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Date Created: 12/21/15
Strategic Financial Planning Reengineering to Secure School Stability Part I Helping to Re-Shape a School’s Future by Re-Shaping its Finances Harry Bloom Rheua Stakely 1 Definition:Financial Reengineering • A fundamental reconsideration of the financial model of school, – From a long term perspective, – To reflect a school’s • Core value proposition in light of its market and the institutions within it • Desired strategic positioning for long term future success. 2 Learning Acceleration, LLC. All Rights Reserved. 2008 Financial Reengineering When? • *Immediately, in times of crisis • *Every other year, to avoid crisis Who • Schools in financial trouble – Little schools – Big schools • Everyone else! 3 Who: Big Schools with Financial Challenges Total Tuition Prior to Scholarship 8,346,873 Scholarship( 15% of Net Tuition) (1,255,297) Net Tuition Income 7,091,576 Less Uncollectible Tuition(1% of Net Tuition) (70,916) State Reimbursements 280,000 Net Fund Raising 1,150,000 Donations/Grants 850,000 Other Income 54,000 Total Income 9,354,660 Enrollment Expenses 630 Total Salaries 6,911,818 620 610 Total Salaries/ Salaries related Expenses 8,066,231 600 Total School Related Expenses 289,430 590 580 570 Total Office Expenses 233,810 560 Total Building Expenses 463,500 550 540 Total Other Expenses 187,460 2005/6 2006/7 Budget 2007/8 Projected 2007/8 Total Flexible Expenses 1,174,200 Fixed Expenses Total Rent 985,857 General Insurance 107,100 Transportation(Net) 199,500 Total Fixed Expenses 1,292,457 Total OTPS Expenses 2,466,657 Total (PS and OTPS)Expenses 10,532,896 Net Profit/(Deficit) (1,178,236) 4 Small Schools With Challenges 2007-2008 Budget SUMMARY Hard Income $1,485,500 Annual Fundraising $550,000 Enrollment Grants $101,250 140 Total Revenue $2,136,750 120 Expenses 100 80 Personnel $1,691,853 Other than Personnel - Facilities $381,252 60 Other than Personnel - Other $224,234 40 20 Total Expenses $2,297,339 0 Operating Surplus (Deficit) - hard income ($811,839) Act.2005/6 Act.2006/7 Budget 2007/8Actuall 2007Projected 2008/9 % hard income coverage of expenses 64.66% Operating Surplus (Deficit) - all income ($160,589) % all income coverage of expenses 93.01% cost per student $22,745.93 Surplus (deficit) per student - all income ($1,589.99) 5 Foundation=Know What Your School’s Positioning Is… and Program and Process Performance Implications Product Must Be Leadership Strong on C X 1-2 And X=Our School Ballpark A=School A On the B=School B 3rd C=School C U=Unserved PopulationU A B Operational Customer Excellence Intimacy 6 Learning Acceleration, LLC. All Rights Reserved. 2008 Financial Planning for the Long Term • Develop a financial plan that mirrors your school’s strategic plan • Engage in more creative annual budgeting – The norm is incremental budgeting – The problem: Incremental budgeting reinforces incremental thinking • Many of school’s challenges and opportunities require longer time perspective • What is a “given” in the short term is amenable to change in the longer term 7 Learning Acceleration, LLC. All Rights Reserved. 2008 A Long Term Perspective is Necessary, When – Significantly realigning tuition with cost to approach the cost of education – Renegotiating a union contractual obligation so that it better promotes program improvement – Renegotiating expensive long term real estate leases when underlying needs shift – Building a new building – Reducing operating expenses when enrollment declines permanently due to new school start ups or fundamental population shifts…to try to maintain program integrity and quality – Making virtuous cycle investments, e.g., in the Arts, Math and Science, Special Needs 8 Learning Acceleration, LLC. All Rights Reserved. 2008 Required Budgeting • Process-driven budgeting, e.g., – Recruitment process? • Faculty? • Student? – Professional development process? – Communication process? • Program-driven budgeting – E.g., virtuous cycle investments in Hebrew language or math/science curriculum enhancements 9 Learning Acceleration, LLC. All Rights Reserved. 2008 The School’s Processes THE WORK OF THE SCHOOL Develop Recruit Teach and Develop Students Recruit Staff Students Evaluate Curriculum Teachers Manage Communicate Raise Funds Manage Finances Facilities Tuition Setting Financial Aid Process Cash Flow Management What is desired investment posture for each process? 10 Learning Acceleration, LLC. All Rights Reserved. 2008 Taking Control 3-5 Year Investment Posture (Compound Annual Average Growth in Spending) Strategic Reduced Investment Maintenance Investment Candidate (+8-10%) Candidate (+4-5%) Candidate (0-3%) Overall Faculty Compensation Target Departmental Compensation (e.g., Hebrew Language, Math and Science) Overall Process Investment Target Process Investment Tuition Setting Total Budget Financial Aid Process 11 Learning Acceleration, LLC. All Rights Reserved. 2008 12 13 14 In Summary • Know your school’s value proposition • Understand the implications of that value proposition for process and program spending • Take a long term prospective to financial planning • Utilize creative budgeting: Process and Program budgeting to shape a more positive future • Respect the Virtuous Cycle wisdom Note: Please do not miss Part II Session: Dealing with Financial Moments of Truth (2:15pm;Back Bay C) 15 Bio Harry Bloom President Learning Acceleration, LLC Harry Bloom is an experienced marketing manager and management consultant who has worked for some of the leading corporations and consultancies in the world, including Procter & Gamble, General Electric, McKinsey & Company, and the Computer Sciences Corporation. Mr. Bloom helped the Partnership for Excellence in Jewish Education develop the highly successful Joint Purchasing Initiative which assists hundreds of Jewish day schools in saving money through collaborative purchasing activities. Additionally, he helped design, research and establish the PEJE Knowledge Exchange which codifies and makes easily accessible independent school best practice in Admission, Leadership and Governance, and Fundraising. Mr. Bloom lectures for the Partnership for Excellence in Jewish Education, the Solomon Schechter Day School Association, the Association of Modern Orthodox Day Schools, and Torah Umesorah and is a much-in-demand facilitator of leadership retreats for teams of professional and lay leaders of Jewish non-profit organizations on the topics of governance, fundraising, marketing and student recruitment. Mr. Bloom is an active PEJE coach and is assisting a number of Jewish organizations throughout the U.S. in programmatically strengthening their governance, strategic planning, student recruitment and fundraising operations. Additionally, Mr. Bloom is serving as the Director of Institutional Advancement of South Area Solomon Schechter Day School where he has helped develop a compelling vision, strategic and long range financial plan, directs fundraising and marketing, and led a successful campaign for a new campus. Mr. Bloom has a B.A. and Hebrew Teacher’s License from Yeshiva University and an MBA from Columbia University’s School of Business. He is an instructor at the Azrieli Graduate School of Education and Administration at Yeshiva University, where he is a doctoral student. Contact Information: Email: firstname.lastname@example.org 16 Telephone:617-212-4910 Mail: 200 Cotton Street, Suite 18, Newton, MA 02458 Rheua S. Stakely Consultant 225 Washington Street Marblehead MA 01945 email@example.com • 781-631-0255 BIO • Rheua Stakely is a consultant from Marblehead, MA who specializes in independent school admission, recruitment, attrition, and financial aid. After working in admission and financial aid at Phillips Exeter Academy for 12 years, she formed her own consulting company working with nonprofits, for profits, and management training institutes, as well as schools. Some of her other consulting work includes: board professional development and retreat facilitation, as well as short and long range planning. Over the past 22 years she has worked with more than 350 schools and nonprofits including more than 90 Jewish day schools coast to coast. Rheua is a senior coach for PEJE. • In addition, Rheua has plenty of coaching and performing experience as an Outward Bound instructor, a tennis pro, a nationally ranked squash player, and an amateur musician. She also learned much about thinking quickly in difficult situations while climbing the Matterhorn, Mont Blanc, Kilimanjaro, and other mountains around the world. 17
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