Presenter Information

1. School Financial Management Additional Information Diocese of Columbus Charles M Russell Chief Advancement and Business Development Officer mrussell@ncea.org Presenter Information Vincent de Paul Schmidt, Ed. D. Head of School Cardinal Stritch Catholic High School & Academy vschmidt@cardinalstritch.org @NCEATALK

2. NCEA Corporate Partner Thank You for Making this Professional Development Opportunity Possible!

3. The Job We Think We Are Doing

4. Overview – School Financial Management Workshop • What and Why- School Financial Budgeting & Management • Actual Cost of Education (ACE) • Budgeting Best Practices/ Data Driven Decision Making • Cash Flow Analysis • Revenue Sources & Bridging the Gap

5. Definitions WHAT A BUDGET IS: • Policy document • Reflective of school/ community philosophy • Money is spent on what is valued • Financial plan • Record of past results and forecast for the future • Operations guide • Tool from which decisions are made • Communications tool • Conduit to share strengths and challenges facing the school Four Major Functions of Budgets Bennett, Hall, and Berg (2006)

6. Definitions TYPES OF BUDGET DOCUMENTS: • Operating Budget • combination of known expenses, expected future costs, and forecasted income over the course of a year. Theyare completed in advance of the accounting period, which is why they require estimated expenses and revenues. These figures are complied into the basic Profit & Loss statement. • Operating Cash flow • Operating cash flow (OCF), refers to the amount of cash a company generates from the revenues it brings in.

7. Definitions • Balance Sheet/ Statement of Financial Position • a statement of the assets, liabilities, and capital of a business or other organization at a particular point in time, detailing the balance of assets and liabilities and equity over a certain period. • Monthly and YTD reports/ Statement of Activities • YTD reports are financial statements detailing the performance of a business entity. Providing current YTD results, as well as YTD results for one or more past years as of the same date, us to compare the company's current performance to that of past periods.  • Monthly report provide a snapshot of where the organization is at any given time. There are four main monthly reports but the two that impact us the most are basic P&L, and Cash Flow statement. Other two are balance sheet and a cash flow forecast.

8. Definitions Cash Flow • Critical and sometimes overlooked reality that new principals sometimes need support with • Inflow/ outflows of cash • Tuition collection - Large fundraisers • Payroll - Planned major projects • Important that you understand the flow and prepare accordingly (i.e. Christmas and summer payroll…) • Monthly reports are extremely important • Compare costs against budget –identify spending issues before they become critical • YTD numbers to keep expenditures in line over the course of the year

10. Catholic School Finance:Key Realities and Philosophies Catholic School Principals are Financial Experts Great Educators Philosophy of Growth

11. Catholic School Finance:Key Realities and Philosophies Every day across the country, great Catholic School leaders make key decisions that impact the school program and future without a full understanding of the monetary cost.

12. Catholic School Finance:Key Realities and Philosophies Stewardship challenges can close the doors tomorrow.

13. Budget Philosophy 101Starting with what you HAVE versus with what you WANT

14. Other Considerations for Catholic School Finance • Single school vs. multiple school experience with finance • Stewardship and accountability • The business side of running a school • Financial nuances between Elementary and High School

15. Turn and Talk:FINANCES AT MY SCHOOL… • My school is financially stable and the reason is . . . •  My school is financially challenged and the reason is . . . •  I’m not sure. The area of financial management that most concerns me is . . .

16. Actual Cost of Education Define and determine the per-pupil cost of educating each student at your school. (ACE)

17. Actual Cost of Education Actual Cost of Education= Budgeted expenses / # of students • Seems simple • Can be complex if forecasted budget or enrollment numbers are off.

18. Actual Cost of Education Aligning Tuition with Expenditures • Needs to provide for school goals • You should not count on fundraising for salaries and benefits • In general, tuition should be raised every year • Cost-Based vs. Family Discount • Negotiate, but be smart & savvy –the goal should be to keep families in the school, even with reduced tuition but always verify • Half tuition is better than an empty desk, when budget is set and balanced

19. What are the key factors in determining the Actual Cost of Education? • Total Tuition and Fees • Compute the Average Tuition and Fees per Student Total Tuition Income + Total Fees Income / Total Enrollment = Average Tuition & Fees Per Pupil St. Affluent Example Total Tuition Income = $1,559,675 Total Fees Income = $140,800 Total K-8 Enrollment = 313 Average Revenue Per Pupil = ? St. Humble Example Total Tuition Income = $650,000 Total Fees Income = $57,180 Total K-8 Enrollment = 334 Average Revenue Per Pupil = ? $2117 $5434

20. What are the key factors in determining the Actual Cost of Education? 2) Cost Per Pupil Total All Expenses / Total Enrollment = Cost Per Pupil St. Affluent Example Total K-8 Enrollment = 313 Total All Expenses = $1,962,149 Cost Per Pupil = ? Average Tuition Per Pupil = $5434 Difference of -$835 (x313= $261,355) St. Humble Example Total K-8 Enrollment = 334 Total All Expenses = $1,058,857 Cost Per Pupil = ? Average Tuition Per Pupil = $2117 Difference of -$1053 (x334=$351,702) $3170 $6269

21. Budgeting Best Practices Outline ways to align expected resources to desired student outcomes and create criteria to measure the effectiveness of the budgeting process

22. 7 Factors Critical to Best Budgeting Practices and Catholic School Financial Competency 1 6 3 2 4 7 5 BUDGET MONITORING and FINANCIAL DECISION MAKING FINANCEOPERATIONS MANUAL DEFINED BOOKKEEPER ROLE BUDGET FAMILIARITY BILL PAYING PROCESS COMMUNICATING FINANCES TO STAKEHOLDERS FINANCIAL REPORTS

23. At Your Parish School, Are the Following Tasks Being Performed? Yes / No / Don’t Know • Using a Computer System to Record Financial Transactions • Paying Bills Using your Software Rather than Handwriting Checks • Managing Tuition Collection In House or Tuition Management System • Accepting Credit Cards for Tuition and Other Payments • Using Sound Processes for Collecting and Recording Other Monies, Fund Raising, Student Activities, Etc. • Entering All Bank Account Transactions Regularly (Insurance, payroll, Checks and tuition deposits) • Performing Bank Reconciliations on All Bank Accounts Monthly • Printing and Reviewing Financial Reports Monthly • Managing Cash Flow on a Regular Basis (Reviewing Income vs. Expense and Payroll) • Monitoring on a Regular Basis Your Tuition Collection and Delinquencies

24. At Your Parish School, Who Performs These Tasks?Principal? Bookkeeper? Other? • Paying the Bills • Managing Tuition Payments In House or Through Tuition Management System • Monitoring Tuition Collection and Delinquencies • Handling Credit Card Transactions • Managing Cash Flow on a Regular Basis (Reviewing Income vs. Expense and Payroll) • Entering Income and Expense Transactions Into Accounting Software • Reconciling Bank Accounts Monthly • Printing and Reviewing Monthly Reports • Communicates with Payroll Provider • Handles Employee Insurances and Benefits

25. Daily Management for Principals • Money Comes InHow is it handled? Who Counts? Are there 2 Counters? Who Receipts? Is it handled in accordance with Archdiocesan requirements Where are the receipt records kept? Where is the money secured? Walk through the process. • Bills are Received in the Mail Principal reviews the invoice to ensure it is legitimate. Date and initial for payment. Direct to bookkeeper for payment according to schedule (once a week, every other week) • New Family Registers for SchoolInstruct parents on finance responsibility, review all policies, ensure all paperwork is processed and forwarded to Parish Business Manager • Monitors Delinquent Tuition

26. Weekly Management for Principals • Meet with Pastor and the Parish Business Manager to discuss any changes with respect to finances (the approved budget) • Students Enrolled • Student Withdrawals • Any unexpected adjustments (shortfall in fundraising event, under/over estimated receipt or expense) • Changes in personnel or benefit changes • Outline options for addressing these changes • Meet with Parish Business Manager and consult with the Parish Finance Counsel • Review Tuition Management • If approved by Pastor, learn how to access and use school financial information system

27. Monthly Management for Principals • Meet with Parish Business Manager to receive and review Monthly Reports and any issues with school finances or building maintenance • Highlight and document budget adjustments • Prepare with Parish Business Manager, presentation for Finance Council or equivalent.

28. Catholic School Financial Crisis:Questions of best practice… • salaries and wages for faculty and staff that are socially just • qualified and worthy teachers who provide excellent instruction • appropriate number of support staff, office staff, and instructional aides that is proportionate to student enrollment • “black hole” line items on your budget (administrative, technology) • use of Federal and State Funding: Library? Staff Development? • capital planning for building, grounds, and technology • firm commitment to surplus and directing those set aside funds (5%?)

29. Cash Flow Analysis

30. Basic Structure of Cash Flow Statements: • Inflows: coming from operations such tuition collection, subsidy or outside scholarship funding, development/ advancement activities. • Outflows: generated during business operations such as standard business expenditures, salary & benefits, and business purchases. • A cash flow statement shows liquidity while an income statement shows profitability. • A cash flow statement is not only concerned with the amount of the cash flows but also the timing of the flows. • Show us how and when we spend. Great tool for future budgeting and decision making “Developing Cash Flow Analysis” SBA.GOV, 2015

31. Cash flow analysis statements are generally separated into three parts: • Operating activities: This section evaluates net income and loses of a business. By assessing sales and business expenditures, all income from non-cash items is adjusted to incorporate inflows and outflows of cash transactions to determine a net figure. • Investment activities: This section reports inflows and outflows from purchases and sales of long-term business investments such as property, assets, equipment, and securities. For example - if your bakery business purchases an additional piece of kitchen equipment, this would be considered an investment and accounted for as an outflow of cash. If your business then sold equipment that was no longer needed, this would be considered an inflow of cash.. • Financing activities: This section accounts for the cash flow trends of all money that is related to financing your business. For example: if you received a loan for your small business, the loan itself would be considered an inflow of cash. Loan payments would be considered an outflow of cash, and both would be recorded in this part of the cash flow analysis statement. “Developing Cash Flow Analysis” SBA.GOV, 2015

33. Bridging the Gap

34. Raise Tuition • Fundraising • Donations and Philanthropy • Increase Enrollment • Development • Various Fee Charges • AppropriateStaffing • Tuition Management How to close that financial gap

35. Bridging the Gap • Tuition – Major Proportion. 70% • Parish Subsidy/ Scholarship programs (10%-15%) • Fundraising (10%-15%)

36. Budget Projection • Key is good long-term planning • Examine needs and anticipate your reality next school year • enrollment, staffing, programs, • Overestimate expenses and underestimate revenues • We are stewards of the resources entrusted to us –Use invested resources to further mission • Quality of the education is of primary importance • Keep facility management and upkeep in mind while budgeting

37. Budget Projection • Relevant Questions: • What is working well? • What needs improvement? • Staff efficiency –honest look at effectiveness • New textbooks? Cost? • Maintenance improvements? • Increase in health care and workers comp costs (can be 10-15%) • You should budget realistically but also with hope and optimism about growth and progress

38. Budget Projection • Enrollment estimate - • (tuition + fees = salaries + benefits) • Use real data to plan forward to enrollment • How will each class look moving forward • What does the baptism, confirmation, tax, demographic and census data tell you about your potential population • Increase registration fee -all students pay • Tuition should be increased every year. -- Your costs go up and you have to meet those • Fundraising to fund instructional program

39. Budget Projection • Staffing -hard choices based on reality • Are any senior staff retiring • Does the salary structure keep you competitive with the competition • –Don’t plan optimistically but realistically • Income -tuition rates • –Be realistic re enrollment -conservative • –How will difference be made up? • –Uncollected Tuition –plan for collection

40. Teacher Compensation Form

41. Budget Projection • Ignored finance problems DO NOT go away • As the leaders of a school, care and attention to this is YOUR responsibility • Delegate authority but never responsibility • Important rules for budgeting in a Catholic school: • Friday night lights rule – Clear eyes/ Full Heart • Hole Rule – STOP DIGGING • Red Flags: • Low enrollments in Pre K, K or 1st Grade • Decline in enrollment -class size challenge • Poor academic program • Missing revenue budget amounts • The inability to meet payroll • Unpaid or delinquent bills • All of these reflect a serious concern for a school’s future and must be addressed.

42. For Discussion • What brutal fact must I confront at my school in order to move from good to great? • What at my school do I have absolute faith in, regardless of the present reality? • What is some adversity that I am facing now that I have to deal with head on?

43. Fundraising Development Advancement Fundraising: Transactional activity with a focus is on solicitation, the ask. Specific and short-term financial asks for a one-time, usually modest gift from a donor, usually for a specific cause or project. Definitions “Fundraising vs Development” ; Loren Anderson 2012

44. Development: Building, over time, of a continuous, powerful and life-long connection between a donor / philanthropist and the organization or cause we represent Advancement: A strategic, integrated method of managing relationships to increase understanding and support of the institution’s mission among its key constituents

45. Drivers Behind increased need for advancement dollars Affordable tuition Competitive Staffing Costs Enrollment Challenges Plant and Facilities Need based Financial aid fund Rainy Day Funds Mission Driven Advancement

46. Revenue vs. Non-Revenue Non-Revenue: Community Relation, Communications, Volunteerism, Strategic Planning, Research Revenue: Dollar generating components, Enrollment management, Special Events Components of Advancement Program

47. Mission Driven Advancement Advancement is a strategic, integrated method of managing relationships to increase understanding and support among an educational institution's key constituents

48. Is your mission clearly integrated and present in all you do? • Academics • Arts • Athletics • Activities • Do you stop at excellence or…? Mission Driven Advancement

49. For Discussion • Consider the breakdown of expenses (instructional, student and staff expenditures, administrative and other) and the anticipated revenues for the school • Are the expenditures and revenues in balance in Balance? • What is the plan to move into bridge the Gap? (cuts in expenses or increases in revenue) • Where can I effectively manage expenses • Are we maximizing at least three streams of revenue coming in to school • What are the limiting factors preventing me from being in balance and effectively maximizing revenues?

50. Well Functioning Organization • Money being allocated to institutional priorities • In balance or on plan to become balanced • Critical piece of Strategic Planning • Transparent Process • Multiple Revenue Streams • Meets Diocesan Policies and Goals