Head’s Network - Women’s Leadership Seminar
Finance… what school leaders need to know
October 18, 2014
You are a finalist in a Head Search. You are wondering about the financial stability of this school… What questions would you ask?
What sources of information would you
seek?
How would you evaluate the data you
receive?
Where do you begin?
Graland Mission Statement
Achieve intellectual excellenceBuild strong character
Enrich learning through the arts and athleticsAnd prepare our students to be
Engaged citizens and thoughtful leaders.
Graland Strategic Plan 2011-17
Provide a program that brings the Graland Mission to life
Create a dynamic learning community composed of highly effective
teachers, administrators and staff
Foster an inclusive community focused on supporting Graland’s
Mission and Guiding Principles
Ensure financial sustainability and maintain campus and facilities
that optimize Graland’s program
Implement Board governance practices that serve Graland’s
Mission
Basic Assumptions
Finance is a key component in achieving the
school’s mission
It is a reflection of the school’s true priorities
The Head must be actively involved in all
phases of the budget
The critical question is:
Does the school have or can the school
generate the resources needed to meet
the mission?
Staffing
Financial Aid
Technology
Plant
Program
Budgeting
Budgeting is the allocation of resources
required to achieve the School’s mission
Bottoms Up
Top Down
Strategic Indicators for Independent Schools Revenue
Expenses
Budget excess/deficit
Enrollment data
Student/faculty ratio
Debt
Capital projects
Financial aid
Faculty profile
Demographics
Deferred maintenance
Annual Fund
Endowment
Who is Involved?
Budget Managers
*CFO*
Head
Finance Committee
Board
What Happens Know goals from planning
processes and multi-year financial plan
Gather input
Start budget building and prioritizing
Timeframe
Oct/Nov
• Input, define assumptions
Dec/Jan
• Preliminary budget approval for tuition setting
Jan/Feb
• Appointment renewals, contracting, budget setting
April/Mayor
Aug/Sept
• Budget finalization
Fiscal year usually July 1-June 30
Operating Income
86%
6%
3% 5%
2013-14 Actual Operating Income
Tuition ($13,788,323)
Endowment ($970,001)
Misc. Income ($414,356)
Annual Fund ($879,623)
Operating Expenses
46%
17%11%
8%
6%6% 5%
2013-14 Actual Operating Expenses = $13,599,761
Instructional Salaries
Adminstrative Salaries
Instructional Materials
Maintenance Expense
Lunchroom Expense
Adminstrative Expenses
Technology
Financial Aid and its sources
FA as a % of tuition income / benchmark
Mission based
Discounting to fill seats
Financial Aid Endowment
Restricted Annual Giving
Faculty Class sizes
Student/Teacher ratios Class size studies public school – Tennessee, Texas
Gains with smaller class size early grades No impact after grade 5
Workload Student facing hours Prep hours Extra Capacity - Schedule
Graland Compensation Philosophy
Graland Country Day School commits to
attracting, retaining and rewarding high-
performing employees – those that demonstrate
the qualities of innovation, collaboration,
professionalism, leadership and actively
contribute to further the mission of the School.
Compensation
Compensation Philosophy to drive decisions
Understand marketplace National benchmarks
Local benchmarks
Demographics of faculty and staff Family health insurance coverage
Retirement
Employee childcare
Faculty Salaries Benchmark
Faculty Salaries 11-12Lowest
11-12Median
11-12Highest
Graland $36,885 $53,438 $77,976
NAIS Day School (50th percentile)
$37,743 $52,275 $76,556
Denver Public Schools (Step 1 with BA): $37,551
THEN A MIRACLEOCCURS
Alumni Program Part-time Alumni Director $35,000 Alumni Expenses $21,250 Total Investment $56,250
Return on Investment: Annual Fund – 8% Participation $128,000 Alumni Speakers – 6 Visits $6,000 7 Alumni Kindergarten Students $136,500 Total Return $270,500
What to look for
Are there any unexplained significant trends evident in the
historical financial summary
Does the school have reserves?
Does the school have sufficient funds to pay
the debt service? Is there a strategic plan to retire the debt?
Cash Flow? Does the school pay this year’s bills with next
year’s money?
What to look for continued
Does the school have any standards violations in its
accreditation report?
What is the ratio of debt to endowment?
What is in the most recent Management Letter?
Is there any “going concern” issue due to
unexpected losses, failure to meet loan
covenants or mismanagement?
What to look for continued
Are checking accounts reconciled quickly
and systematically?
Are vendors paid on a timely basis
Are IRS 990’s filed on time?
Are audits done smoothly and efficiently
on a regular schedule
Has the school done financial projections of income
and expenses?
Questions?
Balance Sheet
Total Assets = Total Liabilities and Total Net Assets
OR
What you own = What you owe plus what you are worth
Assets
Cash
Accounts Receivable (Tuition and Fees)
Contributions Receivable
Equipment
Property
Liabilities
Accounts payable (your bills)
Accrued Expenses (e.g. salaries and
benefits of employees)
Deferred Revenue
Registration Deposits
Notes Payable (Loans, Mortgages, LOC, etc.)
Net Assets
Unrestricted
Temporarily Restricted
Permanently Restricted
Total Net Assets = What you are worth
Almost nothing can be accomplished in one year!
Remember:
Just because we are “not for profit,” it does not follow that we are “for loss.”
Financial Forecast-Key Drivers Operating
Enrollment Annual Tuition Increase Financial Aid Staffing Salary & Benefits
Non-Operating Annual Fund Endowment
Capital Expenditures Debt Service
Drivers and Dynamics in Schooland Financial Models Size of school
Dependence on tuition for income
Endowment
Debt
Deferred Maintenance
Salaries and Benefits (labor intensive)
Drivers, continued
Financial Aid and its sources
Endowed Financial Aid
Restricted Annual Giving
FA as % of tuition income
Mission based financial aid v. financial
aid as discount to tuition
Other Drivers Technology
Specialized program needs
Athletics and transportation
And so many more…
Budget vs.Actual
Graland Country Day School
ENROLLMENT 681 683
FTE - Instructional 97.8 97.8
Student/Teacher Ratio 6.97 6.98FTE – Admin and Staff 37.6 37.6 TUITION AND FEES PER STUDENT 20,164 20,188
FINANCIAL AID AS % OF TUITION & FEES 12.6% 12.9%
SALARIES & BENEFITS AS % OF TOTAL EXP. 73.5% 73.2%
OPERATING EXPENSES (Excl. Fin. Aid, Cap Campaign & New bldg)
Salaries 7,860 7,830 30Benefits 2,116 2,121 (5) All Other 3,632 3,648 (16)
2013-14 2013-14 Favorable/Budget Actual (Unfavorable)
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Actual Actual Actual Actual Actual Actual Actual Actual
ENDOWMENT
Endowment fund, beginning of year 39,363 38,359 44,923 52,126 60,614 66,913 74,847 66,350 Gift income 354 2,683 4,446 5,260 2,823 1,299 67 180 Realized gains/(losses) (976) (142) 1,181 344 550 416 1,056 (3,575)Unrealized gains/(losses) (1,373) 1,955 1,346 2,705 2,723 9,904 (7,986) (9,439)Transfers to/from Operating 991 2,068 230 179 203 (3,685) (1,634) (751)
Endowment fund, end of year 38,359 44,923 52,126 60,614 66,913 74,847 66,350 52,765
DEBT
Outstanding balance, June 30th 18,238 16,684 16,022 15,369 14,687 18,965 18,503 17,701
Principal payment - Bond 520 555 620 610 640 680 720 760 Interest Expense - Bond 1,097 1,074 774 755 726 694 659 623 Interest Expense - Loan 0 0 0 0 0 0 300 137
CAPITAL EXPENDITURES
Capital Expenditures - 20 East 92nd 320 387 389 301 345 557 522 880 Capital Expenditures - Other 0 0 0 0 0 9,542 124 79
FACILITIES
Property and Equipment, net of depreciation 20,774 20,212 19,664 19,036 18,474 27,049 26,947 26,448
Year by YearBudget
From a school in New York City
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