A Budget for the Future
by John Vegt, SCSBC Director of Finance ◊
Remain faithful, reflect gratitude, be receptive to new ideas … and observe what the Lord will do.
It is often in times of recession and cutbacks that new ideas and thinking are formed. This is equally true for the Christian schools we serve. However, for that to happen we must pray earnestly and work at it diligently.
As you develop your upcoming 2011-12 school budget and continue governing your schools, carefully consider the following key financial and operational issues:
Build a zero-based staff model: Starting with a blank sheet, determine optimum staffing needs, given realistic enrollment projections and program requirements. Consider required staff expertise, demographics and flexibility in determining an optimum staff list. Then compare it to existing staff for possible rearrangements. The current staff/student ratio of 12.4 to 1 has dropped from 13 to 1 only two years ago. If your staff/student ratio is low, have you examined whether the value gained from increased staff is commensurate with expected results? Fully 73% of all operational expenses relate to salaries and benefits for administrative, teaching, and support staff. The SCSBC Budget Template also assists schools in determining optimum staffing levels.
Stay on top of tuition accounts receivable: Our SCSBC schools had 5.4% of tuition still outstanding at the end of the 2009-10 fiscal year. In addition, schools had already written off bad debts and provided tuition assistance of 4.4%. Together this represents 10% of total tuition revenue. A robust collection policy and fair tuition assistance policy must be in place and followed diligently. No tuition discount should be automatic. Schools are urged to examine their budgets to understand what precious tuition revenue is being given away. At the same time, it is important to be compassionate and gracious to those parents in real need.
Develop a marketing plan to recruit new students: Each new student is an annuity with an average of $7,800 in tuition and government grant revenue. Recruiting new students is a much more efficient way to achieve and maintain financial stability than receiving a donation. Survey parents and students to find out what programs in the school make them most satisfied and excited, causing them to recommend your school to others.
Establish a strong board nomination committee: The combination of a dedicated staff, a supporting community, and a strong, highly skilled, visionary board and committee governance model will keep your school on the right path. To ensure strong leadership, a nomination committee must work year round to seek out parents or individuals who are supportive of the school. Board members who understand fiduciary responsibilities make for a more financially secure school.
Ensure internal controls are documented and implemented: Internal controls comprise the measures and practices used to mitigate exposures and risks that could prevent the school from achieving its objectives. The board should understand and act on its fiduciary responsibility towards ensuring internal controls are in place. SCSBC has developed an Internal Controls Checklist for schools as well as a PowerPoint presentation explaining what internal controls for schools are all about. Administrators, finance committees, and boards may well want to review the issue of internal controls at a future committee or board meeting.
Analyze the financial impact of your school’s educational model into the future. The administration should guide the board in understanding what their school may look like in the future. Distributed learning, differing learning spaces, sharing courses with other schools, new technological tools, online classes and online summer school are some of the things that have short, medium and long-term financial consequences. These should be examined and included in every school’s strategic plan. Clayton Christensen from the Harvard Business School projects that 50% of all high school courses in the USA will be offered online by 2019. That’s only eight years from now!
Determine parent satisfaction, school differentiation and staff morale: When these factors are positive, necessary increases in tuition are accepted more readily. Quality Christian education, excellent delivery of instruction, and high staff morale tend to make it easier to set appropriate tuition fees. Parents want value in all these areas. On average, parents presently pay about one third of the actual operating costs; in general, tuition fees are set too low in our schools, considering the staffing ratios and program offerings of our schools.
Challenge your school on the sufficiency of professional development for staff. The hallmark of a healthy teaching profession is ongoing professional development, especially how a Christian worldview is taught within all courses and programs in the school’s curriculum. Presently, schools only invest 0.4% of expenses on professional development. Are we taking this seriously enough?
A school budget is a statement of a willed future with stewardship for entrusted funds and the responsibility to mold students into disciples for Christ in society. What you deem important for your school is what you will ultimately budget for. What does your budget say about your school’s priorities?
Dr. Harro van Brummelen writes, “Schools must define educational quality and excellence not just in terms of knowledge and skills that help students prepare for the marketplace, but in terms of enriching personal lives as well as the life and soul of our communities and culture”. (Goheen, Michael & Glanville, Erin: Gospel and Globalization, 2010 p.357)
Let’s develop a school budget and governance structure that reflects the priorities needed to move towards graduating such students. What a privilege! What a responsibility!