2. “Planning by the Numbers” Marc Hunt, OSI Conservation Lending Program - Southern Appalachians Coordinator and Manager of Credit Operations Peter Howell, OSI Executive Vice-President

3. Seminar Goals To add a strong financial dimension to your planning. To demystify the accounting environment. To provide tools and “next steps” for you to move forward.

4. The Open Space Institute (OSI) protects scenic, natural, and historic landscapes to ensure public enjoyment, conserve habitats, and sustain community character. OSI achieves its goals through land acquisition, conservation easements, regional loan programs, fiscal sponsorship, creative partnerships, and analytical research. - The OSI Mission Statement

5. OSI Programs Land Protection in New York State Conservation Finance Program Conservation Institute – Research and Education

7. Financial Strategic Plan Implementation of Annual Plan(s) Evaluation and Measurement New Challenges and Opportunities Conceptual Strategic Planning The Strategic Planning Cycle

8. An Effective Strategic Plan: Derives from a clear mission. Involves board, staff, and stakeholders in development. Is written … but brief and readable. Is updated periodically. Specifies goals, action items, and measurable outcomes. Is understood and embraced.

9. Board Staff Executive Director Organizational Culture and Authority

10. Finance in the Organization Board of Directors Executive Director Staff or Contract Bookkeeper Outside CPA Board Chair and/or Treasurer

11. Meet “The Jones”. 2 parents, each age 28, both on career paths Home in a quiet neighborhood, kids (ages 2 and 4), a cat named “Gandhi”. Committed to a life of strong family unity, commitment ot the larger community, healthy living, intellectual curiosity, and adventure. Family (Strategic) Goals: –Modest but comfortable lifestyle. –Freedom to be selective about careers, place, etc. –Capacity to educate kids through college. –Freedom to travel and find adventure. –Long, healthy retirement. *In Handout

12. Personal Net Worth Statement ASSETS 12/31/2006 Age 28 Cash and Savings 5,000 IRA or Other Retirement Account 15,000 Educational Savings Funds (for Kids) 1,000 Stocks, Bonds, and Other Financial Assets - Real Estate 155,000 Automobile and Other Personal Property 40,000 Total 216,000 LIABILITIES Credit Card and Consumer Debt 1,000 Automobile Notes Payable 16,000 Student Loans 23,000 Mortgages on Real Estate 140,000 Total 180,000 Net Worth 36,000

13. Personal Net Worth Statement ASSETS 12/31/2006 Age 28 12/31/2046 Age 68 Cash and Savings 5,000 50,000 IRA or Other Retirement Account 15,000 350,000 Educational Savings Funds (for Kids) 1,000 - Stocks, Bonds, and Other Financial Assets - 150,000 Real Estate 155,000 275,000 Automobile and Other Personal Property 40,000 80,000 Total 216,000 905,000 LIABILITIES Credit Card and Consumer Debt 1,000 Automobile Notes Payable 16,000 - Student Loans 23,000 - Mortgages on Real Estate 140,000 - Total 180,000 1,000 Net Worth 36,000 904,000

14. Personal Net Worth Statement ASSETS 12/31/2006 Age 28 12/31/2016 Age 38 12/31/2026 Age 48 12/31/2036 Age 58 12/31/2046 Age 68 Cash and Savings 5,000 10,000 15,000 30,000 50,000 IRA or Other Retirement Account 15,000 50,000 125,000 225,000 350,000 Educational Savings Funds (for Kids) 1,000 35,000 65,000 20,000 - Stocks, Bonds, and Other Financial Assets - 10,000 50,000 100,000 150,000 Real Estate 155,000 275,000 Automobile and Other Personal Property 40,000 45,000 55,000 75,000 80,000 Total 216,000 305,000 465,000 725,000 905,000 LIABILITIES Credit Card and Consumer Debt 1,000 2,600 3,700 1,350 1,000 Automobile Notes Payable 16,000 15,000 5,000 - Student Loans 23,000 15,000 - - - Mortgages on Real Estate 140,000 120,000 50,000 - Total 180,000 152,600 58,700 51,350 1,000 Net Worth 36,000 152,400 406,300 673,650 904,000 *In Handout

19. Personal Net Worth Statement ASSETS 12/31/2006 Age 28 12/31/2016 Age 38 12/31/2026 Age 48 12/31/2036 Age 58 12/31/2046 Age 68 Cash and Savings 5,000 10,000 15,000 30,000 50,000 IRA or Other Retirement Account 15,000 50,000 125,000 225,000 350,000 Educational Savings Funds (for Kids) 1,000 35,000 65,000 20,000 - Stocks, Bonds, and Other Financial Assets - 10,000 50,000 100,000 150,000 Real Estate 155,000 275,000 Automobile and Other Personal Property 40,000 45,000 55,000 75,000 80,000 Total 216,000 305,000 465,000 725,000 905,000 LIABILITIES Credit Card and Consumer Debt 1,000 2,600 3,700 1,350 1,000 Automobile Notes Payable 16,000 15,000 5,000 - Student Loans 23,000 15,000 - - - Mortgages on Real Estate 140,000 120,000 50,000 - Total 180,000 152,600 58,700 51,350 1,000 Net Worth 36,000 152,400 406,300 673,650 904,000 *In Handout

21. Consider… Net Worth best defines financial capability A roadmap toward target Net Worth goals is key Income and expense activity comprises the journey Plan the journey year year-by-year

22. Land Trust Balance Sheet Assets: Current Assets Cash Accounts Receivable Etc. Long Term Assets Land Buildings Etc. Total Assets______ Liabilities: Current Liabilities Accounts Payable Etc. Long Term Liabilities Notes Payable Total Liabilities______ Fund Balance (Equity) Unrestricted Fund Balance Temp. Restricted Fund Balance Perm. Restricted Fund balance Total Fund Balance______ Personal Net Worth Statement ASSETS 12/31/2006 Age 28 Cash and Savings 5,000 IRA or Other Retirement Account 15,000 Educational Savings Funds (for Kids) 1,000 Stocks, Bonds, and Other Financial Assets - Real Estate 155,000 Automobile and Other Personal Property 40,000 Total 216,000 LIABILITIES Credit Card and Consumer Debt 1,000 Automobile Notes Payable 16,000 Student Loans 23,000 Mortgages on Real Estate 140,000 Total 180,000 Net Worth 36,000

23. Land Trust Income Statement Revenues: Membership Dues Contributions Etc. Total Revenues _______ Expense: Salaries Supplies Transaction Costs Etc. Total Expense ________ Net Income ________

24. Photo - David Ramsey Photo – Kevin Adams Southern Appalachian Highlands Conservancy All Images - SAHC Photo – Kevin Adams

25. Southern Appalachian Highlands Conservancy Founded in TN in 1974. Asheville, NC, based 37,000 Acres Protected to Date Assets of $19 Million Acquires and Holds Fee and Easement Occasional Intermediary Owner Outreach and Partnership Programs Moderate Expansion Geographically and Programmatically Staff of 7 Active Board of 20 1500 Members 4600 Volunteer Hrs/Yr

27. The Balance Sheet *In Handout

28. Working Capital Current Assets Less Current Liabilities = $698,193 Current Ratio = 14 : 1

29. Workbook Exercise Exercise: Working Capital Total Current Assets per Balance Sheet Total Liabilities per Balance Sheet Working Capital (Current Assets less Current Liabilities) Current Ratio (= CA / CL, expressed as ratio, e.g., : 2.4 : 1 ) Working Capital : Revenues (Working Capital : Revenues, Expressed as %) Yr 1Yr 2 Trend

30. Endowment Funds Ttl. Endowment : Revenues Ratio = 5% (* Revenues = $1.38 million) Stewardship Endowment per Acre = $39/acre

31. Exercise: Total Endowment Exercise: Stewardship Endowment ********************************** Workbook Exercise Stewardship Endowment Balance Sheet Permanent Acreage Under Protection Stewardship Endowment per Acre Under Protection Total Endowment per Balance Sheet Endowment : Revenues (Total Endowment / Revenues, expressed as %) Yr 1Yr 2 Trend

32. Lands Held for Protection

33. Liabilities

34. Net Assets

35. Net Assets (a.k.a., "Fund Balance" or "Net Worth")

37. Net Assets

38. Unrestricted Net Asset Ratio = 5% Net Assets to Revenues Ratio = 649% * Revenues = $1.38 million

39. Donor Restrictions Temporarily Restricted – Donor-imposed restriction that is released with passage of time or by actions of the organization. Permanently Restricted – Donor imposed restriction permanently; usually does not apply to earnings/gains. Unrestricted – No donor-restriction imposed. Can include “board designated” amounts. (See FASB 117 – On Web Resource)

40. Financial Strength and Leverage Debt : Equity Ratio = 0.02 : 1

41. Exercise: Net Assets (aka, “Equity” or “Fund Balance”) Workbook Exercise Unrestricted Fund Balance per Balance Sheet Total Fund Balance per Balance Sheet Total Revenues per Income Statement Unrestricted Net Assets Ratio (= UFB / TFB, expressed as a percentage, e.g., 23% ) Net Assets / Revenues (Unrestricted Fund Balance / Total Revenues, expressed as %) Total Liabilities per Balance Sheet Total Fund Balance per Balance Sheet Debt : Equity Ratio (Ttl Liabilities / Ttl Net Assets, expressed as ratio, e.g., 0.3 : 1 ) Exercise: Balance Sheet Strength ******************************* Yr 1Yr 2 Trend

42. Various Land Trusts *In Handout

44. Strategic “Postures”… “Expansion Mode” “Steady State” “Start-Up Phase” “Under-Capitalized” “Merger Candidate?” Other?

45. SAHC – Culture & Practices Leadership Dynamics: Balanced authority between E.D. and Board. Active and functional board committees (6). Quarterly Board meetings and one annual board retreat. Financial Systems: On staff financial administrator performs all routine accounting. Outside CPA available for ongoing consultation and prepares year-end statements. In process of adapting standards and practices of regional Land Trust association (Blue Ridge Forever). Strategic Planning Process: Written outline format updated every 2-3 years; last updated 2005. No discreet financial section. Considering assistance from consultant for update in next few months.

46. SAHC – Strategic Goals General –Adhere to LTA S&P, which have been formally adopted. Financial and Fundraising –Build Various Endowments –Increase Unrestricted Revenue to Cover Operational Costs –Improve Fundraising Efforts at All Levels –Improve Financial Reporting and Control Systems Lands Program –Focus on Roan Highlands Geography (landscape-scale effort). –Proactively expanded activity in other Target Geographies. –Get Land Stewardship to “Maintenance’ Level –Improve Financial Viability (Sustainability) at Project Level

47. SAHC – Strategic Goals (cont.) Governance –Improve Board Quality and Diversity –Improve Function at Board and Committee Levels Membership –Retain and Expand Membership –Better Engage Members Community Engagement –Improve Education Efforts, Press Coverage, Community Dialogue

49. 5-Year History *In Handout

50. Land and Net Assets

51. Land and Net Assets Acreage grew at average rate of 13%; $$ investment in land at 20% Net Assets matched land growth at 20% Unrestricted Net Assets growth lagged at 2%

52. Working Capital

53. Working Capital Working Capital grew at 11% average, which does not match pace of Lands growth at 13%(acres)/20%($$) Working Capital growth at 11% did outpace Unrestricted Net Assets Growth at 2%

54. Stewardship Fund and Lands

55. Stewardship Endowment Stewardship Fund increased at 19% average growth, in synch with land ($$) growth. Stewardship Fund balance reached $32 per acre in 2006 vs. $28 per acre in 2002.

56. General Endowment

57. General Endowment Growth from $23K to $108K over 5-year period represents a good start.

58. SAHC 5-Year History “Done Well”s Articulated a Strategic Plan and Pursued its Goals. Achieved Growth in Lands Protected Achieved Growth in Net Worth Expanded Endowments “Do Better”s Should Improve Working Capital Expand Endowments Further – Not Yet Optimum Improve Growth Rate in Unrestricted Net Worth Should Build More Focused Targets in Strategic Plan

59. SAHC – 5 Year Balance Sheet Targets Grow to 35,000 Acres / $21.8 Million in Land Under Protection. Achieve Net Worth of $26.7 Million, including $1.9 Million in Unrestricted Net Worth. Grow Stewardship Endowment to $1.5 Million. Grow Operating Endowment to $1.2 Million Achieve $250K Acquisition of Office Space, funded 50% with debt; 50% with fundraising proceeds. Grow Working Capital to $1.8MM

60. 2011 Target

61. 5-Year Targets *In Handout

62. 5-Year Targets: Trends and Ratios Land Holdings (in $$) to Grow at 5% Avg. Net Assets – 7% Growth Rate Unrestricted Net Assets – 16% Growth Rate Working Capital – 12% Growth Rate Stewardship Endowment – 15% Growth Rate Operating Endowment - 74% Growth Rate Acquire Office Space

63. Sustainability and the Balance Sheet Plan Toward Target Outcomes Regarding: Scale of Enterprise (Lands Under Protection) Total Net Assets and Unrestricted Net Assets Endowment(s) Liquidity Balance Sheet Trends and Ratios in General Other Measures: Avoid Long Term Debt for Conservation Projects and Operations Bias Toward Unrestricted Fee Interest in Property

64. SAHC – 5 Year Income Statement Targets Growth to 2,300 Members, with Membership Revenue Achieving $90,000 Annual Fundraising Campaign to Achieve $280,000 per year. Outreach Programs to Provide 18 Events and Achieve $200,000 in Annual Revenues. Unrestricted Revenues to grow to $750,000. Staff Growth to 9, Total Payroll to $410,000 Etc.

65. Income Statement *In Handout

66. Income Statement *In Handout

67. Program- Level Accounting

68. Net Income

70. Net Income Effect on Balance Sheet

71. Fund Accounting

72. Effect on Balance Sheet

73. Stewardship Fund

74. Effect on Balance Sheet

75. Total Cost Analysis

76. Total Cost Analysis Allocates general and admin. cost over all programs and projects Allows for comparison of estimated total costs to direct program/project revenues An analytical exercise and not routine accounting.

77. Budget Reporting

78. Budget Reporting (Cont.)

79. Sustainability and the Income Statement Seek to Achieve: Measured reliance on operating grants Stable and reliable sources of operating revenue. Stabilized flow of funds from endowment(s). Bias toward fully-funded programs and projects against all costs. Embracing projects as fundraising opportunities.

80. Financial Sustainability Report Card (Organization Name Here) For the Fiscal Year Ending _____________ Balance Sheet FactorsMetricPerformance Grade Development of Endowment To increase Stewardship Endowment by $245K to $519K at year-end. Stewardship balance at $480K 1 Development of Unrestricted Net Worth To increase Unrestricted Net Worth by $130K to $1.212 MM at YE. Unrestricted Net Worth at $1.35MM 3 Working Capital Working Capital of at least $1.169MM at YE.W/C at $1.17MM 2 Ratios re: “Consumptive” Assets Etc. Other *In Handout

81. Income Statement Factors MetricPerformance Grade Non-Reliance on Operating Grants Stability of Operating Revenue Sources Endowment Performance and Deployment Direct-Revenue Funding of Programs and Projects Realization of Fundraising Opportunities Other Total Score Grading Scale – “3”=Outperform; “2”=On-Target Performance; “1”=Under-perform *In Handout

82. Next Steps Put a strategic plan to paper. Define the annual planning cycle. Ensure talent (staff, board, and outside professionals), best practices, quality tools, and adapt for human factors. Ensure clarity as to leadership of planning. Create a targeted 5-year balance sheet progression. Begin and endowment fund or two. Develop next year’s budget only after establishing next year’s balance sheet target.

83. Next Steps (continued) Create a Sustainability Report Card for your organization, and put it to use for current and future years. Conduct routine (monthly) accounting, and compare actual performance to budget. Define the annual planning cycle. Keep it simple and streamlined! Remember that financial outcomes are not the primary goals!

84. “Perception is strong and sight weak. In strategy, it is important to see distant things as if they are close and to take a distanced view of things that are close.” –Miyamoto Musashi (b. 1584), Japanese author and reputedly the greatest swordsman of all time.

86. Endowment Spending

87. Endowment Spending Strategy

92. *In Handout