Where Does $100 to the Natural Resources Defense Council Go?
The Natural Resources Defense Council (NRDC) was created in 1970 by a group of attorneys and law students in New York “to safeguard the earth – its people, its plants and animals, and the natural systems on which all life depends.” Initially funded with a $400,000 grant from the Ford Foundation, the NRDC is considered one of the most influential environmental non-profits in the country.
A non-profit 501 (c)(3), NRDC is related to four other organizations:
- E2: Environmental Entrepreneurs: a partner and part of NRDC, this organization receives funding from membership fees (starting at $1,000 for an Associate) through NRDC. Contributions are made directly to NRDC; E2 collects no funds. NRDC provides full-time staffing dedicated to E2, as well as administrative, communications, legislative and analyst/policy support for the work of E2.;
- NRDC Action Fund, Inc.: a separate 501 (c) (3) controlled by NRDC;
- NRDC Action Fund, Inc. PAC: a 527 (non-profit) created primarily to influence the selection, nomination, election, appointment or defeat of candidates to federal, state or local public office; and
- NRDC Limited: an uncategorized organization in Hong Kong.
The focus of this analysis is the NRDC (which includes E2) whose fiscal year runs from July 1 – June 30th. The most recent IRS Form 990 available is for the year beginning July 1, 2016 and ending June 30, 2017 (hereafter referred to as 2017). The analysis will be divided into Revenue, Expenses, Assets, Liabilities, and Net Fund Balance.
In 2017, NRDC reported the receipt of $177 million, which came from four (4) sources:
- $119 million (or 67% of total revenue): Contributions, Gifts, and Grants
- $ 42 million (or 24% of total revenue): Membership Dues
- $ 9 million (or 5% of total revenue): Court Awarded Fees
- $ 7 million (or 4% of total revenue): Investment Income/Gains
In 2017, NRDC reported expenses of $129 million (or 73% of revenue) with $48 million (27% of revenue) retained by the organization in their net fund balance. In other words, for every $100 the organization received, they spent $73 and retained the rest in their net fund balance (think savings account).
NRDC’s website reports expenses as a percentage of expenses (i.e. 83% of expenses are spent on programs, 9% of expenses are spent on fundraising, and 7% of expenses are spent on management and general operations). What this type of reporting fails to do is take into account revenue.
Expenses as a percentage of revenue should be reported because these figures consider both sides of the equation: the two most important aspects of the organization and its ability to function. By reporting expenses as a percentage of expenses on their website, the organization is not disclosing that they only spent $73 out of every $100 received in 2017. In addition, providing information on revenue collected in a given year and expenses incurred a given year give donors a more accurate summary of how their donations are being spent.
Expenses can be analyzed two ways: by four broad general categories: Programs, Grants, Fundraising, and Management, or by individual line item expenses (i.e. staff compensation, office expenses, travel, grants, etc). Both ways provide valuable information with the later providing more specific information to the reader.
Expenses By Broad General Categories
$129 million in expenses were reported in 2017 in the following four broad categories:
- $100 million (or 57% of revenue): Programs
- $ 6 million (or 3% of revenue): Grants
- $ 12 million (or 7% of revenue): Fundraising
- $ 11 million (or 6% of revenue): Management
Utilizing the above figures, $100 in revenue was spent as follows:
-$ 57: Program Expenses
-$ 3: Grants
-$ 60: Subtotal Program and Grant Expense
$ 40: Revenue Remaining
-$ 7: Fundraising Expenses
-$ 6: Management Expenses
-$ 13: Subtotal Fundraising and Management Expenses
$ 27: Revenue Remaining to Fund Balance
As illustrated above, NRDC spent $60 out of every $100 on programs and grants. An additional $13 was spent on fundraising and management, leaving $27 unspent at year-end.
Expenses by Specific Line Item Category
$129 million was spent in the following specific line item categories, as reported on the IRS Form 990 for the year ending June 30, 2017:
- $ 67 million (or 38% of total revenue): Staff Compensation
- $ 22 million (or 13% of total revenue): Office-related Expenses
- $ 17 million (or 10% of total revenue): Fees for Services (i.e. consulting, creative design, program services)
- $ 6 million (or 3% of total revenue): Grants
- $ 5 million (or 3% of total revenue): Miscellaneous (i.e. list rentals, other, depreciation, etc)
- $ 4 million (or 2% of total revenue): Fees for Services (i.e. mgmnt, legal, accounting, lobbying, investment)
- $ 4 million (or 2% of total revenue): Advertising and Promotion
- $ 4 million (or 2% of total revenue): Travel and Conferences
Using the above information, $100 in revenue was used as follows:
-$ 38: Staff Compensation
-$ 13: Office-related Expenses
-$ 10: Fees for Services (legal, accounting, lobbying, management, investment)
-$ 3: Miscellaneous Expenses
-$ 2: Fees for Services
-$ 2: Advertising and Promotion
-$ 2: Travel and Conferences
-$ 70: Subtotal Expenses
$ 30: Revenue Remaining
-$ 3: Grants
$ 27: Revenue Reaming to Fund Balance
As illustrated above, the largest single line item expense is for staff compensation, followed by office-related expenses and fees for outside services. Since, NRDC is an environmental agency intent on improving living conditions on earth, a large portion of their efforts are in the form of legal actions, testing, lobbying, etc. Donors are essentially paying for people to work on improving environmental conditions.
At year-end 2017, NRDC reported having $366 million in assets concentrated in five areas:
- $180 million: Publicly Traded Marketable Securities
- $ 71 million: Cash
- $ 56 million: Other Securities
- $ 35 million: Land, Buildings, and Equipment (primarily buildings)
- $ 19 million: Pledges Receivable
Liabilities totaled $61 million in the following categories:
- $24 million: Other liabilities (i.e. Defined Benefit Plan Obligation, Charitable Gift Annuities)
- $17 million: Accounts Payable and Accrued Expenses
- $10 million: Tax-exempt Bond Liabilities
- $10 million: Secured Notes and Loans Payable
NET FUND BALANCE
At the beginning of the year, NRDC had $237 million in Net Fund Assets. After raising $177 million and only spending $129 million, $48 million was retained and increased the net fund balance to $285 million. $17 million in net unrealizable gains on investments and $4 million in other asset increases, allowed the net fund balance to increase to $306 million at year-end – a significant increase of $69 million in one year.
Of the $306 million, $211 million is unrestricted, $76 million is temporarily restricted, and $19 million is permanently restricted.
To read the IRS Form 990, click here.