Standing Meeting Review

To achieve long-term sustainability in your organization, follow this process for developing a financial strategy that looks well into the future.

Impacts of financial decisions

Strategic Long-Range Financial Planning in State and Local Governments

  • 3/4/2019

In this era of heightened accountability, financial stewardship, and transparency in state and local governments, long-term sustainability is crucial. It’s a popular concept in the industry, but to truly achieve sustainability for the next five, 10, or 20 years, your organization must earnestly engage in strategic long-range financial planning.

A long-range financial strategy can create tremendous opportunities for your organization to evaluate financial and staffing tactics for long-term stability and allow you to be nimble and proactive, instead of reactive. It can help you recognize potential funding challenges, which may require a shift in or elimination of purchases, debt financing, internal borrowing, or revenue enhancements. It also can outline opportunities where resources can be used to proactively and systematically adjust the impact to constituents, without the need to significantly correct those decisions several years later. Having a strategic long-range plan may also assist in securing financing or a lower interest rate on debt (when other factors are considered by potential creditors).

A good long-range strategic financial plan should be designed over a thorough and deliberate process. It considers capital and operational expenses for a span of up to 20 years; identifies your constituency and its expectations; and aligns them with your organization’s mission, vision, and values. A complete plan includes funding for capital and operational expenses in both the near and long terms and encapsulates your government’s core message to your stakeholders.

Start with the basics

No matter on the complexity and sophistication of your organization, a strategic long-range financial planning process will be based on several foundational components that should already be in place. If not, strive to build these components first, and then proceed with the process.

  • Project champion and communication plan — This should be the job of your finance leader (i.e., CFO or finance director). Strong leadership is vital to the success of the process, and the finance leader and team must provide consistent, timely, and useful communications throughout the process. The finance champion should be available to direct, support, answer questions, or provide suggestions.
  • Mission, vision, and values — An articulated mission, vision, and values document is essential to this process. This should be created through constituent, leadership, and staff input and reviewed and updated routinely.
  • Current policies and procedures — Having sound policies and procedures in place is another key building block in developing a strategic long-range planning process by narrowing the focus of the plan. They should align with your mission, vision, and values, where applicable.
  • Capital improvement plan — Your organization’s capital improvement plan should identify funding sources that are designated for capital needs. Also, your organization should consider having a capital improvement plan which is at least for the same duration as the long-range financial plan. Together, they can determine your organization’s financial opportunities and challenges in the coming years.
  • Operations budget — It’s imperative that your organization develop a sound operational budgeting process that focuses on your mission, vision, and values. Are revenues, expenses, staffing levels, projects and programs regularly reviewed with clear expectations? Are trend analyses performed and budgets adjusted accordingly to ensure adequate resources, while being excellent financial stewards?

Consider the range and data structure of your long-range financial plan

Once you have the foundational components in place, you’ll want to move forward with as much information as you can reasonably gather in structuring your long-range plan’s timeline. The structure can vary as widely as the organization, with the focus being on what makes best business sense for your government. A minimum of two or three years of historical data, the current year budget, and at least five years of projected data should be considered. The more historical and projected data you have, the more robust your trend analyses will be.

For your governmental entity, the document could include many different funds, which have detailed worksheets that roll into more summarized information. This summary information may outline categorical revenues and expenses such as taxes, charges for services, personnel, and materials and supplies. Depending on the plan’s audience and the time range, it could also be constructed on a simple revenues and expenses total for each fund, with a difference between the two. No matter the structure you choose, be sure to utilize many different pieces of information in building the plan to achieve its desired product.

Rely on staff for input and revisions

This step is crucial. Be sure to allot enough time for your staff to review of all the information, ask questions, and make revisions as needed, before delivering the draft to leadership and constituents. Provide an overview of the entire process; focus on the mission, vision, and values; then move into the details of the documents. You want to build buy-in and support, demonstrate how integral each person’s role is to the success of the plan, ensure that the information is accurate, and outline next steps.

Present the plan to leadership and constituents

This will most likely occur over the course of several presentations or sessions. It may be beneficial to cover the information first with an audience that doesn’t have an accounting or finance background and is not invested in the plan’s outcomes; they can help you weed out tedious or irrelevant details to better engage your true target audiences (leaders and constituents).

Close the loop, solicit feedback, and update regularly

With any significant undertaking, closing the loop and soliciting feedback is an important step in completing the first and subsequent iterations of your organization’s strategic long-range planning process. This is the time to request honest feedback on what worked well and where adjustments may be needed.

Remember that a long-range strategic financial plan is never complete and must change with the introduction of new, relevant and material information. Routinely revisit your plan for accuracy and set annual planning process sessions to keep your plan current and effective.

How we can help

Creating, updating, and implementing a successful strategic long-range planning process and plan is a very substantial effort. When conducted properly, it’s a very powerful tool which can provide an effective and clear plan for success. CLA’s state and local government professionals can help you manage the process from start to finish so you can achieve your goals for long-term sustainability.