Capital Budgets
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About This Guidance
This document lays out when land trusts should develop a capital budget and provides a sample of one.
© 2019 Land Trust Alliance, Inc. All rights reserved.
When nonprofits talk about budgets or fundraising campaigns, they refer to the costs of acquiring or rehabilitating land, buildings and equipment as capital costs. Larger organizations with substantial investment in these items frequently prepare capital budgets, as well as operating budgets. They separate their plans for purchasing land or rehabilitating their facilities and equipment from their plans for routine operating costs. Even when capital budgets are used, the cost of regular, ongoing stewardship of easements or land or maintaining buildings usually appears in the operating budget.
Does your land trust need to prepare a separate capital budget? In most cases, smaller organizations will simply include plans to purchase land, buildings or equipment in the annual operating budget, setting these capital items up as a cost center and identifying both the funding sources and the anticipated costs. Of course the acquisition of assets (land, buildings, equipment) is not an expense from an accounting point of view. So organizations that choose to include these capital items in the operating budget may create a separate section for the capital line items below the other expenses. See Figure 1 for an example of this approach.
If your goal is a major purchase of land, the acquisition of new facilities or completing major rehabilitation on property your land trust already owns, you may find a capital budget is very helpful in communicating with potential donors, funders and lenders. Remember, however, that potential donors and lenders will also want to see your operating budget to be sure that you have reasonable plans to meet the costs of operating your new facility or equipment.
