The Importance of Being Honest

Money spent on international development is often easier allocated than well spent. Madonna’s non-profit recently collapsed after mismanaging millions of dollars. Bono’s ONE foundation was criticized last year for donating little more than one percent of the 9.6 million Euros it raised in 2008—and for spending more than 5.1 million Euros on staff salaries. In the UK, millions of taxpayer pounds were wasted on poorly constructed wells in Afghanistan, even after earlier internal government reports had warned that the projects would likely fail.

Despite these initiatives’ good intentions, the lack of transparency about their operations has led to public dismay and, more importantly, a failure to create substantive positive change in the communities they seek to help. Unfortunately, such misrepresentation in the sphere of social change and development happens more often than we would like to think.

Madonna’s non-profit, Raising Malawi, crumbled in March when news broke that the organization had spent $3.8 million to build a girls’ school that never came to fruition. A recent report by the Global Philanthropy Group stated that the organization had mismanaged funds and could not account for some of the money that had been spent. It also alleged that funds had been used to pay for a golf club membership for the incoming head of the school. This financial fiasco was both disrespectful to donors and deleterious to the community, as the organization has failed to bolster education there.

While this was a particularly egregious case, less obvious instances of misstating a project’s mission or accomplishments are still surprisingly common. Often, organizations don’t blatantly embezzle or misuse money, but they use it inefficiently or misrepresent their activities to the public. According to the website CharityNavigator.com, which rates American charities based on their financial management, many charities spend over 50 cents to raise one dollar. Similarly, non-profits like Bono’s sometimes spend significantly more on operations than on doing good. Using such large proportions of donated funds for purposes other than directly doing good misleads donors who are told they are investing in projects that will create social impact.

This is not to say that non-profits mask their inefficiencies and errors out of bad intentions. Rather, non-profits feel pressure to produce positive outcomes. In today’s philanthropy sector, claiming positive results is rewarded, while admitting mistakes can damage an organization’s support network and funding prospects. This fundamental feature of the social change sector incentivizes misreporting of activities and outcomes. For example, a report on the Hewlett Foundation’s Neighborhood Improvement Initiative notes that even when the program had yet to make tangible positive change at its three sites, “Hewlett staff felt great pressure to demonstrate positive results.”

The disincentive to be honest in social change projects can undermine the social mission of these efforts themselves. By masking the realities of tough situations, we will miss genuine opportunities to make a real change. For instance, had the United Kingdom’s government acknowledged the unfeasibility of the Afghanistan wells project early on, it might have tweaked the project strategy or spent the money on more effective interventions, such as the successful microfinance and schools programs it started in the region.

Honestly admitting mistakes is difficult in the social change sphere, but it can yield insights that will bolster future initiatives. When the Hewlett Foundation admitted that its community development initiative in West Oakland “self-destructed,” it took the opportunity to go beyond the typical “finger pointing” associated with such acknowledgements and instead reflected on the project, using its insights to help improve the Foundation’s other project sites. In another instance, FORGE, a non-profit that helps refugees in Africa, admitted that it was facing a $100,000 budget shortfall in 2008 because it had ended a program that had asked student volunteers to raise $5,000 each to work with the refugees. By publicly sharing its embarrassing misstep, the organization actually attracted donations that helped alleviate its financial problems.

Ann, a university student who ran youth leadership workshops in Uganda, openly shared her mistakes in first imposing American ideas in the program design rather than empowering local peer educators early on to make a difference in their own communities. Her insight could benefit the many students who travel to foreign countries and run projects to help the communities there.

We can learn much from organizations and individuals that already discuss honestly the good and the bad aspects of their projects. Not only can we glean insights perhaps applicable to our own endeavors, but we can also find the inspiration and precedent to be more transparent about our own work for social change.

It is critical that we work towards creating a culture that encourages and rewards transparency in philanthropy and social entrepreneurship. Only then can we begin to avoid the inefficiencies and damage done by floundering projects striving to cover up their mistakes.

Niharika S. Jain ’12 is a Social Studies concentrator in Dunster House. Her column appears on alternate Wednesdays.