The principal should ensure that the local school board has policies that govern the financial practices of the school. Several examples are listed here:
Mark Remboldt | Treasurer, north pacific union
A useful way to report core financial data clearly and concisely is to use a few financial indicators. Not only does it provide a snapshot of the school’s financial position simply, it facilitates easy comparisons and consistent data points between regular monthly and yearly reports. More data points may reveal financial trends. Following are some financial indicators that may be useful for schools in reporting to board members.
Balance Sheet Ratios:
Current Ratio = (Total Curr Assets/Total Curr Liabilities)
Ability to repay debts due using available and accessible resources
Accounts Receivable = (AR+Loans Receivable/Op Fund Balances)
Amount of credit extended by the school to students and other debtors
Working Capital = (Curr Assets - Curr Liabilities/NAD Recomm %)
Adequacy of available resources for viable operation
Expenses Per Day = (Total Operating Exp/Number of Days in Time Period)
Average dollar amount for operations covered by available liquid assets
Days of Cash = (Cash & Investments/Expense Per Day)
Number of days of operations covered by available liquid assets
Percentage of Operating Expense = (Total Op Exp/Earned Op Inc)
Shows over/under budget in percentage
Percentage of Income to Budget = (Total Inc - Budg Inc/Budg Inc)
Shows difference from budget in percentage
Personnel Expense = (Employee Wages & Benefits/Total Op Exp)
Total cost for all employee wages & benefits compared to all expenses
Scholarship Expense = (Scholarships & Financial Aid/Total Tuition & Fees Inc)
Indicates level of financial aid needed to meet current tuition and fees
Student Labor = (Campus Student Labor/Total Tuition & Fees Inc)
Indicates level of tuition and fee income self-generated by the school
Board Financial Reports
Steve Fuchs | Business manager, walla walla valley academy
Accurate Enrollment Predictions. A school’s successful financial operation starts with an accurate forecast of expected student enrollment. Accurate budget preparation based on viable student numbers in the spring translates to fewer surprises after school starts in the fall. Revised budgets based on actual students are simplified or unnecessary if projections are on target. Be aware of:
Five-year average from feeder schools, geographic areas, and returning students
Students enrolled who were not on the radar screen
Track these unknown students who arrive for registration day or during the first week of school; use a shorter average of two years, as this sector can fluctuate year to year and is not as stable as feeder schools and returning student averages. (Our school experienced a time when this sector was as high as 17%. This is substantial; less than half of this is more typical.)
In an era of rising student populations, a school will likely do slightly better than forecast (Smile). During an era of falling student populations, the bell curve effect may put that school slightly below projections. (Frown) Therefore, it is wise to keep student enrollment at the head of the list in every financial report to the board.
Accurate Collections Figures. Next, it is important to keep boards aware of actual tuition/fee payments. Observe parent payment trends and expect higher collections prior to payment deadlines, like registration and semester tests; expect lower returns after those deadlines. I prefer to express this data in terms of “percentage” vs. “days of receivables outstanding,” because a school may have the same collection percentage on two given months. However, in one month parents may be paying less and the school giving more in financial aid or may have paid out more in student earnings; vice versa is also true. The important figure to follow is parent payment. There is always an increase in collections after a big financial aid remittance from the conference, union, or local church, but this doesn’t mean the parents consistently follow the financial plan each month.
Where Does Cash Stand? What do you have to work with? Cash flow should be explained carefully to board members. In the case of an academy with a minimum of four self-balancing funds, a large “Unexpended Plant Fund” cash balance could give the illusion that the school has money, but cash held in the “Unexpended Plant Fund” or cash held for “Trust and Agency” accounts is not available for day to day operations.
Working Capital. The working capital percentage is an indicator of how a school will meet financial obligations during hard times. The NAD has created formulas and the AASI software calculates this. The lower the percentage, the more the cash shortage will be felt. Putting away money for the future is prudent. Examples of areas that could benefit are:
Use Layman’s Terms on the Financial Statement. Although this is more difficult with a “canned” accounting program, try to present figures for categories that board members understand. They may not have a grasp of all that “Instructional” or “Student Services” departments encompass, but they do understand categories like Financial Aid, Utilities, Salaries and Benefits, Maintenance and Repair, Grounds, and so on.
The Financial Report: Keep it Simple
Dennis Plubell | Vice president for education, north pacific union
Nearly 25 years ago a friend and long-time Adventist school leader (David Penner) penned an article for the Journal of Adventist Education, on the topic of this month’s newsletter. Despite the passage of time, it is still on target! The premise is that the goal of a financial report to school board members must facilitate understanding that will support good fiscal decisions. Our students need quality instruction, which is built in part on a foundation of adequate funding and sound financial management, both priorities for all school boards.
Too often, the financial report to the board meetings seems to drag on interminably. This happens when too many pages filled with too many numbers overwhelm. Also, we instinctively know finances are vital to school programming, so we dwell too long on the details reported rather than on how they should inform good operational decisions. Then, add the fact that many board members feel unprepared to digest figures, let alone dialogue about them, and we are all too willing to trust that the other board members get it and we’ll just vote when they finally get to the motion to accept the report “subject to audit.”
So, how do we keep it simple? We need to prepare and present accurate financial reports. Accounting software-generated reports are important for those who can delve into the details. But, a highlight page that answers the following ten questions will work wonders at giving everyone confidence that they know the school’s operation is solvent. Giving the answers to these questions is the first step. Next, show the members where these answers are found in the actual statements and balance sheet.
Monthly statement: february 20xx
How many students are currently enrolled?
Enrollment Last Month
Enrollment Last Year
How much cash did we receive?
How much were we expecting?
How much did parents pay?
How much were we expecting?
How much did students earn (on academy campus)?
Last month how much did they earn?
How much did we spend?
How much were we planning to spend?
How much do we owe others?
How much did we owe last month?
How much do others owe us?
How much did they owe last month?
How much is in the bank (checking, savings, etc.)?
How much did we have last month?
How old are our debts to vendors?
How old were they last month?
How are we doing financially? (gain/loss to date)
What were we expecting?
Change your focus from making money to serving more people. Serving more people makes the money come in.
- John C. Crosby
Vice President for Education North Pacific Union Conference
Berit von Pohle, Editor
Pacific Union Conference, Director of Education
Ed Boyatt, Editorial Advisor
MISSION: STRENGTHENING ADVENTIST EDUCATION ONE LEADER AT A TIME