The Transparency of Philanthropic Foundations

Transparency is the fundament of any further accountability of NPOs towards their stakeholders. However, speaking for the German case, the sufficiency of NPO transparency is repeatedly contested – in the scientific and the political area, but even amongst NPOs themselves as the following argument will show.

In the context of a joint research project of Hertie School of Governance and Centre for Social Investment at Heidelberg University on the “Positioning and Contributions of German Foundations” we conducted the first representative survey on the self-perception of German Foundations. Besides other topics, we asked if foundations agree that they should be more open, more transparent. With an approval rate of 31%, transparency was the second often named organizational problem (after insufficient funds with 64%).

Our empirical data enable us to test for correlations between the self-perception of the foundations as “adequately transparent” and structural factors like budget size, mode of operation (grant-making, operative, mixed), number of regular employees and volunteers, founding date, and so on.

The focus of the research paper will lie on the effect of budget size on the self-perception of foundations: Building on current research we know the more professionalized a foundation is, the more it strives for “rationalization”. We assume that the “professionality” of a foundation (e.g. having full-time employees with specific educational backgrounds and regular trainings) increases with its budget. Testing may proof, if more professionalized foundations perceive themselves as more transparent because of their higher capacity to be transparent, or if the opposite is the case and they are more sensitive to the lack of transparency in their organization. Furthermore, one may also argue smaller foundations think of themselves more often as being transparent enough, because they are better integrated locally and therefore have a more direct exchange with their stakeholders.