of interconnected risks that can impact their financial sustainability, reputation, relationships with stakeholders, and overall ability to fulfill their missions effectively. Prioritizing transparency and building public trust is essential for the long-term success and impact of nonprofit organizations.

What the public wants from nonprofits

A national survey conducted by Independent Sector and Edelman Intelligence showed that the top things the public cited as the role of nonprofit organizations in strengthening American society were:

1. Improving living conditions
2. Serving all members of the community
3. Finding solutions to societal problems

Their survey also confirmed that trust is a necessary condition for public engagement with nonprofit organizations.

Benefits of using governance technology to help improve trust

Governance technology can play a significant role in helping nonprofits build and maintain public trust. Nonprofits are often held to high standards of transparency, accountability, and ethical conduct due to their social missions and reliance on public support.

Here are some ways that governance technology can contribute:

Transparency and accountability: Governance technology can provide tools for nonprofits to maintain transparent and accountable operations. This includes systems for documenting financial transactions, project progress, and decision-making processes. By making this information accessible to stakeholders — including donors, volunteers, and the general public — nonprofits can demonstrate their commitment to openness and responsible management.

Financial management: Nonprofits often rely on donations and grants to fund their activities. Governance technology can offer financial management software that helps nonprofits track their finances, create budgets, and generate accurate financial reports. This level of financial transparency can reassure donors that their contributions are being used as intended.

Ethical conduct and compliance: Governance technology can help nonprofits establish and adhere to ethical guidelines and legal compliance standards. This might involve implementing software that tracks conflicts of interest, monitors compliance with relevant laws and regulations, and ensures the organization’s activities align with its mission and values.

Board governance: Many nonprofits have a board of directors responsible for strategic decision-making. Governance technology can facilitate board communication, collaboration, and decision-making processes. This includes features like virtual board meetings, secure document sharing, and electronic voting systems, all of which contribute to efficient and well-governed operations.

Stakeholder engagement: Governance technology can provide platforms for nonprofits to engage with their stakeholders, including donors, volunteers, beneficiaries, and the public. By involving stakeholders in decision-making processes and soliciting feedback, nonprofits can build a sense of ownership and community involvement, which in turn enhances public trust.

Impact measurement and reporting: Nonprofits often need to demonstrate the impact of their work to maintain trust with donors and the public. Governance technology can offer tools to collect, analyze, and present data related to the organization’s achievements and outcomes. This data-driven approach helps validate the nonprofit’s effectiveness and showcases its contributions to the community.

Data security and privacy: Protecting sensitive donor and beneficiary information is crucial for maintaining public trust. Governance technology can provide tools to secure data, implement privacy policies, and adhere to data protection regulations. Demonstrating a commitment to data security helps alleviate concerns and builds trust.

Crisis management: In times of crisis, nonprofits need to respond quickly and transparently to maintain public trust. Governance technology can support crisis communication by providing platforms for timely updates, clarifications, and information dissemination.

By leveraging governance technology effectively, nonprofits can streamline their operations, ensure ethical conduct, enhance accountability, and communicate their impact more transparently. These factors collectively contribute to building and maintaining public trust, which is essential for the long-term success and sustainability of nonprofit organizations.

See how BoardEffect, a Diligent Brand, can help increase public trust in your nonprofit organization. Request a demo today.