Long-term Financial Planning

Course Description

A nonprofit board’s primary responsibilities is the fiscal life of the organization it governs, it follows that long-term financial planning should be the primary method of carrying out that responsibility.Many board members and nonprofit executives, though, only view their fiscal responsibility within the context of the annual operating budget. But a long-term financial plan looks beyond one fiscal year and projects revenues, expenses, and other key factors that may financially impact the organization over many years.

In this course, we will discuss the importance of the long-term financial planning process for nonprofits. The course will also focus on the creation of financial models. A financial model uses a computer program to simulate how an organization functions. With that data, the model applies a set of assumptions to project the organization’s future financial activities and financial position. During class, we will use the model as part of a planning activity. Finally, we examine capital budgeting, which Investopedia defines as the process of choosing projects that add to a company’s value. In theory, a for-profit organization can always finance a capital project if it provides adequate return to its shareholders. Nonprofits, though, are often limited by how much they are able to invest in capital projects. We will discuss how nonprofits generally make capital budgeting decisions using a technique known as capital rationing.