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