School Financial Report Cards
by Tim Williams, SCSBC Director of Finance ◊
If you were to assess your school’s financial management, as compared to best practice, would you be able to give it a passing grade?
A school’s financial health can be demonstrated in very simple terms:
If you were to read your school’s financial statements, would they provide an accurate picture of the true financial position of the school? Sometime this isn’t as clear as it could be due to common reporting errors such as:
- failing to account for depreciation of capital assets;
- including donations and fundraising as educational income i.e. not understanding the difference between a Society budget and Educational Operation budget; and
- not using the accrual accounting method i.e. not understanding the difference between cash and accruals basis of accounting.
SCSBC has a long history of advising schools to develop balanced budgets according to the simple best practice guidelines articulated above. Organizations that are unable
or unwilling to develop balanced budgets are ultimately forced to commit the following financial bloopers:
- using donations to pay teachers salaries and other operational items;
- borrowing money from the overdraft to finance operational deficits;
- spending cash surpluses built up from previous decades;
- failing to set aside reserves to deal with replacement of assets that will definitely occur in the future.
If school leaders do not understand the financial position of the organization, they need to acquire this important skill. Leaders have an ethical and legal responsibility to learn about and understand financial management, and to be sure their schools are operated accordingly.
Administrators and board members who fail to promote financial best practice are potentially putting their school in a perilous long term financial situation. Repeated deficit operational budgets could impact a school’s ability to maintain its programs into the future. It is simply not a sustainable model. As leadership is entrusted with looking into the future to chart an organizational course, the question of sustainability should be one that is considered regularly.
SCSBC objective is that all member schools would achieve an excellent report card in financial management. We offer advice, consultation and financial health audits to help schools reach this position. When schools budget accordingly, they develop a reputation for wise stewardship of the resources they have been blessed to receive. Schools find that when their financial house is in order, it is much easier to approach potential donors or obtain a mortgage when large capital projects are required.
Every SCSBC school receives a detailed Financial Benchmark Report each year. School leaders, treasurers and boards are encouraged to analyze these results carefully and measure themselves against financial management best practice. SCSBC staff are available to assist member schools.
Leaders who take their fiduciary responsibilities seriously will want to ensure their school has a balanced educational budget for the coming year. This will allow schools to weather storms that may come (economic recession, for example) and ensure sustainable into the future, thereby meeting the mission of Christian education for generations to come.