EVALUATING NON-PROFITS

Deciding and Applying the Best Criteria to Select and support a Non-Profit Organization

ENC4331 – Writing Rhetoric and Community

EVALUATING NON-PROFIT ORGANIZATIONS

Introduction

Selecting a non-profit organization to support with your time and money is a difficult task. Specially when there are so many and all with great missions and goals. The task could be daunting. But if you know roughly the initiatives you would like to support then the challenge becomes comparing between the organizations that sponsor your cause to select the one that is more efficient and transparent. As an exercise to approach this analysis, I have selected two organizations I believe have a good mission and goals support the protection of wildlife and the biodiversity in our world but are also very different in size and reach. To provide some light to the analysis I have selected the World Wild Foundation and The national Wildlife Federation as subjects for this research. My objective is to provide an understanding of the best criteria by which we can analyze and evaluate the performance of these organizations. I will divide this blog in two parts. Part 1 makes reference to the research and criteria selection. Part II is dedicated to the evaluation of the organizations mentioned above in an attempt to determine which one is using their assets more efficiently. The final goal is to approach a response to the question: How to select the best Non-Profit Organization? and Who do we select?

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Part I – DEFINITION OF CRITERIA TO APPLY

In evaluating Non-Profit organizations, I would use the following 3 criteria:

Mission and Goals: The goals need to be stated clearly and leave no room for ambiguity. They need to state what is their purpose and what they are trying to achieve with the funds they will raise. This is closely tied up with their business plan, describing how they are going to achieve those goals. As John Sawhill and David Williamson wrote on their article “Measuring what matters in Nonprofits“ (McKinsey, 2020), “nonprofit missions are notoriously lofty and vague”, meaning they develop a nice and pompous mission, but it is impossible to measure their impact with just that information.

Key Performance Indicators: The KPI’s are the actual numbers or metrics the organization needs to track, measure and report. This is their hard assessment. KPI’s can look like: funds raised, people reached, animals saved, species preserved, etc; but they can also look like: total money raised, total cost, ratio: money raised to money spend, ratio: money raised species saved, etc. There are many ways to design key performance indicators to provide the necessary information. The important thing about KPI’s is that they need to be traceable and measurable and can be obtain regularly and systematically. As important it is that the KPI’s designed to track the success or failure of the organization are strongly connected to the mission and goals of the organization. Otherwise, we could have biased results.

Transparency: I think this criteria should go without saying, but unfortunately it is necessary to include it in my top 3 criteria selection. By transparency I do not only mean a clean book and balance sheet or a beautiful annual report that shows that the organization is doing great but no substantial progress have been measured and reported. What you know is that they spend thousands of dollars in producing that report to impress their donors. With transparency I mean if the organization has an accountability process. Do they share what they do, their success (I am sure they share that), their failures (not so sure they share this), how much do they spend in their actions to execute their mission? are they opened and willing to receive feedback, do they do open session where the donors and shareholders can ask tough questions. Such a forum is necessary for me and should be held on a quarterly basis. Allowing people to express their ideas. In my research, I found a nonprofit organization that is transparent in this way. I wanted to bring that as a source/example of what I am referring to. Mission capital opens up about the lessons learns and what they did well and where they failed in an open and honest manner allowing for participation – Mission & Vision — Mission Capital – more of this is needed in the nonprofit sector to gain support and generate more impact in the community and around the world. It is much needed.

The organizations I choose to evaluate and compare: Both organizations are dedicated to the preservation and protection of wildlife and environment. One is the World Wildlife Foundation (WWF), and the second is National Wildlife Federation. The first one has a global focus while the latter is oriented towards the domestic issues with wildlife preservation in the US.

Part II – APPLICATION OF SELECTED CRITERIA

Criteria 1: Mission & Goals

World Wife Foundation	National Wildlife Federation
Our vision is to build a future in which people live in harmony with nature. To deliver this mission, we work to conserve and restore biodiversity, the web that supports all life on Earth; to reduce humanity’s environmental footprint; and to ensure the sustainable use of natural resources to support current and future generations.	Our strategic plan sets in motion a Common Agenda for Wildlife to increase America’s fish and wildlife populations and enhance their capability to thrive in a rapidly changing world.

We can see that both organization are dedicated to the preservation of wildlife and protecting the environment where they live. The first one – WWF – has a broader scope of action extending their reach to globally, whereas NWF concerns themselves with national issues and is focused more in fish and wildlife populations in America. Although the scopes of engagement are different the function in a similar way. Both raise funds to protect the environment and apply those funds supporting their initiatives. It is important to understand the mission and goals of each organization under analysis to understand if the application of funds is efficient and reaching the ultimate beneficiary in the proportion that is expected.

Criteria 2: Key Performance Indicators

To begin understanding what this criteria refers to, I need to clarify that key performance indicators could be many and may include different ratios and financial information that goes beyond the scope of the analysis here presented. We will focus on the audited financials and metrics to get an overview an understanding of the organizations financial health and allocation of funds. These type of organizations receive private donations and federal awards. They are subject to a thorough scrutiny of their activity and expenditures.

It is important to note how accessible the information is on their resource centers and media links, as well as how user friendly that information is presented. The point is to have a clear understand of the results without needing to be an auditor accountant or a financial specialist.

Both organizations have the information easily accessible through their resource links:

WWF: Funding and Financial Overview | WWF (worldwildlife.org)

We can see how WWF uses big graphics highlighting how much money the receive and distribute to achieve their mission and goals. However, we need to look closer at this number and not just stop at the 82% of “program expenses”, what we need to understand clearly is what they include in program expenses and this is where wee need to be careful. On a closer look at their financial statement ended in June 30, 2021and audited in December 15, 2021, I could see that out of the $247 million received, they spend 18% in Supporting Services. This includes finance and administration activities and fundraising activities. Another $5.5 million in buildings and after that the $289 million described above is applied to programs. It is important to say that those programs each one of the included also the costs of finance and administration, fundraising and buildings and leases and are not broken down in the financials. Although 82% seems to be a big number and one that can impress many of us, it does little in telling us how much of the $454 million in revenues they had in 2021 is actually going to protect biodiversity and life on earth. I will recognize that it is better something than nothing.

NWF: Financials | National Wildlife Federation (nwf.org)

The National Wildlife Federation takes a more conservative approach by just providing a link tot their “Statement of Activities” and the source and use of funds. Despite the difference in size and scope, we can still compare the organization in efficiency and reach. NWF revenues for the year ended in August 21, 2021 where $118,295 and their expenditures on fundraising and general and administrative activities reached 12%. Theis allocation of funds to programs, education and other supporting activities was close to 73% of the operating revenue which means that WWF is allocating more funs proportionally than NWF in Conservation activities. The report lacks the appeal and purpose of the WWF report which is focused on highlighting their successes in order to show good performance and potentially attract new funds. The report by NWF focuses on the basic information which also communicates the difference in size and reach.

Both report were audited by independent firms and provided good an accurate information. However, in both cases it is difficult to asses where are the funds going when applied to the programs. It would be necessary to perform thorough analysis on the programs and organizations they are allocating these fund to in order to establish their effectiveness. Based on what can be evaluates, both organizations allocate between 70-80% to programs supporting their goals and and roughly between 12-18% of their revenue to administrative and fundraising activities. Based on IRS standards, Consultants Richard Male and Associates recommends that no more than 25% be applied to this activities. In this case both organization are withing the standard and therefore their spending is in line and within range.

Criteria 3: Transparency

As described in Part 1, my interest in this criteria for evaluation has nothing to do with the information they share or how impressive and glamorous and flashy their web pages are. It has more to do with their accountability process and access to the information.

The WWF makes a statement of “Transparency and Accountability” that read as follows:

Although this is a good statement of transparency and accountability it lacks the opportunity for the their supporters to provide feedback in an open and meaningful manner. They do not hold open meetings with supporters and stakeholders where they can ask the tough questions to management and put to the test the transparency and accountability of the organization.

Regarding NFW we were unable to locate a statement of transparency and accountability similar to WWF. At the time we wrote this report we have no received a response from their contact us link on their webpage requesting additional information regarding the subject. This could be for lack of resources, them being a smaller organization. We hope to receive a response in the near future and update this report accordingly. For the time being , we must conclude that there is not accountability or transparency process in place other than the financial audits performed by independent firms in compliance with the accounting principles generally accepted in the United States of America (GAAP).

Conclusion:

In both case we found a clear mission and goals, stating what each organization stands for and how they pursue their activities. The key performance indicators we selected to analyze, expenditures in administrative and fundraising activities over total revenue seem to be in line with the general industry practices. However, NFW show somewhat more of a conservative approach to allocating expenses in these activities over WWF. That can be the results of their size and reach. Nevertheless, the idea of using a percentage as a method of comparison is exactly for the purpose of eliminating this factor. To have a clear understanding on how efficiently the fund are being allocated, it would be necessary to aggregate all the expenditures in administrative and fundraising activities performed by the organizations and programs each one support. It is only by doing that analysis that we can see how many funds are actually getting to the beneficiaries or the programs they support. Overall, NFW is a smaller organization and easier to understand in the sense of fund allocation and program supported. WWF is a global organization with a global reach where funds can be distributed in many ways. That hurts efficiency and transparency, regardless of the statements publicly made. For the reasons explained above, and based on the available information at the time of closing this report, If I had to recommend a non profit organization to support with funds I would choose National Life Fundation.

I hope this helps you gain more clarity in the analysis and selection of non profit organizations.

Sebastian Manes

Sources:

1. World Wild Foundation – www.worldwildlife.org
2. National Wildlife Federation – www.nfw.org
3. Scott Thompson, “Percentage of Funds a Nonprofit Can Spend on Management” – AZCentral – USA Today Network, Percentage of Funds a Nonprofit Can Spend on Management (azcentral.com)
4. Article – “Measuring what matters in Nonprofits”, John Sawhill and David Williamson, Public and Social sector, Mckinsey & Co, 2002. Measuring what matters in nonprofits | McKinsey
5. Mission & Vision — Mission Capital –