Standard 6: Financial and Asset Management
The land trust manages its finances and assets in a responsible and accountable way.
Sound financial and asset management is critical for a land trust. Federal and provincial laws have financial reporting requirements, and financial records should be available to donors upon request. Poor financial management may jeopardize the future of the land trust and its land conservation programs. It could even lead to legal challenges against the land trust. Even a small land trust with modest revenue and expenditures should have annual budget and periodic financial reports, although the format of these may be simple. Organizations with larger budgets must follow specific reporting formats. Assuring sound financial management is one of the core responsibilities of the full board, no matter who keeps the books or prepares financial reports.
- Society Act, RSBC 1996, c. 433, s. 39, 41.
- Canada Not-for-profit Corporations Act, SC 2009, c. 23, s. 179-194.
- Society Act, RSBC 1996, c. 433.
- Canada Corporations Act, RSC 1970, c. C-32.
- Society Act, RSBC 1996, c. 433, s. 30.
A. Annual Budget
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.
CLTA Assessment Questions
- Do annual revenues consistently exceed expenses?
- Does the land trust have an operating reserve?
- If yes, what percent of annual operating expenses could be covered by the operating reserve?
- Is the budget guided by a long-range financial plan?
- The land trust’s total annual operating budget (i.e., excluding land or conservation agreement acquisition) for the last two years:
|Current Income||Last Year|
- If the land trust does not have an annual budget, how does it ensure that its finances and assets are managed in a responsible and accountable way?