The End of the School Year Doesn’t Always Bring Closure for Non-Profit Private School Financial Leaders
Published on by Rachael Cruse in Assurance, Not-for-Profit
Many of us remember the emotions we felt when a school year ended and summer break began. But it’s a different story for non-profits that provide primary and secondary education services – for them, the end of the school year means rolling up their sleeves to continue the planning and execution of their missions.
With many changes in our economic, social, and political climate over the past year, we wanted to know what they see as the biggest stressors in their organizations.
So, for the summer edition of our non-profit roundtable series for the private education sector, we assembled a group of financial leaders from local primary and secondary education organizations for knowledge sharing, support, and thought leadership on industry challenges and trends. Here’s what they had to say.
Overall concern: budgeting and forecasting for the future
Historically, the private education sector’s best tool for effective budgeting has been forecasting its enrollment. Many schools glean enrollment expectations through demographic studies, historic data, and a pulse on their community’s appetite and trends. Do they look at this on an annual basis? Absolutely. However, many also forecast enrollment up to five years in the future to better predict, adapt, and effect change.
Some private schools shared they’ve seen positive trends in their enrollment numbers for the upcoming school year thanks to a flow of interest from families formerly in the public school system. Some of these schools have reached capacity and established a waiting list for interested students. This should mean an easy budgeting process, right? It turns out that might not be the case.
Schools expressed concerns about how our current economy and inflation projections will impact a family’s capability to pay for their child’s education. Changes in the number of students who qualify for state financial aid programs or who need a school-financed scholarship both play a considerable role in whether a school collects sufficient funds to support its operations.
Plus, schools are feeling the direct economic impact of higher prices of goods and services as well as the demand for higher pay for employees.
Remember, too, that the COVID-19 pandemic and other social impacts have taken their toll on the emotional well-being of teenagers and youth. Schools are finding ways to support the mental health needs of their students and realizing that the needs are far greater and more costly than they’ve experienced in the past.
While schools have been supporting these needs largely through financial assistance from government funding sources established during the pandemic, as the country returns to a perceived state of “normal,” and that funding assistance ends, leaders are feeling increased anxiety over how schools will continue to finance these programs, which remain in high demand.
The impact of endowments – and the markets
Many private schools are fortunate to have endowments that assist with student financial aid, and maybe even general operating support. However, large investment losses in these endowment accounts in recent months don’t help provide the flexibility and resources schools had benefited from over the previous two years. Even though they can’t predict or control the investment market, its performance often plays a significant role in providing options and security in an otherwise tight budget.
Tools for developing realistic plans
As with any budgeting and forecasting process, there are a variety of ways to go about developing a realistic plan and getting buy-in. Leaders shared the importance of providing both meaningful written and visual tools for leadership and governance groups to understand and reflect on.
Should there be a preliminary plan established that is later “trued up” for tuition rates and enrollment changes or are original budget projections sufficient to carry a school through its fiscal reporting period? While preferences are diverse, the key is finding the right balance between the accuracy of assumptions and timeliness of information so that the school has a sound financial plan to guide and aid in decision-making.
Join the conversation
Our next non-profit roundtable for the private education sector will be held in the fall of 2022. Want to be part of the conversation? Please contact Rachael Cruse at rcruse@barnesdennig.com.
If you’re a non-profit struggling with these same issues, the Barnes Dennig team of top non-profit financial professionals is here to help. Contact us for a free consultation.