Financial literacy and information needs: an investigation of individual donors’ perceptions

Regulators have long emphasised on organisational financial transparency and accountability to improve public confidence and trust in the not-for-profit (NFP) sector. Yet, they have placed limited attention on individual users’ financial information needs. Similarly, NFP literature on donors’ information needs is still developing.

It remains heavily focused on disclosures from an organisational perspective despite its acknowledgement that NFP stakeholders (in particular donors) seek information assisting their economic decisions and NFPs face increasing pressures for improved transparency around specific disclosures. This study contributes to the NFP literature on information needs by exploring relationships between donors’ attitudes, financial literacy, and their financial information needs. Using 2017 survey data from 400 useable responses, the study found that neither financial literacy nor involvement on their own where good predictors of the disclosure needs of stakeholders.

Respondents who were involved with charities and also had high practical financial literacy were statistically more interested in financial disclosures compared to other groups, although the relationship is complex. The study also noted that respondents who valued official sources of information, trusted and cared about charities, saw nonprofits as having a public obligation to report valued financial information when making a decision to support a charity. The findings of this study will inform financial disclosure within the NFP sector such that organisations are able to better address individual donors’ information needs and economic decisions. Also, observations made in this study may further debates around charity disclosures and contribute to enforcing national charity regulators’ objectives of accountability and transparency.