ORI GIN AL PA PER

Determining Factors in Online Transparency of NGOs:A Spanish Case Study

Marıa del Mar Galvez Rodrıguez •

Marıa del Carmen Caba Perez • Manuel Lopez Godoy

Published online: 15 October 2011

� International Society for Third-Sector Research and The John’s Hopkins University 2011

Abstract The social demand of transparency in nongovernmental organizations

(NGOs) has increased. This is due to their social and economic impact and the

incidences of fraudulent behavior by some international NGOs managers. In this

regard, an improved and abundant dissemination of information by NGO is

essential. The Internet is considered a strategic communication tool in such dis-

semination. Following an explanatory research line, this article aims to identify the

influence of the factors ‘‘organizational size’’, ‘‘organizational age’’, ‘‘public

funding’’, ‘‘legal form’’, ‘‘internationalization’’, ‘‘board size’’, and ‘‘board activity’’

in the dissemination of web page information. The results show that only the factors

of ‘‘organizational size’’, ‘‘public funding,’’ and ‘‘organizational age’’ are statisti-

cally significant.

Resume La demande sociale pour une transparence au sein des Organizations

non-gouvernementales (ONG) s’est accrue. Ceci est du a leur impact social et

economique ainsi qu’aux consequences d’agissements frauduleux par certains

responsables d’ONG internationales. A cet egard, une diffusion optimisee et

abondante d’informations par l’ONG est essentielle. Internet est considere comme

un outil de communication strategique pour une telle diffusion. Adoptant une ligne

de recherche explicative, cet article s’attache a identifier l’influence des

facteurs « taille organisationnelle », « age organisationnel », « financement pub-

lic », « forme legale », « internationalisation », « taille du conseil

M. M. Galvez Rodrıguez � M. C. Caba Perez (&) � M. Lopez Godoy

Departamento de Direccion y Gestion de Empresas, University of Almerıa, La Canada de San

Urbano, s/n, Almerıa 04120, Spain

e-mail: ccaba@ual.es

M. M. Galvez Rodrıguez

e-mail: margalvez@ual.es

M. Lopez Godoy

e-mail: malopez@ual.es

123

Voluntas (2012) 23:661–683

DOI 10.1007/s11266-011-9229-x

d’administration » et « activite du conseil d’administration » dans la transmission

des informations d’une page Web. Les resultats indiquent que seuls les facteurs tels

que « taille organisationnelle », « financement public » et « age organisation-

nel » sont statistiquement importants.

Zusammenfassung Die gesellschaftliche Forderung nach Transparenz in nicht-

staatlichen Organisationen hat zugenommen. Grund dafur sind der soziale und

wirtschaftliche Einfluss nicht-staatlicher Organisationen sowie Falle betrugerischen

Verhaltens seitens einiger Leiter internationaler nicht-staatlicher Organisationen. In

diesem Zusammenhang ist eine verbesserte und ausgiebige Informationsweitergabe

der nicht-staatlichen Organisationen ausschlaggebend. Das Internet gilt hierbei als

ein strategisches Kommunikationsmittel. Einer erklarenden Forschungslinie folgend

zielt dieser Beitrag darauf ab, den Einfluss der Faktoren ,,Organisationsgroße‘‘,

,,Alter der Organisation‘‘, ,,offentliche Finanzierung‘‘, ,,Rechtsform‘‘, ,,Interna-

tionalisierung‘‘, ,,Vorstandsgroße‘‘ und ,,Vorstandstatigkeiten‘‘ bei der Informa-

tionsweitergabe mittels Websites zu bestimmen. Die Ergebnisse zeigen, dass

lediglich die Faktoren ,,Organisationsgroße‘‘, ,,offentliche Finanzierung‘‘ und ,,Alter

der Organisation‘‘ von statistischer Bedeutung sind.

Resumen La exigencia social de transparencia en las Organizaciones No

Gubernamentales (ONGs) ha aumentado. Esto se debe a su impacto economico y

social y a la incidencia del comportamiento fraudulento de algunos directores de

ONGs internacionales. En este sentido, resulta esencial una difusion mejorada y

abundante de la informacion por parte de las ONGs. Internet se considera una

herramienta de comunicacion estrategica en dicha difusion. Siguiendo una lınea de

investigacion explicativa, este documento tiene como objetivo identificar la influ-

encia de los factores ‘‘tamano de la organizacion’’, ‘‘antiguedad de la organizacion’’,

‘‘financiacion publica’’, ‘‘forma legal’’, ‘‘internacionalizacion’’, ‘‘tamano del cons-

ejo’’ y ‘‘actividad del consejo’’ en la difusion de informacion en la pagina Web. Los

resultados muestran que solamente los factores de ‘‘tamano de la organizacion’’,

‘‘financiacion publica’’ y ‘‘antiguedad de la organizacion’’ son estadısticamente

significativos.

Keywords Transparency � NGOs � Best practice � The Internet � Disclosure

Introduction

In recent years, the recognition of the work of nongovernmental organizations

(NGOs) in society has increased. The activities that NGO carry out address market

and state shortcomings (Weisbrod 1977). Putnam (1992) pointed out that the

particular role that NGO plays due to its features such as trust, norms, and networks

improves the efficiency of society. According to this, the social activity of these

institutions affects not only their direct beneficiaries but also influences the

improvement of the surrounding social and economic environment (Brown and

Kalegaonkar 2002).

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Although the objectives of NGO are focused on serving public interest, their

legitimacy has been undermined by recent incidences of fraud by directors of some

international NGOs (Greenlee et al. 2007). Due to these circumstances and given the

societal importance of these entities, there is an increased demand for transparency

not only with respect to the publication of NGO’s results but also with respect to the

governance practices of such organizations (Montserrat 2008). To respond to such

demand, NGO should provide a global overview of the entity, reporting on both

their economic and organizational aspects as well as on their activities (Granados

et al. 2010).

Furthermore, in order to be transparent NGO should communicate the

information to society. In this regard, the Internet is a strategic tool in the

dissemination of information due to its availability, low cost, and accessibility

(Bonson-Ponte et al. 2006). Web pages are an excellent connecting link between

stakeholders and NGO (Oehler 2000). Although the use of the Internet in NGO has

increased (Hart 2002), the studies that analyze the use of the Internet as a tool for

the disclosure of information (Kang and Norton 2004) and the exploratory factors

that affect NGO online transparency (Saxton and Guo 2011) are scarce. The

literature is mainly focused on the economic aspects both in terms of online

visibility (Verbruggen et al. 2011) and the exploratory factor that affects such

disclosure of information (Sargeant et al. 2007). Christensen and Mohr (2003)

posited that there are several reasons for this lack of research: the relative newness

of the interest in NGO reporting, the lack of accessible information, and the

diversity of entities and their reporting practices.

Moreover, to guarantee the appropriate access to the information the account-

ability mechanisms are needed (Keating and Frumkin 2003; Murtaza 2011).

However, in an international level there are not specific legal rules for NGO

transparency. In this regard and taking into account what is done in other sectors,

NGO are adopting voluntarily mechanisms of accountability that are drawn up by

external agents (Paton and Foot 2000) or by peer organizations (Szper and Prakash

2011).

Based on these precedents and in a Spanish context, this article sets out to

identify the influence of some of the most relevant contingent factors, according to

the literature reviewed, on the level of NGO online transparency. To fulfill this

objective, this article is organized as follows:

(1) Analysis the level of online transparency of Spanish NGO, and

(2) Identification of the influence of the contingent factors such as ‘‘organizational

size’’, ‘‘organizational age’’, ‘‘public funding’’, ‘‘legal form’’, ‘‘international-

ization’’, ‘‘board size’’, and ‘‘board activity’’ in the level of information

disclosed by such NGO through their web pages.

NGO Transparency in the Digital Age

The demand for transparency in the management of public and private entities

(Mutula and Wamukoya 2009; Soto 2009; Tagesson et al. 2009) has been

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transferred to the NGO sector; in fact, the NGO transparency is nowadays one of

issues with most interest (Paton and Foot 2000). Murtaza (2011) noted that there are

several reasons that justify the need of NGO transparency: it representativeness and

contribution to the society, the doubtful quality of NGO’s projects, and the cases of

abuse of power in recent years. Regarding the fraudulent incidents, Greenlee et al.

(2007) posited diverse cases such us AmeriDebt, Big Charity Scam, Dallas Charity.

Likewise, Greenlee et al. (2007) pointed out that the most frequent frauds in NGOs

are the misappropriation of assets, the corruption, and the falsification of an NGO’s

financial statements.

From a theoretical perspective, information transparency is needed to mitigate

the information asymmetries between the principal and the agent (Gonedes 1978;

Leftwich et al. 1981). For NGO, the transparency increases their credibility as it

allows that both large donors and small donors can attain better and more

information about the decisions of the organization (Keating and Frumkin 2003).

Some authors such as de Andres-Alonso et al. (2006) and Szper and Prakash (2011)

claimed that transparency reduces the conflict of interest and the mismanagement of

resources. In addition Burger and Owens (2010) noted that the advantages of

transparency affects are not just with respect to the relations with donors but also

with all the stakeholders of the organization.

Regarding institutional theory and resource dependence theory, the disclosure of

information is considered as a response to the requirements of governments and

other stakeholders (Meyer and Rowan 1977), specifically, the pressures exerted by

the major resource providers of the organization (Froelich 1999). Some authors such

as Bies (2010) and Verbruggen et al., (2011) noted that NGO are characterized by

their volatility due to their dependence on external funding. Furthermore, the

voluntary dissemination of information encourages their legitimacy in their moral

dimension as it enhances the trust of the stakeholders in the organization (Suchman

1995). Therefore, NGO disclose voluntarily information to strengthen their image as

agents that serve society (Taylor and Warburton 2003; Christensen and Mohr 2003).

Hooper et al. (2008) defined transparency as access to financial information.

Vaccaro and Madsen (2009) and Burger and Owens (2010) posited that

transparency is related to information about the activities that the organization

carries out and organizational governance. Therefore, we consider that informative

transparency should incorporate not only financial information but also that which

affects the functioning of the organization.

Murtaza (2011) pointed out that this information should be communicated in all

directions: upward to donors and home and host governments; inward to their

boards; downward to communities, staff and partners, and sideward to NGO bodies.

Thus, transparency not only serves to keep stakeholders informed about the

functioning of the organization but also makes possible their participation in the

same (Eggert and Helm 2003). Transparency, therefore, has gone from being an

operational issue to becoming a strategic issue. It relates to the legitimacy of the

organization, the verification of best practice by its managing members, as well as to

the control mechanisms that avoids mismanagement (Campos et al. 2011).

With respect to the procedures of accountability that guarantee a NGO’s

adequate transparency, it is important to point out that, in general, there is no

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specific law mandating such transparency (with some exceptions as Guatemala),

indicating that these mechanisms are adopted voluntarily. Such voluntary mech-

anisms may be classified in two groups: those self-regulatory rules known as codes

of conduct, ethics or best practice (Bies 2010), and those which are audited by

external agents, such entities providing a type of quality certification (NGO

Benchmarking Standard). Among the diverse codes of best practice,1 and in

particular, those from Spain, the code of the Lealtad Foundation called the ‘‘Guıa de

la Transparencia y las Buenas Practicas’’ (Transparency Guide and Best Practice) is

one of the most remarkable. This code not only sets out a guide for best practice but

also is a tool that measures the level of NGO’s transparency. Consequently, the

Lealtad Foundation serves to develop credibility by issuing a report and a certificate

of transparency for those NGOs, that voluntarily agree to be assessed, based on

compliance with the nine principles of its code. According to the information

examined in the nine principles of the ‘‘Guıa de la Transparencia y las Buenas

Practicas’’ the first principle analyzes the board functioning, the second and third

principles are related to the activities of NGO, and the fourth evaluates the

communication of the information. The sixth, seventh, and eighth principles analyze

economic information that is related to the source and application of funds and

compliance with legal requirements. Finally, the ninth principle examines the

relationship with volunteers.

Moreover, the transparency does not just refer to access of information,

intentions, and behaviors but also is related to disclosure of the same (Turilli and

Floridi 2009). The Internet has diverse attributes that promote the communication of

information such as the availability, accessibility, and low cost, and updated and

segmented information (Wanderley et al. 2008). Both in the business sector and the

public sector, relations between the organization and its stakeholders have improved

with the use of Internet. In the business sector, Bonson and Flores (2011) and

Bonson-Ponte et al. (2006) pointed out that with the use of Internet a new model of

business has created as this tool facilitates the communication in commercial

transactions and the exchange of information. Gandıa (2008) noted that the use of

Internet improves the relationship with investors and enhances the best practices in

corporate governance. Moreover, Vaccaro and Madsen (2009) posited that the use

of information and communication technologies (ICT) and, particularly, Internet-

based tools is a new practice of transparency that can be termed ‘‘dynamic

transparency’’. This new practice of transparency allows not only the unidirectional

exchange of information between the company and the stakeholders but also among

stakeholders. Madsen (2009) added that the dynamic transparency promotes justice

and avoids crisis and the manipulation of information. In the public sector, the

Internet allows organizations to interact with users of their products and services

thus facilitating a more adequate response to the needs of citizens (McIvor et al.

2002; Smythe and Smith 2006).

In the NGO sector, the use of Internet is also regarded as a tool to enhance

information transparency. Hackler and Saxton (2007) and Ingenhoff and Koelling

1 Code of Ethics and Conducts for NGOs; Principles for Good Governance and Ethical Practice: A Guide

for Charities and Foundations, etc.

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(2009) noted that nowadays the use of the Internet as a tool for internal

communication is adequate; however, its use as a mechanism of communication for

external stakeholders and peer organizations is scarce. Likewise, the Internet is

regarded as a potential tool for competitive advantage (Greenlee et al. 2007) and

also as a source of information and a mechanism to improve fundraising,

recruitment of personal, and marketing of the NGO (Oehler 2000). Moreover,

Cramer (2009) argued that the Internet’s potential as a channel to communicate

relevant information is not being sufficiently utilized. Denison (2009) posited that

this underutilization is due to diverse reasons, mainly, boards consider that the cost

of this tool is greater than its utility and thus the Internet is not included in the

strategy of the organization. Another reason is the lack of resources and personal

with technological knowledge within NGO.

Literature Review

Diverse authors have analyzed the relevance of Internet in disseminating

information (Hedlin 1999; Ettredge et al. 2002; Oyelere et al. 2003; Lim et al.

2007). According to Marston and Polei (2004), this area of research is divided into

two lines of work: descriptive and explanatory. The first assesses the use of internet

as a tool to disclose information, while the second identifies factors which affect

disclosure information.

According to the descriptive research line, most of the studies have focused on

the business sector, usually offering an analysis of the behavior of organizations

within a country (Gowthorpe and Amat 1999) or making a comparison between

countries (Deller et al. 1998). This, although to a lesser extent, has been transferred

to other sectors such as NGO both in the analysis of individual countries (Kang and

Norton 2004) and in the comparison between countries (Naude et al. 2004).

In keeping with the explanatory research line, potential factors influencing the

dissemination of information are liquidity (Oyelere et al. 2003), leverage (Xiao et al.

2004), internationalization (Oyelere et al. 2003), and profitability (Khanna et al.

2004). Using these studies as a base, other authors have carried out investigations in

the public sector (Fisher et al. 2005; Caba et al. 2008), although few are in relation

to the NGO context.

Based on the literature review of disclosure information (Courtis 1976; Cooke

1989; Depoers and Firth 2000; Owusu-Ansah 2000; Oyelere et al. 2003; Gul and

Leung 2004; Marston and Polei 2004; Gutierrez-Nieto et al. 2008; Gallego et al.

2009, Saxton and Guo 2011; Verbruggen et al. 2011), we have identified the

following contingent factors: ‘‘organizational size’’, organizational age’’, ‘‘public

funding‘‘, ‘‘legal form’’, ‘‘internationalization’’, ‘‘board size’’, and ‘‘board activity’’.

Size

Utilising agency theory, many studies have found that large companies disclose more

information (Oyelere et al. 2003; Gul and Leung 2004; Marston and Polei 2004;

Gallego et al. 2009). This factor also applies to microfinance institutions, which are

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entities that in many cases began as NGO and then expanded its activities by offering

financial services (Gutierrez-Nieto et al. 2008). In prior research, the factor of larger

size is seen to be associated positively with a greater use of the Internet to

disseminate information in NGO (Saxton and Guo 2011; Verbruggen et al. 2011).

Organizational size is most commonly measured by number of employees

(Forman 2005; Al-allak 2010). In the case of NGO, the size of the organization is

related to the number of volunteers (Steinberg 1997; Wallace 2006). Authors such

as (Zarzuela and Anton 2008) emphasized that, based on the theory of reasoned

action, attracting and involving volunteers is associated with the systemic use of

available information. Likewise, authors such as (O’Hanlon and Chang 2007)

demonstrated that, along with the number of volunteers and staff of the

organization, the budget is one of the criteria which has the most influence on the

development of an NGO’s web page.

Therefore, we argue that a larger organizational size affects positively the online

transparency of NGO.

Organizational Age

Organizational age is considered as a factor that improves the financial reporting in

publicly listed companies (Courtis 1976; Owusu-Ansah 2000). Gonzalez and

Canadas (2005) found that, in NGOs with a long tradition, managers demonstrated a

greater predisposition to improve financial information reporting. In line with the

positive effects of this factor, Romero et al. (2008) demonstrated that the reputation

of an NGO implies a greater public visibility. Although organizational age is

considered as an important factor in NGO, no significant results were found (Saxton

and Guo 2011). The number of years since the organization was created is the most

usual measure of the organizational age (Courtis 1976; Owusu-Ansah 2000; Saxton

and Guo 2011). As a result, longer organizational age as a factor that enhances

positively the online transparency in NGO is considered.

Public Funding

Gutierrez-Nieto et al. (2008) noted that in microfinance institutions the visibility of

financial and social information is tied to the pressure by various stakeholders of the

organization, including donors. In this sense, NGO donors and, more concretely,

donors which are public entities, significantly influence the organization’s

disclosure, both on an internal level and external level. On the external level,

public funding is perceived as an indicator of good reputation, and thus this factor

increases societal trust in publicly funded NGO (Okten and Weisbrod 2000).

Frumkin and Kim (2001) showed that public funding enhances the number of

private donations. On the internal level, it is a factor that influences the efficiency of

the organization. Moreover, Fafchamps and Owens (2009) noted that those NGO

whose main financial resources come from public entities prepare and disclose more

financial information. This contribution was empirically proven in the research of

Verbruggen et al. (2011) whose results confirmed the positive relation between

public funding and disclosure of financial information.

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To measure public funding, the subsidies received from the central and local

governments are normally used (De Andres-Alonso et al. 2005; Marcuello and Salas

2000). Therefore, we assumed that greater public funding is positively associated

with the online transparency of NGOs.

Legal Form

In Spain, the legal form of NGO is association or foundation (Valor and De la

Cuesta 2006). Although in both cases, the final goal is improving societal welfare,

there are differences in some key aspects such as the level of dependence on the

public sector, management decision making processes and internal operations, and

economic relevance (Calderon 2004). Marcuello and Salas (2000) considered that

legal form was an important factor as this variable may affect the internal controls

of the organization. Moreover, Aksartova (2003) noted that foundations are more

concerned about demonstrating their legitimacy than other NGOs. This is due to the

fact that the large private resources that their founders have directed into the public

sphere arouses attention and criticism. Given the specific characteristic of

foundations, we consider that the legal form of a foundation is a factor that

promotes the online transparency of NGOs.

Internationalization

Falkenbach and Toivonen (2010) posited that internationalization enhances

transparency due to it improves market stability and environment certainty. Luo

and Du (2005) added that the development of internationalization is related with use

of the Internet to disseminate information as it reduces intermediaries and some

transaction costs. Furthermore, Cooke (1989) and Depoers and Firth (2000) showed

a positive relation between online disclosure of information and internationaliza-

tion. Therefore, we assume that internationalization affects positively NGO online

transparency.

Board Size

De Andres-Alonso et al. (2009) noted that the determinants that are examined in

corporate governance can be used in NGO as the role played by the boards in both

organizations is analogous. Authors such as Gallego et al. (2009) and Saxton and

Guo (2011) showed the positive relation between the board size and the online

disclosure of information in corporate and NGO organizations, respectively.

Moreover, Murtaza (2011) pointed out that the members of the board in NGO are

interested in the disclosure of information as it is considered a mechanism to

safeguard its reputation.

The majority of the researchers that analyze board size both in the business

(Gallego et al. 2009) and NGO sector (Saxton and Guo 2011) measure this factor

according to number of board members. Therefore, we consider that a large board

improves NGO online transparency.

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Board Activity

Gallego et al. (2009) and Holland (2002) pointed out that the activity of the board

members leads to better transparency. Furthermore, Gallego et al. (2009) confirmed

that there is a negative relationship between the size of the boards and the use of

Internet to disseminate information. Moreover, Saxton and Guo (2011) found a

significant result in the positive association of the board performance and the online

disclosure of NGO information.

The literature shows that the number of board meetings is a good measure for

board activity (Garcıa Lara et al. 2009; Lorca et al. 2011; Vafeas 1999; Xie et al.

2003). Bradshaw et al. (1992) and Inglis and Weaver (2000) pointed out that NGO

board meeting attendance is one of the most important obligations of the board

members.

According to the literature reviewed, we consider that a greater board activity

affects positively in the online transparency.

Methodology

The section below sets out the sample used and the methodology applied.

Sample

To obtain the necessary information, a sample of 130 NGOs that were voluntarily

analyzed by Lealtad Foundation was utilized. As mentioned above, the Lealtad

Foundation has a code of conduct and as well measures the transparency of the

participating NGOs. According to this, a significant feature of the sample is that the

NGOs involved intentionally subject themselves to an accountability mechanism. In

addition, the analysis of Lealtad Foundation is not based on a specific area of work,

size, or legal form; thus, the results can give a global overview of the online

transparency practice of Spanish NGOs.

After determining such sample, the web pages of the selected NGOs were visited

between April and May, 2009. Two NGOs were removed from the sample due to

the unavailability of their web pages. Furthermore, five NGOs within the sample

recently withdrew from their relationship with the Lealtad Foundation. Conse-

quently, the final sample was composed of 123 NGOs.

In relation to the information collected for the analysis of the influence of the

proposed factors mentioned above, the Foundation Lealtad reports of transparency

found on its web pages were used, such information corresponding to the year 2008.

Disclosure Index (IDI)

In line with the methodology of authors such as Saxton and Guo (2011) and

Verbruggen et al. (2011), the use of a IDI was proposed to analyze the information

provided in the NGO web pages. The items selected for this index were stem from

the literature reviewed and the information required in the nine principles of Lealtad

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Foundation code, mentioned in ‘‘NGO transparency in the digital age’’ section. The

index is composed of 29 items.

Having considered that online transparency entails providing overview informa-

tion, this index was comprised of three sections: organizational aspects (IDIo),

activities of the NGOs (IDIa), and economic aspects (IDIe). Each of these sections

contain various items (as), in order to assign a score: if the item appears in the web

page it is assigned ‘‘1’’ and if the item does not appear it is assigned ‘‘0’’ (Table 1).

To asses each section, the sum of the total number of items of each section (as)

displayed on the Web is divided by the total number of items that should be

disclosed (h). The 29 items were divided into four items to analyze the

organizational transparency, eight items to analyze the transparency of their

activities, and seventeen items for the economic aspects. IDI maximum score is 100,

thus the sections mentioned are determined by the following expression

IDIj ¼Ph

j¼1 asj

h� 100

There are varied views on the weighting of information disclosure. Rodrıguez

(2004) did not weigh the information in keeping with the position of previous

research which argued that weighting was subjective (Dhaliwal 1980). In addition,

his position is also supported by research that shows that the results are independent

of the weighting (Choi 1973; Robbins and Austin 1986; Chow and Wong-Boren

1987). Therefore, in this article all factors are assessed with an identical weight. The

IDI is determined by the following expression:

IDI: IDIo þ IDIa þ IDIeð Þ � 1

3

Empirical Study

Once the online transparency level of the NGOs was analyzed, the influence of the

contingent factors in disseminating information through the NGOs Web pages was

identified. Following prior researchers (Saxton and Guo 2011; Verbruggen et al.

2011), a multivariable linear regression analysis was used to test the association

between the factors and the level of online transparency. For the dependent variable,

not only was the score obtained by the index (IDI) considered but also the score

obtained for each of the three sections that comprise the IDI. Thus, four dependent

variables were obtained: online overall transparency (IDI); online transparency of

the organizational aspects (IDIo); online transparency of the activities (IDIa); and

the online transparency of the economic aspects (IDIe).

For independent variables the following factors were considered: ‘‘organizational

size’’, ‘‘organizational age’’, ‘‘public funding’’, ‘‘legal form’’, ‘‘internationaliza-

tion’’, ‘‘board size’’, and ‘‘board activity’’. In accordance with the literature

reviewed, these variables were measured as follows:

• Organizational size, measured as the number of volunteers (size_volunteer) and

the annual budget of the NGO analyzed (size_budget).

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Table 1 Items taken into consideration for the transparency analysis

Score max

asj

Score

min

1. Online organizational transparency 4.00 0.00

a. It provides information on the website: 1.00 0.00

a.1. Are the number of annual meetings of the board members public? 0.33 0.00

a.2. Are the issues discussed in annual meetings by the members of the board

public?

0.33 0.00

a.3. Are the agreements adopted by the members of the board public? 0.34 0.00

b. Information about the members of the board: 1.00 0.00

b.1. Are the names of the members of the board and management team

public?

0.2 0.00

b.2. Are the professions or public positions of the members of the board

public?

0.2 0.00

b.3. Are family relations and relationships with members of the board and

with the management team public?

0.2 0.00

b.4. Are management team curriculum vitae public? 0.2 0.00

b.5. Are the relationships among the members of the board and suppliers and

activity co-organizers public?

0.2 0.00

c. Is the renewal of the board members, public? 1.00 0.00

d. Is the policy to avoid conflicts of interest among the members of the board

public?

1.00 0.00

2. Online activities transparency 8.00 0.00

a. Is the social goal public? 1.00 0.00

b. Is the information provided of the social goal clear and according to the

activity performed and beneficiaries?

1.00 0.00

c. Is the strategic plan public? 1.00 0.00

d. Is the annual plan public? 1.00 0.00

e. Are the reports of monitoring and justifying projects public? 1.00 0.00

f. Are the criteria and process of selecting projects and counterparts approved

by the board, public?

1.00 0.00

g. Is the activities annual report, public? 1.00 0.00

h. Is the information about the activities that volunteers can perform public? 1.00 0.00

3. Online economic transparency 17.00 0.00

3.1. Financial information transparency 6.00 0.00

a. Are the annual cost of private and public fundraising, public? 1.00 0.00

b. Are the annual fundraising, public? 1.00 0.00

c. Are the information about fundraising of the main funders, both public and

private, and the amounts contributed by them public?

1.00 0.00

d. Are the allocations of the funds raised in each activity, public? 1.00 0.00

e. Is the privacy policy of members and donors, public? 1.00 0.00

f. Are the information about the clauses of licensing logo to companies and

institutions public?

1.00 0.00

3.2 Transparency the use of financial resources 11.00 0.00

a. Is the operating cost grouped in three categories: fundraising, programmes-

activities, administration-organizers, public?

1.00 0.00

Voluntas (2012) 23:661–683 671

123

• Organizational age, measured as the number of years since the NGO was created

(age).

• Public funding, measured by the percentage of subsidies received with respect to

the total income by the NGO analyzed (public_funding).

• Legal form, measured as the dummy variable that takes a 0 value if the NGO is

an association and 1 if the NGO is a foundation (legal).

• Internationalization, measured as the dummy variable that takes a 0 value if the

NGO performs its activities at a national level and 1 if the NGO performs its

activities at an international level (internationalization).

• Board size, measured by the number of board members reported (board_size).

• Board activity, measured by the number of annual board meetings

(board_activity).

Hence, the regression analysis models used to assess the association between

dependent and independent variables, mentioned above, where:

Dependent variable: = a ? b1 organizational size ? b2 organizational age ? b3

public funding ? b4 legal form ? b5 internationalization ? b6 board size ? b7

board activity ? l.

where a is the constant term, Xij represents the variables that have an influence on the

information disclosure on the Web, bj is a coefficient vector to be calculated, and l is

the random error term, presumably with identical and independent distribution, with

an average of 0. Likewise, as in the studies by Fisher et al. (2005) the Spearman

coefficient is used to analyze the associations between the independent variables.

Table 1 continued

Score max

asj

Score

min

b. Is the information about the fund applied by each project and area of

work public?

1.00 0.00

c. Are the name of the main suppliers, public? 1.00 0.00

d. Are the entities that participate in NGO’s activities organization, public? 1.00 0.00

e. Is the expenses policy, public? 1.00 0.00

f. Are suppliers selections’ criteria approved by the board, public? 1.00 0.00

g. Is the annual budget of the following year with a explanatory report,

public?

1.00 0.00

h. Is the annual budget of the previous year public? 1.00 0.00

i. Does any information about the tracking system of donors’ funds on the

website?

1.00 0.00

j. Is the economic annual report public? 1.00 0.00

k. Is the audit report public? 1.00 0.00

Resource: Compiled from the transparency guide and best practice of Lealtad Foundation

672 Voluntas (2012) 23:661–683

123

Analysis of Results

Results of IDI

According to Table 2, in general terms, the level of online transparency by Spanish

NGO is low, with results of 30.03%, indicating that the use of Internet to

disseminate information appears underutilized. In addition, the results of the

sections that comprise the index (IDI) show that most of the information available in

the NGOs’ web pages relates to the activities carried out by the relevant NGO

(52.24%), thus indicating a lack of information related to economic (23.43%) and

organizational (14.42%) aspects.

With respect to the results obtained in online activities transparency (IDIa), the

overall presence of information related to social goals, work areas, and beneficiaries

is notable. As well, a high dissemination of the relevant annual report (61.79%) was

evident. However, the NGOs analyzed showed a low interest in reporting by

Internet the planning of their projects. In this respect, the lowest item available was

related to the selection criteria for projects (6.91%).

In the analysis of economic disclosure, it should be noted that the items related to

the application of financial resources were the least available economic information

in Spanish NGOs web pages. In particular, disclosure concerning budget informa-

tion was almost inaccessible. The results do show that most of the NGOs disclose

information about the organizations that collaborate with them, thus suggesting that

this behavior is due to the necessity of maintaining a relationship with such entities

(63.41%). As for the sources of financial resources, there was a high level of

dissemination of annual fundraising and financial statements (48.78%). Little

information was available about the clauses to licensing agreement of NGOs’ logo.

The organizational information is the least disclosed in Spanish NGOs web

pages. The most scored item for the online organizational transparency (IDIo) was

the names of the members of the board (78.05%) while the results were very poor

for the information related to relationships among members of the board and the

management team (1.63%). Therefore, it would appear that NGOs do not consider it

relevant to disseminate this information through their web pages.

Results of the Empirical Study

Following the methodology mentioned above, Table 3 presents the Spearman

correlation coefficient for all the independents variables that were included in the

models. The highest correlation was between public funding and budget (0.811),

thus showing a multi-colinearity problem. To avoid this problem, we opted to not

consider budget and instead just measure the size using the number of volunteers.

Coinciding with the results of Melissa et al. (2001), a direct significant relation

between ‘‘public funding’’ and ‘‘organizational size’’ was shown. This result and

other significant associations presented low levels of correlation; therefore, the rest

of the variables proposed in the regression model were maintained in this study.

Table 4 displays the results of these regression analyses. The coefficients in

Models 1 through 4 (with standard errors in parentheses) indicate the effects of each

Voluntas (2012) 23:661–683 673

123

Table 2 Results of online transparency

Media-itemP123

1 asj � 100� �

=123

Disclosure

index IDI

1. Online organizational transparency, IDIo (max. 100) 14.42

a.1. Are the number of annual meetings of the board members

public?

20.33

a.2. Are the issues discussed in annual meetings by the

members of the board public?

3.25

a.3. Are the agreements adopted by the members of the board

public?

7.32

b.1. Are the names of the members of the board and

management team public?

78.05

b.2. Are the professions or public positions of the members of

the board public?

17.89

b.3. Are family relations and relationships with members of

the board and with the management team public?

1.63

b.4. Are management team curriculum vitae public? 10.57

b.5. Are the relationships among the members of the board

and suppliers and activity co-organizers public?

11.38

c. Is the renewal of the board members, public? 17.89

d. Is the policy to avoid conflicts of interest among the

members of the board public?

5.69

2. Online activities transparency, IDIa (max. 100) 52.24

a. Is the social goal public? 99.19

b. Is the information provided of the social goal clear and

according to the activity performed and beneficiaries?

99.19

c. Is the strategic plan public? 18.7

d. Is the annual plan public? 10.57

e. Are the reports of monitoring and justifying projects public? 60.98

f. Are the criteria and process of selecting projects and

counterparts approved by the board, public?

6.91

g. Is the activities annual report, public? 61.79

h. Is the information about the activities that volunteers can

perform public?

60.57

3. Online economic transparency, IDIe (max. 100) 23.43

3.1. Financial information transparency 29.13

a. Are the annual cost of private and public fundraising,

public?

16.26

b. Are the annual fundraising, public? 55.28

c. Are the information about fundraising of the main funders,

both public and private, and the amounts contributed by

them public?

32.52

d. Are the allocations of the funds raised in each activity,

public?

34.96

e. Is the privacy policy of members and donors, public? 34.15

f. Are the information about the clauses of licensing logo to

companies and institutions public?

1.63

674 Voluntas (2012) 23:661–683

123

independent variable on the online organizational transparency (IDIo), online

activity transparency (IDIa), online economic transparency (IDIe), and online

overall transparency (IDI), respectively.

Regarding a top-down analyses, the results in model 4 (Table 4) of the online

overall transparency (IDI) confirm the expected positive relation of the organiza-

tional size. This result follows previous research both in the NGO sector (Saxton

Table 3 Spearman correlation matrix of independent variables

1 2 3 4 5 6 7

1. size_volunteer 1

2. size_budget 0.38 1

3. Age -0.83 0.261** 1

4. Public funding -0.001 0.811** 0.274** 1

5. Legal -0.50 -0.065 -0.335 0.60 1

6. Internationalization -0.57 -0.23** -0.211 -0.028 -0.023 1

7. Board size -0.030 0.242** 0.260** 0.293** -0.64 0.124 1

8. Board activity -0.003 -0.49 0.67 0.000 -0.179* 0.50 0.58

* p \ 0.1, ** p \ 0.5

Table 2 continued

Media-itemP123

1 asj � 100� �

=123

Disclosure

index IDI

3.2 Transparency the use of financial resources 20.33

a. Is the operating cost grouped in three categories:

fundraising, programmes-activities, administration-

organizers, public?

9.76

b. Is the information about the fund applied by each project

and area of work public?

27.64

c. Are the name of the main suppliers, public? 10.57

d. Are the entities that participate in NGO’s activities

organization, public?

63.41

e. Is the expenses policy, public? 1.63

f. Are suppliers selections’ criteria approved by the board,

public?

3.25

g. Is the annual budget of the following year with a

explanatory report, public?

1.63

h. Is the annual budget of the previous year public? 17.89

i. Does any information about the tracking system of donors’

funds on the website?

3.25

j. Is the economic annual report public? 48.78

k. Is the audit report public? 35.77

Total disclosure index, IDI = (IDIo ? IDIa ? IDIe) 9 1/3

(max. 100)

30.03

Voluntas (2012) 23:661–683 675

123

Tab

le4

Det

erm

inan

tfa

ctors

asso

ciat

edw

ith

onli

ne

tran

spar

ency

:re

gre

ssio

nan

alyse

s

Ind

epen

den

t

var

iab

le

Hy

po

thes

ized

dir

ecti

on

Mo

del

1M

odel

2M

odel

3M

odel

4

Org

aniz

atio

nal

onli

ne

tran

spar

ency

Act

ivit

ies

on

lin

e

tran

spar

ency

Eco

nom

ico

nli

ne

tran

spar

ency

Ov

eral

lv

iew

on

lin

e

tran

spar

ency

Siz

e_v

olu

nte

er?

-0

.07

78

(0.0

01)

3.3

33

**

*(0

.00

0)

3.4

19

**

*(0

.00

0)

2.7

67

**

*(0

.00

6)

Ag

e?

-0

.182

(0.0

00)

2.0

27

**

(0.0

01)

0.7

73

(0.0

01)

0.7

97

(0.0

89)

Pu

bli

cfu

nd

ing

?0

.954

(0.0

00)

2.0

16

**

(0.0

00)

3.5

37

**

*(0

00

)2

.701

**

*(0

.00

0)

Leg

alst

atu

s?

-1

.255

(0.0

38)

1.5

30

(0.0

33)

0.4

94

(0.0

34)

0.2

53

(2.6

88)

Inte

rnat

ion

aliz

atio

n?

-1

.622

(0.0

36)

-0

.121

(0.0

32)

-0

.27

(0.0

33)

0.8

16

(2.6

05)

Bo

ard

size

?1

.483

(0.0

03)

0.0

03

(0.3

95)

0.0

47

(0.0

03)

0.5

47

(0.2

14)

Bo

ard

acti

vit

y?

-1

.129

(0.0

03)

1.1

77

(0.0

03)

0.3

36

(0.0

03)

0.1

00

(0.2

37)

**

p\

0.5

0,

**

*p\

0.0

01.

Sta

ndar

der

rors

are

show

nin

par

enth

eses

676 Voluntas (2012) 23:661–683

123

and Guo 2011) , the business sector (Gallego et al. 2009) and, the public sector

(Gutierrez-Nieto et al. 2008). Therefore, it seems logical to assume that larger NGO

are more aware of the need for online transparency.

The positive influence of ‘‘public funding’’ in IDI is also significant in model 4

(Table 4). This result is similar to the research of Verbruggen et al. (2011) that

showed that those NGO that received more financial resources from public entities

are more aware of being accountable through their website. With respect to the

effect of the variable ‘‘legal form’’, a statistical significance was not found in line

with the results of other research (Marcuello and Salas 2000).

Although it might be assumed that those NGO that work abroad exhibit more

visibility on the Internet, our results in model 4 (Table 4) showed that internation-

alization does not affect IDI. This result coincides with the studies of Oyelere et al.

(2003) and which revealed the neutral effect of this factor in the business sector. The

factors ‘‘organizational age’’ and ‘‘board activity’’ partially coincide with the results

of Saxton and Guo (2011) in which a significant positive relation with board

performance and the online disclosure is shown. However, a significant association

among ‘‘board size’’ and IDI was not found.

Data collected in model 3 (Table 4) showed the association between the

information disclosed about the online economic aspects and the contingent factors

mentioned above. According to Verbruggen et al. (2011) and Saxton and Guo

(2011), the organizational size, measured by the numbers of volunteers, affects IDIe

(p \ 0.01). Given that volunteers are an essential human resource for NGOs, we

could deduce that the dissemination of management funds they receive is crucial to

maintain this support. Moreover, an association between the public funding factor

and online economic transparency IDIe was observed (p \ 0.01). This result is in

contrast to previous articles that did not find an empirical evidence of the

relationship between public funding and the disclosure of information (Verbruggen

et al. 2011) and public funding and others economic aspects such as private

donations (Marcuello and Salas 2000; Frumkin and Kim 2001). This result suggests

that Spanish NGOs use the Internet to disclose financial information due to the

pressure of public entities, such entities in effect acting as an external agent that

controls the use of NGO funds.

With similar result as Saxton and Guo (2011), we did not find empirical evidence

to confirm the relation between the ‘‘organizational age’’ and online transparency of

the economic aspects (IDIe). This suggests that the older Spanish NGOs could

associate the duration of their organization with the trust that stakeholders have in

the management of their accounts. Likewise, the results showed in model 3

(Table 4) the neutral effect of ‘‘board size’’ and IDIe, in contrast to previous

research that showed influence of this factor on other economic aspects such as the

financial performance (Eisenberg et al. 1998; Huang 2010). We did not find

empirical evidence that supports a significant relationship between the online

economic transparency and the board activity factor. This result is in contrast to

Lorca et al. (2011) who pointed out the influence of board activity in reducing

information asymmetry. A significant relationship between IDIe and the factors

‘‘legal form’’ and ‘‘internationalization’’ were not found.

Voluntas (2012) 23:661–683 677

123

In model 2 (Table 4), the data of the association among the online activities

transparency and the contingent factors aforementioned are showed. As Saxton and

Guo (2011) pointed out, the factor organizational size is positively associated with

the online activities transparency IDIa (p [ 0.01). Therefore, the influence of the

volunteer in the online disclosure of NGO projects is confirmed. Furthermore, in

contrast to the neutral effect found in previous researches (Saxton and Guo 2011), a

significant influence (p \ 0.05) of the factor ‘‘organizational age’’ is showed. This

result suggests that NGOs with long tradition promote their image by disseminating

their activities through the Internet. The factor ‘‘public funding’’ was other factor

that confirmed the positive association expected with the online activities

transparency. This behavior could be assumed that the Spanish NGOs with greater

public incomes could be using the online activities transparency to enhance their

legitimacy towards to their main financial providers. Moreover, in the model 2, the

results of the relation of the IDIa and the factors ‘‘internationalization’’, ‘‘legal

form’’, ‘‘board size,’’ and ‘‘board activity’’ were not significant.

Finally, in spite of the results obtained in models 2, 3, and 4, we did not find any

significant relation between online disclosures of organizational aspects (IDIo) and

any of the proposed factors.

Conclusions

Currently, the use of the Internet to respond to the social demand for NGO

transparency is essential. Based on an explanatory methodology, this article aims to

identify the association between the online transparency of Spanish NGOs, and the

following contingent factors: ‘‘organizational size’’, ‘‘organizational age’’, ‘‘public

funding’’, ‘‘legal form’’, ‘‘internationalization’’, ‘‘board size,’’ and ‘‘board activity’’.

In order to fulfill this objective, a IDI was first proposed to measure the level of

information visibility. This is followed by an assessment of the influence of the

contingent factors, mentioned above, on the online transparency levels utilising a

multivariate regression analysis.

According to the results, we highlight that the use of the Internet in Spanish

NGOs to disseminate information is scarce. In particular, these entities consider that

online disclosure of the information about their area of work and activities

performed is sufficient to demonstrate their legitimacy. The Spanish NGOs analyzed

are reluctant to show the management of their funds and their governance through

their web pages. Therefore, we consider that both the government and NGO should

increase their encouragement of the use of web pages as an excellent tool to access/

disseminate information and thus, to facilitate information transparency. In this

regard, more accountability mechanisms that promote the Internet as a tool for the

communication and interaction are also needed.

Our findings on examining potential factors of online transparency showed that

the organizational size, measured by the number of volunteers, and public funding

significantly affect online transparency of Spanish NGOs. According to institutional

theory and resource dependence theory, the behavior of these NGOs is influenced by

pressure from their principal stakeholders. In particular, their providers of human

678 Voluntas (2012) 23:661–683

123

and financial resources are the most efficient influence for increasing the

information available in the Internet.

The oldest Spanish NGOs analyzed are those who most consider that the online

disclosure of their activities is the information needed to demonstrate their

legitimacy. In keeping with this, the duration of an organization is an indicator of

reputation. Therefore, it is possible that if the oldest NGOs were more aware of the

use of the Internet to disseminate organizational and economic information, the

transparency online of other NGOs could be increased. In summary, this study

pointed out that although there is an increased use of Internet the use of this tool is

still limited. Likewise, the utility of this tool to encourage the trust of the sector is in

agreement with that noted by Vaccaro and Madsen (2009) who claimed a new

model of transparency termed ‘‘dynamic transparency’’.

In light of the fact that there are few researches in NGO context that analyze the

use of Internet to disclose information, this study contributes to a more

comprehensive analysis of NGO’s online transparency. In particular, it analyses

not only the financial information disclosed in NGO web pages but also the online

dissemination of their activities and their organizational aspects. Future research

could consider the inclusion of other variables and other countries to intensify the

sharing of knowledge concerning the determinants of online best practice.

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