Improving and measuring transparency in NGOs: A disclosure index for activities and projects

• Author: José Miguel Tirado‐Beltrán,J. David Cabedo,Amparo Maset‐LLaudes,Iluminada Fuertes‐Fuertes
• Date: 01 March 2018
• Published date: 01 March 2018
• DOI: http://doi.org/10.1002/nml.21298

RESEARCH ARTICLE

Improving and measuring transparency in NGOs:

A disclosure index for activities and projects

J. David Cabedo | Iluminada Fuertes-Fuertes | Amparo Maset-LLaudes |

José Miguel Tirado-Beltrán

Jaume I University

Correspondence

José Miguel Tirado-Beltrán, Department of

Finance and Accounting and Institute for Local

Development (IIDL), Universitat Jaume I, Av. de

Vicent Sos Baynat, s/n. 12071 Castellón. Spain.

Email: tirado@uji.es

Nongovernmental organizations (NGOs) are established

not with the aim of making profits but rather to provide

social values by implementing different projects and

activities. Transmitting complete information about these

projects to society is a key element of transparency, as

they operate within an atmosphere of public trust.

Although there is a large body of literature on transpar-

ency in NGOs from a global perspective, very little

research has been conducted on transparency within the

area of projects and activities. This study takes a deeper

look at this line and contributes to the literature on trans-

parency in NGOs by proposing an index to measure the

information transparency of the projects implemented by

these organizations. The index captures three dimensions

of the information about the projects (technical, financial,

and scope) and makes it possible to: analyze the level of

transparency of the portfolio of projects, detect the spe-

cific aspects that could be improved in each organization,

and carry out comparisons among organizations.

KEYWORDS

NGOs, non-profit sector, project portfolio transparency,

transparency index

1|INTRODUCTION

Nongovernmental organizations (NGOs) play a vital role within our society. This role has become

even more important in recent years as a consequence of government cuts in the resources allocated

for social purposes. Indeed, the cutbacks which, in response to the crisis, have been introduced by

governments in the amounts budgeted for social affairs have driven NGOs to start working in areas

which were previously covered by government programs. In addition, and also as a result of the eco-

nomic crisis, the number of people whose basic necessities are not covered, and who therefore

Received: 2 December 2016 Revised: 18 October 2017 Accepted: 25 October 2017

DOI: 10.1002/nml.21298

Nonprofit Management and Leadership. 2018;28:329–348.wileyonlinelibrary.com/journal/nml © 2017 Wiley Periodicals, Inc. 329

receive aid from NGOs, has risen sharply. It could therefore be said that organizations of this kind

have become a key element not only to help meet the needs of the population but also for the actual

functioning of the system itself, by mitigating the social tensions that arise in times of need.

The activities carried out by this type of organizations cover a wide range of groups (stake-

holders): fund donors, both public and private, the beneficiaries of the projects and activities, the

people related with those beneficiaries, volunteers, workers, etc. All these groups insist, either

directly or indirectly, on being informed on the activities carried out by the organizations with which

they have some kind of relationship. And these organizations have the moral obligation to satisfy

the informational needs of these groups. In short, they have the obligation to be transparent. NGOs

have to be able to convey the added value provided by their activities to society by implementing

the actions they consider necessary to do so and which result in improved transparency.

A growing number of studies dealing with transparency in nongovernmental organizations have

appeared in the literature. But all of them have approached transparency from a global perspective.

That is, they analyze transparency from a viewpoint that considers the organization as a whole.

Nevertheless, we have not found any studies that concentrate on analyzing the extent to which this

transparency works at the micro level; that is to say, to what extent NGOs are transparent in the

specific actions they carry out in their projects, which is an aspect where transparency is essential

for certain stakeholders.

This circumstance has led us to consider a new perspective in the analysis of the transparency.

Thus, the main contribution of this study is that it moves away from the traditional global approach

and examines the information about the actual projects and activities of the NGO, as the crucial ele-

ments needed to generate social value and to reinforce its legitimacy in the eyes of society. More-

over, this work contributes to the literature on transparency in NGOs with a methodology that

allows it to be captured and quantified by means of an index.

This study proposes an index for measuring information transparency in relation to the projects

carried out by NGOs. This index, which summarizes the three dimensions of information that are

required by outside users (technical, financial, and scope), is constructed from a set of items that

measure the informational content of the different aspects analyzed in each of these dimensions.

Application of the index makes it possible not only to analyze the level of transparency of the

portfolio of projects of the organization, but also to determine the specific aspects in which transpar-

ency could be improved, by means of an individualized analysis of the items it is made up of. In

fact, the empirical application that was carried out based on the information published in the social

reports of 49 Spanish NGOs distinguishes the points in which the transparency of the projects is

acceptable from those in which it could clearly be improved. This latter group of aspects includes

the quantification of the social impact of the projects, which is information that is not disclosed by

any of the organizations analyzed.

The rest of the study is structured in four sections. In the first of them, we review the main stud-

ies conducted on transparency in nongovernmental organizations. The Section 3 covers the proposed

index for measuring transparency in the projects carried out by these organizations. Section 4 shows

an empirical application of the calculation of the index for a set of Spanish organizations. And in

the last section, the main conclusions from the study are discussed.

2|STUDIES ON TRANSPARENCY IN NGOs

Transparency can be considered a dimension within a wider concept, namely, accountability (see

Fox, 2007). Accountability is a multidimensional issue (Saxton & Guo, 2011) that includes

330 CABEDO ET AL.