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| Methodology |
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What is our partnering criteria?
The Common Sense Environmental Fund rates potential environmental partners by evaluating three broad areas, the environmental worth of their programs and services, their organizational efficiency and their organizational capacity. We use a set of ratios or performance categories to rate each of these areas, and we issue an overall rating. Our ratings demonstrate how effective their programs and services are, how efficiently we they use their support, and to what extent they are growing their programs over time. We provide these ratings so that the Fund has a basis to make intelligent partnering decisions.
We only invest in organizations that demonstrate the highest levels of value and integrity and spend 80% (at a minimum) of their revenue directly on biodiversity, forest, international, sustainable agriculture, wetlands and water/marine research, conservation and restoration projects.
The seven key financial performance areas are:
Organizational Efficiency
Analyzing an organization's efficiency reveals how well it functions day to day. Organizations that are efficient spend less money to raise more. Their fundraising efforts stay in line with the required expenditures of the programs and services they provide. They keep administration costs within reasonable levels and devote the majority of their spending on the programs and services or, in other words, the reasons why they exist.
Performance Category 1: Fundraising Efficiency
Environmental organizations spend money to raise money. Effective organizations must be efficient fund raisers spending less to raise more. The Common Sense Environmental Fund calculates an organization's fundraising efficiency by determining how much it spends to generate $1 in charitable contributions. In other words, we divide an organization's expenses by the total contributions it receives. For example, Organization Z, with expenses of $500,000 and total contributions of $3.4 million, spends $14.7 to raise $1.
Performance Category 2: Fundraising Expenses Environmental organizations spend money to raise money, but they do not exist to raise money alone. Organizations should ensure that the effectiveness of their programs and services, not for their ability to raise money. The Common Sense Environmental Fund will evaluate a organization on fundraising by comparing it with the organization's overall spending. That is, we divide a organization's fundraising expenses by its total functional expenses. Organization Z, which spends $500,000 on fundraising and $3.5 million overall, spends 14.3% on fundraising. Performance Category 3: Program Expenses Environmental organizations exist to provide programs and services. They fulfill expectations of givers when they allocate most of their budgets to providing programs. Organizations fail contributor expectations when spending on their programs is insufficient to accomplish the desired results. To rate an organization's program expenses, we divide its expenses by its total functional expenses. Organization Z spends $2.5 million on program expenses compared with its overall operating budget of $3.5 million. Thus, Organization Z spends 71.42 % on program expenses. Performance Category 4: Administration Expenses As with successful organizations in any sector, effective environmental organizations must recruit and develop talented people. At the same time, they ensure that these administration and management expenses remain reasonable and in line with the organizations overall expenses. We compare an organization's administration expenses by comparing them to its total functional expenses. For example, Organization Z spends $500,000 on administrative expenses, compared with $3.5 million in total expenses. Therefore, Organization Z spends 14.3% on administration expenses. Organizational Capacity We analyze an environmental organization's capacity to determine how well it has sustained its programs and services over time, and whether it can continue to do so, even if it loses support or faces broad economic downturns. By doing so, we determine how well the organization is positioned to pursue long term systemic changes. Environmental organizations that show consistent growth and maintain financial stability are most likely to last for years to come. They have the financial flexibility to plan strategically and meet long-term objectives, rather than facing flurries of fundraising to meet payrolls and other financial obligations. These organizations can more ambitiously address the environmental challenges and work toward long term solutions. Performance Category 5 and 6: Primary Revenue Growth and Program Expenses As do organizations in other sectors, environmental organizations must grow over time if they are to sustain their programs and services. First growth means increasing their primary revenue and includes contributions from corporations, foundations, individuals, and government grant revenue, contracts and fees; and revenue from membership dues and fees. Secondly, this means growing their programs and services. Organizations that demonstrate consistent growth in both primary revenue and program expenses are able to outpace inflation and expand their programs year to year. These organizations also supply givers with confidence by reaffirming broad public support for their programs. The Common Sense Environmental Fund analyses an organization's average annual growth of primary revenue and program expenses over its four most recent years. If a organization chooses to supply us with only three years of data, or if only three years are available, we limit our evaluations to those three years, even if the first of the three years demonstrate results of non-recurring and unsustainable activities. Performance Category 7: Working Capital Ratio Environmental organizations depend upon their reserves of liquid assets to survive downward economic trends in order to sustain their existing programs and services. If an organization has insufficient working capital, the difficult choice of eliminating programs or staff, amassing debts and liabilities, or going under are always possibilities. On the other hand, contributions are flowing in those organizations that build working capital. They will develop a greater capability for continuing, expanding, and improving their programs. The Common Sense Environmental Fund analyzes an organization's capital ratio by determining how long it could sustain its programs without generating new revenue. To obtain this ratio, we divide the organization's working capital by its total expenses, including payments and affiliates, for the most recent fiscal year. For example, Organization Z holds $5.4 million in working capital. Its total expenses for the most recent fiscal year are $3.6 million, including a $100,000 payment to an affiliate for its national dues. Therefore, Organization Z has a working capital ratio of 1.5 years. As with each of our other six performance categories, we calculate an organization's working capital ratio with the information supplied on their most recent IRS Form 990. We include in this the following assets and liabilities: cash, savings, accounts receivable, grants received, investments in securities, accounts payable, accrued expenses, and grants. Assigning Ratings and Scores After rating an organization in each of the seven performance categories described above, The Common Sense Environmental Fund converts an organization's raw score to a numerical score ranging between 0 and 10. We then perform a similar score conversion of the environmental worth of the organization's programs and services and add it to each of the seven financial categories. This score comprises its "partnering score" which can then be compared to other environmental organizations. The Common Sense Environmental Fund will partner with no more than the top three organizations each fiscal year. To save our planet for future generations we need your help. The Common Sense Environmental Fund is a 501(c)(3) non-profit organization. Your contribution is tax-deductible to the fullest extent of the law. To make a donation please click here. |
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