Transparent Donors, Opaque Grantees: High Time for a Nudge

While we are finalizing our ratings, we are here reposting a contribution that Hans Gutbrod previously published with Philanthropy in Focus, a platform by Worldwide Initiatives for Grantmaker Support. 

In recent years, donors have increasingly embraced transparency and accountability. Transparency seems to be on its way to becoming the new norm for donors. Yet at the same time, many nonprofit grantees are lagging behind. A recent study by Transparify, the initiative I work with, has shown that even among the world’s leading open data advocacy groups, over half are not fully transparent about who funds them. Similarly, despite significant recent improvements in that field, over half of major think tanks worldwide still do not fully disclose their funding online.

The cost of this opacity was brought home powerfully to me when I was working at a donor organization and needed to go to lunch with a colleague on the same corridor just to understand what work his program was doing with some of our grantees. We needed to talk to each other because sharing this basic information through an internal database was cumbersome and the data did not capture intent. As for the relationships of our grantees with other donors – who gave how much, when, and for what purposes – we usually simply did not know.

Grantee opacity causes severe problems for all stakeholders involved. For donors, it precludes effective coordination, leveraging of synergies and avoidance of overlaps. For grantees, working with blindsided funders leads to inefficiencies and cycles of over- and underfunding. For external stakeholders such as local government bodies, it makes it hard to identify who is doing how much of what, and when current funding is likely to run out. Finally, financial opacity undermines the reputation of integrity and credibility of the nonprofit sector as a whole because citizens are left wondering where all that tax-exempt money comes from, and what it gets spent for.

Transparent organizations are part and parcel of a modern democratic society, not an optional add-on; this applies to grantees as well as to their funders. However, in terms of transparency, some very good donors have a remarkable number of not-so-good grantees. How can the sector move forwards?

First, it is important to realize that the most useful location of information on projects is on the grantee’s website, where it’s visible to everyone – donors, potential partners, citizens and any other interested stakeholder. Crucially, compared to a donor database, the grantee’s website is far closer to the interface where the grant money (hopefully) benefits citizens, and thus the best location to render account to beneficiaries.

Second, donors can easily nudge their opaque grantees by making transparency the new default setting. The cost of doing this is negligible to both donors and grantees, as recent experiences in Georgia (Caucasus) have shown. There, two innovative donors, the Eurasia Partnership Foundation in Georgia and the ACCESS Program of the East-West Management Institute have recently added a single line to their grant application forms that asks potential grantees to provide a link to their own financial disclosure webpage. This nudges all applicants to update their websites and disclose information on who funds them, with what amount, for what purpose, to show that they align with the donors’ preference for transparency. Other donors are planning to implement similar changes soon.

There are many excellent arguments in favor of transparency. Some of the most compelling arguments have been put forward by grantees themselves, including by the Center for Global Development, Global Integrity, Natural Resources Governance Institute, Sunlight Foundation, Stimson Center, Transparency International Georgia, and the World Resources Institute. Equally, a compellingly simple gold standard for nonprofit transparency exists in the form of Transparify’s 5-star benchmark.

With a simple nudge – a one-line addition to the application form (see here and here for examples) – donors could advance such transparency. The first innovative donors are beginning to implement this change. We hope this will spread, so that transparency indeed becomes the norm.

Why Transparency Matters: the Think Tanks’ Perspective

[a previous version of this post appeared On Think Tanks]

Transparency sometimes can appear like a hard thing to do. Making information available can be an extra effort. Transparency may also invite additional scrutiny. It’s thus not obvious that institutions always welcome disclosure.

Yet Transparify’s experience over the past two years suggests otherwise. Many think tanks welcomed our work. They were enthusiastic about becoming more transparent. Several dozen think tanks engaged, increasing their disclosure, as our 2015 report highlights.

Why? Ask the think tankers themselves – they make a very powerful case in favor of transparency. Here is an overview of their contributions to our blog. 

One common theme across many of these contributions is that transparency is part of research excellence – it communicates confidence in the integrity of one’s findings. In that way, transparency contributes to an open and constructive debate.

This, too, is a reason why we think that transparency should be the default for policy research and advocacy. We hope that more think tanks will join to help set the standard. We believe journalists should routinely ask think tanks and policy experts how they are funded, and highlight when funding sources remain opaque. Also, we think that donors should nudge their grantees to become more transparent. Funding transparency by itself is not a guarantee of integrity, but it is one of the best starting points for a broader debate.

If you want to share your perspective on the importance of transparency, we would very much welcome your contribution to our blog or, as an additional step, you could connect to this theme through On Think Tanks itself.  

Interested in how to increase your transparency? Go here to find out how to get 5-star transparency. 

Do transparency advocacy groups practice what they preach?

Transparify so far has primarily looked at the transparency of think tanks. Yet transparency also matters in many other sectors, including policy advocacy.

Citizens should be able to find out who pays for that advocacy. 

Transparency is particularly relevant for pro-transparency organizations. In line with that idea, we assessed 34 organizations who feature prominently at the Open Data Conference (#IODC15) in Ottawa, Canada. The #IODC15 event, which runs May 28-29, 2015, brings together the leading pro-transparency organizations, experts and donors, from across the world. It thus allows an excellent assessment of the field of pro-transparency advocacy.

Using Transparify's well-established methodology, we rated the extent to which participating organizations publicly disclose through their websites where their funding comes from. 

How transparent are the pro-transparency advocates? 

The news is fairly good, but there is quite some way to go before the sector itself is a role-model. Of the 34 organizations we assessed:

  • 12 are already transparent about who funds them
  • 7 told us that they plan to become transparent in the near future
  • 15 are opaque and seem not to want to disclose more funding data. 

With an average of 2.7 stars, the pro-transparency sector still is less transparent than the leading 35 US think tanks are (3.2 stars). 

Follow us on Twitter to keep up to date about reactions to this report from #IODC15 participants.

We believe that non-profits should embrace transparency for a variety of reasons:

  • non-profits are key actors in democratic societies
  • non-profits enjoy tax free status
  • transparency builds credibility with donors, clients, policy-makers and other stakeholders
  • the sector as a whole is huge, e.g. in the United States it accounts for over 8% of GDP
  • voluntary transparency is the best way to dissuade burdensome external regulation.

We will re-assess all 34 institutions later this year to track and document their progress. To receive our follow-up report by email, sign up here.

To find out who the most transparent pro-transparency advocates are, read our MAY 2015 IODC TRANSPARENCY REPORT.

Think Tanks Are A Billion Dollar Business

A new data set compiled by Transparify shows that a group of 21 top U.S. think tanks broke the billion-dollar expenditure barrier in 2013, showing just how huge the sector has become.

The 21 think tanks in the sample collectively spent over one billion dollars in 2013, probably for the first time in history, and employed a total of 7,333 people, including part-time employees. Their total net assets grew 8% to USD 2.65 billion.

Many individual think tanks in the U.S. are larger than the entire sector in most other countries of the world. The median think tank in our sample had a revenue of USD 39m, expenditures of USD 32m, held assets worth USD 87m, and had 211 employees.

“America’s think tank sector is far bigger, and far more influential, than most people realize,” said Hans Gutbrod, Executive Director of Transparify. “This underlines the importance for think tanks to be transparent about who funds them, and for what purposes.”

Transparify put together the data to provide fellow researchers, funders and think tanks themselves with a comprehensive snapshot of one aspect of the sector. We would like to emphasize that the most important thing about a think tank is the integrity and quality of its research, not the size of its budget or staff. Therefore, the figures presented permit no conclusions about which think tank is “better” or “worse” than its peers – only which is bigger or smaller in size.

The narrative report and a separate data set in Excel format can be accessed from our publications page.

Please follow the On Think Tanks blog for more detailed analyses of the data presented here and to join in discussions of the findings. Also, follow us on Twitter or connect on Facebook to get notified of reactions by journalists, bloggers and assorted wonks.

To request the think tank data in Excel, sign up here.

New Discussion on Think Tank Funding in the US

Earlier this week, the New York Times published a piece on foreign funding of US think tanks. The article by now will be familiar to most people interested in think tanks in the US, but not to all of our readers in other places. (To be clear, we were not involved with it.) We thus wanted to highlight key pieces on this debate. The ongoing discussion complements earlier debates, which we have summarized in four documents.

In a first post, we will highlight key contributions. Subsequently, we will also publish a more detailed comment.

The item by the New York Times is here.

There are two more detailed responses, that we recommend to any reader. David Roodman describes his take, as a former think tank researcher. Enrique Mendizabal provides a detailed discussion, putting the discussion in broader context. (Routine disclosure: Transparify is part of the OnThinkTanks Labs, a group of policy research ventures.)

Think Tank Watch keeps a roster of responses, that are updated regularly, here.

Among think tank responses, the ones we have seen at this point include

  1. response by Strobe Talbott, the President of the Brookings Institution.
  2. official statement by the Brookings Institution.
  3. statement by the Center for Global Development.

We welcome the debate. In the discussion, people have disagreed what to make of the article. Where we see agreement, hopefully, is that we need more transparency. In the past this has often been seen as a side issue. The debate illustrates that transparency demonstrates confidence in the integrity of one's research. It is central to the credibility of think tanks.

More to follow.

Disclosing Funding Data to the Media: Why Shoot Yourself in the Foot?

Guest blogger Robert Bourgoing argues that think tank managers should welcome greater scrutiny of their funding data by the media. The views expressed in this blog are those of the author alone, and may not reflect the views of Transparify.

Recently, the Sunlight Foundation had a great 7-part blog series listing ‘50+ reasons not to release open data’: apathy, confusion, it’s hard, cost, staffing concerns, legality, accuracy.

One important reason which I believe was missing from the list is the concern that it could unleash unwanted scrutiny, especially from journalists. After all, good news generally doesn’t make the news.What guarantees that disclosing funding data will not backfire at some point, especially when you’re a large organization dealing with multiple partners?

It is naturally tempting to not fully walk the transparency talk. This was made clear in a conversation I once had with a senior manager of an organization widely regarded as highly transparent:

“We are presenting information and data in a way that is positive to [us]. We show the main performance indicators, the success stories, the positive changes brought by [us]. But we’re not necessarily going to focus on a country which is not working because of all kinds of other contextual information that we don’t necessarily want to talk about or go in much detail. It makes sense: we’re not going to shoot ourselves in the foot”.

Does it really make sense? I was confronted by this question when I tried to initiate a training program for media representatives to make use of a former employer’s funding data. “Why invite the press to dig up stories that could potentially be embarrassing,or create more communication crises than we could deal with?” I was asked. Here is what I think:

  • Being open about what goes wrong (and what you do about it) is good for your reputation. It shows courage, a sense of responsibilities and seriousness regarding transparency. Transparency is not meant to paint a rosy picture of reality but to highlight things as they are: successes AND challenges AND failures. Failure is okay as long as it allows you to learn and to act on what needs improvement. Running a negative story yourself – taking the time to prepare, put things into context, show what is being done to address the problem – will always be better than fighting allegations of a cover-up.
  • Bad news may be good news when it is factual, fair and balanced.It can help to flag problems while there is still time to do something about them. Large think tanks, global organizations and multi-stakeholder partnerships cannot watch over everything everywhere. Providing journalists with easy access to the whole story about their funding data may serve as an early warning system, to flag issues before it is too late, to limit the damage done by mismanagement, misuse of funds or corruption.

Embracing transparency half-heartedly maybe a more risky option than not being transparent at all, a missed opportunity to work alongside the media for positive outcomes.

Robert Bourgoing is an independent consultant and aid transparency expert. He maintains a blog and a LinkedIn discussion group on the demand side of aid transparency in developing countries.

Arguments for Aid Transparency Equally Apply to Think Tanks

Guest blogger Nicole Valentinuzzi of Publish What You Fund explores common space shared by the aid transparency movement and efforts to make think tank funding more transparent. Transparify does not edit the content of guest blogs; the views expressed in this blog are those of the author alone, and may not reflect the views of Transparify.

Every year, Publish What You Fund produces an Aid Transparency Index (ATI) to rank the world’s biggest donors according to how transparent they are about the aid they give. The ATI has become the industry standard, assessing the state of aid transparency among the world’s major donors, while encouraging progress and holding them to account.

It is a fantastically useful tool for monitoring the progress made by donors with implementing their own commitments to make aid transparent. The ATI can work as both a carrot and a stick.

For example, in many cases, donors working to improve their aid transparency are keen to have their efforts reflected in the ATI. The deadline for collecting data for last year’s Index was 31st July, so donors had until the end of that month to make one final attempt at improving their ATI ranking – and several of them did, with a flurry of activity and phone calls in the final days of July.

Year-on-year, donors can improve either by making the information they already publish comprehensive for all their activities, or by publishing information items for the first time. This is fundamentally what makes for a good index - incentivizing those being measured to change their behaviour.

The good news in our field is that all the world’s largest donors have signed up to the International Aid Transparency Initiative (IATI), the only internationally-agreed standard for publishing aid data. As part of this commitment, they have said they will publish all their aid information to IATI by the end of 2015. (Our Aid Transparency Index also measures this commitment.)

This and other lessons learned by the aid transparency movement can also be applied to think tank transparency.

 So why do we bother?

Well, put simply, there is too little readily available information about aid, and this undermines the efforts of both sides, those who give and those who receive it. Knowing what is being spent where, by whom, and with what results is the basic foundation for increasing aid effectiveness.

Once all of the world’s largest donors are publishing to IATI, we’ll be able to track the money right down the development chain. Being able to follow the money from a donor all the way to the specific project it funds will make it possible to also track donor funds to individual think tanks in developing countries.

 Aid transparency is important because without it:

  • Donor governments don’t know what other donors are spending or planning to spend, leading to the duplication of efforts in some areas and under-funding in others. Without aid transparency, donors cannot coordinate to achieve the maximum impact with their scarce resources.        
  • Recipient governments struggle to know how much aid is invested in their country, let alone where and how it is spent.
  • Civil society, including NGOs, legislators and citizens, who have the right to know what aid is coming into the country and what it’s being spent on, remain in the dark.

These arguments for aid transparency can equally be applied to think tank transparency, where it is just as important to be able to follow the money.

Nicole Valentinuzzi is the communications manager of Publish What You Fund, a not-for-profit organisation that campaigns for aid transparency. The campaign was originally launched in 2008 by a coalition of governance, aid effectiveness and access to information organisations.

When Think Tanking Hurts the Poor: Egypt and Beyond

Two decades ago, the Egyptian Center for Economic Studies think tank was formed with a ten million dollar endowment by USAID. According to the Washington Post, the think tank, which “gathered captains of industry in a small circle”, then advocated for a privatization program that eventually led to the sell-off of state assets worth 104 billion dollars. Apparently, less than ten percent of that value went into state coffers – the rest was lost to high-level corruption involving senior officials closely tied to the think tank. In total, the Washington Post reported, the losses to the Egyptian taxpayer of that privatization program exceeded the total amount of aid provided by the US to Egypt over the course of six decades.

While it would be facile to pin the blame for this sorry saga on a single think tank, it does highlight that some donor-funded think tanks can punch far above their weight when it comes to influencing political and economic decisions with massive implications for economic development and poverty reduction efforts. 

Throughout the developing world, donor-funded think tanks are now weighing in on domestic political debates on issues as diverse as democratic reforms, foreign affairs, military doctrine, economic governance and social policy. Having worked for a think tank in an emerging economy ourselves, we at Transparify strongly believe that think tanks can play a positive role in enriching national debates and decision-making, especially where there is limited capacity for policy analysis by other players. However, as long as most think tanks remain opaque, it will remain impossible for stakeholders in these debates to separate the wheat from the chaff.

Many think tanks in developing countries are predominantly or even exclusively dependent on foreign donors to carry out their work. Far from requiring these think tanks to be transparent, some donors – notably USAID – on occasions actively abet opacity by their non-profit grantees. Such opacity is not helpful at a time when developing countries are increasingly suspicious of donor-funded think tanks, a suspicion that often extends to all NGOs receiving support from abroad. For example, India is reportedly considering further restricting foreign funding for think tanks and other non-profits.

Policy decisions matter hugely, and developing country think tanks can play an important role in informing and improving them. Donors wishing to improve the quality and integrity of policy-making inside developing countries should do two things. First, donors themselves should disclose which think tanks they fund, with how much, and for what work. Second, they should require think tanks to be fully transparent about all the funding they receive before even considering their applications for grants. Financial transparency is not a panacea, but it is an important step on the road to making policies work better for the poor.

This blog is an abridged version of a longer piece written by Transparify that was originally posted on the website of Publish What You Fund, a not-for-profit organisation that campaigns for aid transparency.