Administrative and Program Expense Ratios
CNF monitors its administrative expenses and its fundraising expenses in order to assess our operating performance. As there is no clear consensus on how these ratios should be calculated, we describe below our approach and rationale. These ratios are detailed in our annual reports as found on the Documents and Publications page of our website.
Administrative expenses include items relating to the overall administration of the foundation, including its office operations, board meetings and the like. Allocated salary and travel expenses are also an important component of administrative expenses, as are audit and bookkeeping costs. Investment management fees are not reflected in administrative expenses but instead are deducted from the investment income. Administrative expenses are tracked as a percent of total expenses. There is no clear definition of administrative expenses, but in practice most conservation trust funds exclude program related costs and investment management fees from this metric. In terms of whether fundraising costs are part of administrative expense, there is no clear guidance. Unlike many charities where fundraising is key to the operation, conservation trust funds are generally founded on the idea that once the required level of funding is reached, significant fundraising would not be expected or required. However, fundraising tends to form a key expense in the early years of the fund, as most are started with insufficient capital to meet their objectives. This is the case for CNF, which is still a relatively young conservation trust fund and has not yet reached its target level of funding. As a result, we analyse our administrative expenses on two separate bases:
- Excluding Fundraising: in this ratio, fundraising expense excluded from both numerator (administrative expense) and the denominator (total expenses) on the basis that fundraising will not form a key part of CNF’s long term costs. Another argument for favoring this ratio is that the efficiency of fundraising activity is in any case separately monitored in terms of the fundraising result, as detailed below.
- Including Fundraising: in this ratio, fundraising expense is included in both the administrative expenses numerator and total expense denominator.
Fundraising expenses are primarily an allocation of travel and salary expenses to this activity, but also include consulting expenses. We monitor new firmly committed donations (a figure not derivable from our accounting records) in relation to fundraising expense. Consistent with the practice of a number of other foundations, we consider that the efficiency of fundraising activity is best measured in relation to the fundraising result. We measure this ratio on a three-year trailing basis because we think that, given our size, this gives a truer picture of our efforts.