5-Year Financial Model for Governments
5-year financial model; a good decision making tool
If you are like the leaders in most communities, you are facing dramatic revenue shortfalls. To balance your budget, you must weigh the pros and cons of cuts in spending, services, and capital improvements. And falling property values could mean a need to anticipate more belt tightening next year.
How do you put this year’s challenges into perspective and make good short-term and long-term decisions? A five-year financial model can be a valuable decision making tool in situations like this.
Long-term planning as a decision making tool
For years, governments have developed long-range plans to analyze significant initiatives like development of community facilities, mass transportation and the like. However, in the past, governments have been confident in their tax base and often did not invest in an all-inclusive long-range financial model.
If you are interested in developing a five-year financial model, the government team at Plante Moran can help. Our consultants understand the unique financial planning needs of governments and are aware of the legislative and economic issues that you face.
How long will it take?
The process of collecting data and projecting revenues and expenditures for a long-term plan varies according to the size of the government and the areas covered, but in many cases it can be done in less than two months. A basic long-term plan covers the main activities such as general, fire, and police. It can be expanded to cover other areas of particular interest to the community.
The model considers each department and activity area separately and focuses on key categories of expenditures, including wages and salaries, fringe benefits, and capital outlay. It will be presented to you in a hard copy report as well as an automated version. The automated version will allow you to input variables and quickly determine the bottom-line impact.
Benefits of a financial model
The financial model will help reduce the uncertainty associated with financial decisions by providing a comprehensive picture of your finances and the effects of your decisions across the board. It will help you look ahead, identifying problem areas before they develop.
It will also provide a rational basis for explaining your strategies to your constituents. This will be especially important when you are asked to justify your position related to increasing millages or reducing significant labor-related costs.
Plante Moran is a recognized leader in governmental accounting and consulting. Our five-year financial model is another tool we’ve developed to help governments make wise decisions in these challenging times.