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Analysis Phase

In the Analysis Phase you gather information to identify potential future imbalances in financial condition and to support the development of strategies to counteract the imbalance. This page covers the major steps of the Analysis Phase.

Environmental analysis. Build capacity for forecasting and strategizing by developing an expert understanding of the economic and financial environment.
  • The environmental analysis is the foundation of the analysis phase.
  • Consider both regular features of your environment as well as special events (e.g., closure of a major employer)
  • Use objective sources (like statistics) and subjective sources (like interviews with local experts, such as the chamber of commerce).
  • Examine a variety of factors, such as demographics, land use trends, and legislative and public opinion issues.


Revenue and expenditure forecasting. Provide foresight into future financial condition.

  • A five- to 10-year forecast is most typical, but match the time horizon of the forecast to the time horizon of issues that are driving planning.
  • A very long-term forecast (e.g., 20 years) is possible, but consider presenting it separately from the main forecast to reduce risks to credibility.
  • Hybrid forecasting techniques are the best. Hybrid forecasting techniques take a quantitative technique that fits the data and modifies the result using the forecaster’s expert knowledge of the financial environment.
  • Develop a revenue manual to support forecasting.
  • See GFOA’s revenue forecasting book for more help.


Debt analysis. Debt has important ramifications for future financial position.

  • The importance of debt analysis varies with local conditions. If you have a lot of debt, you might need to determine what an affordable level of debt is for your jurisdiction. If you do not have much debt, you might investigate how debt can be used responsibly to meet capital planning goals.
  • First, analyze the impact of current obligations.
  • Second, examine capacity for future indebtedness. Connect the analysis to a long-term capital plan, where possible.


Financial balance analysis
. Pull together the results of all of the foregoing steps to identify potential imbalances in future financial condition.

  • Consider all types of imbalances: expenditures exceeding revenues, underfunded liabilities, weaknesses in financial policies, demographic and land use trends.
  • Use data visualization to help communicate imbalances more effectively
  • Need help with creating visualizations? Visit GFOA’s MuniCast site.


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