A. Fiscal Health
- Establish a financial plan for the long-term operations of the land trust by:
- Developing an annual budget that reflects the land trust’s annual programs and activities
- Developing and implementing a strategy to address any deficit-spending trends
- Assessing the nature and variability of revenue and seeking to diversify funding sources
- Build and maintain sufficient operating reserves to sustain operations.
- Adopt and implement a plan to build and maintain dedicated or restricted funds sufficient to cover the long-term costs of stewarding and defending the land trust’s land and conservation agreements.
Background
The land trust prepares an annual budget that is reviewed and approved by the board, and is consistent with board policy. The budget is based on programs planned for the year. Annual revenue is greater than or equal to expenses, unless reserves are deliberately drawn upon.
In most land trusts, the budget is reviewed and approved by the full board. In certain limited circumstances, for some large organizations, the board sets budget policies and the staff or committees are able to create budgets that fall within these carefully circumscribed policies. Budgets should track the annual program plans for the organization and should include an annual cash flow projection that will show expected cash flow deficiencies. This allows an organization to use the budgeting process to clarify what it can and cannot accomplish in any given calendar or fiscal year. Annual budgets should also be in line with a multiyear framework budget or philanthropy and fundraising plan, if available.
Because land trusts must be sustainable for as long as the protection agreements they secure, organizations should place a priority on long-term financial stability and create an operating reserve to sustain the organization in difficult fiscal years. (Land trusts with reserves found them to be essential for sustaining their level of operations during the financial instability of the early years of this decade.) The land trust should have a practice of regularly contributing to reserves, but can and should choose to use those reserves when needed. Operating at a deficit or tapping into the reserves should be a careful decision made by the board during the budgeting process.