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.
G. Funds for Stewardship and Enforcement
The land trust has a secure and lasting source of dedicated or operating funds sufficient to cover the costs of stewarding its land and conservation agreements over the long term and enforcing its conservation agreements, tracks stewardship and enforcement costs, and periodically evaluates the adequacy of its funds. In the event that full funding for these costs is not secure, the board has adopted a policy committing the organization to raising the necessary funds. (See 6F, 11A and 12A.)
Land trusts have a perpetual obligation to steward conservation agreements and manage lands they hold in fee for conservation purposes, and to defend these conservation lands. These ongoing obligations set land trusts apart from many non-profits and require that the land trust have a source of funds available to meet its responsibilities. The surest way to meet stewardship and defence costs is to set up a dedicated fund that is managed separately from the land trust’s operating budget. Some land trusts maintain a single fund for all purposes; others have separate funds for stewardship and defence. The choice is largely a matter of financial policy and organizational philosophy and may reflect donor wishes. Likewise, the choice of an internal board-designated fund or a formal endowment is also a matter of financial policy and philosophy. Land trusts with a secure source of annual operating income for stewardship and defence or a general endowment to support their stewardship responsibilities sometimes forgo a dedicated fund.
Like all Canadian charities, land trusts must spend 80% of their charitable receipts on charitable activities in each year (disbursement quota). Charities that exceed the 80% mark in their expenditures may carry the excess forward up to five years or back one year to offset a shortfall. Fundraising expenses are not included as charitable activities (see 5A). Funds applied to endowment funds or other dedicated funds that are established to earn interest over the long term are not included as charitable activities by the Canadian Revenue Agency. Therefore, land trusts who wish to develop these types of funds must either do so by using less than 20% of their incoming receipts, or by carrying over an excess into a future year, or by receiving funds through a bequest (considered exempt by CRA) or by having donors direct funds into a gift that must be retained by the organization for 10 years.
Whether the source of stewardship and enforcement funds is operating, dedicated or from a general endowment, the land trust must track its stewardship and enforcement expenses and periodically evaluate whether the funds it has are sufficient to fulfill its long-term responsibilities. Most land trusts are still building funds required for long-term stewardship. Thus, at a minimum, a land trust should have a strategy for raising the funds necessary for its stewardship and defence obligations, have a board commitment to raising these funds, and make demonstrable progress toward meeting the goals of the philanthropy and fundraising strategy. See also related practices 11A and 12A.
CLTA Assessment Questions
- Does the land trust track stewardship and enforcement costs?
- Does the land trust periodically evaluate the adequacy of its funds?
- If full funding for these costs is not secure, does the board have a policy or plan committing the land trust to raising the necessary funds?
Resources: Example Policies & Template Documents
- NSNT Stewardship Endowment Fund Rules St 6G
- NTNB Stew Fund Policy Costs Worksheet
- 6G Funds for Stewardship and Enforcement - COLT (voluntary land trust)