Faith-based Education Is an Investment in the Future
By: David Byrnes
The financial matters of our private and faith-based schools is one of the most discussed but frequently least understood issues considered by school boards across the country. Salaries, tuition, utilities, new computers, textbooks, building additions, parish support…there’s no shortage of topics to discuss when it comes to the financial matters of your school.
This article, based upon hundreds of discussions with private and faith-based school boards across the country, will present some key financial topics, which should be part of every board member’s understanding.
One of the fundamental issues that board members and administrators should realize is that their school should have three types of budgets: 1) a general operating budget, (2) a cash-flow budget and (3) a three-year or five-year rolling budget.
The general operating budget, which is the total annual school budget, includes a listing of anticipated expenses and revenues for the school year. I have found over the years that most schools have a general budget, but often this budget is simply an operating expense versus revenue budget. This is done in the spring before the next school year and not usually updated. Frequently, this budget does not include items such as depreciation, building costs or utility costs (if paid by church or other sponsoring organization) and other items. An operating budget should reflect the real cost of running your school. If your school does not have a general operating budget, spend the time to go back through the checkbook and calculate the total for salaries, benefits, curriculum materials, utilities and other expenses. Then, prepare an expense budget for the school year.
A cash-flow budget is simply a month-to-month picture of expenses and revenues. This is where you live and is the most crucial operating tool in a school. Cash flow is king, and you must understand it. Good cash flow is simply having enough cash on hand each month to pay each month’s expenses when they are due. Cash-flow budgets help the school board get a picture of when the expenses are to be paid and when the income from tuition and other sources is available to the school. I suggest that you plot each month’s expenses and income as two separate categories on a graph. This will show those months when there may be a cash surplus and other months when income does not meet expenses. Decisions can then be made to reallocate cash flow for better financial management. Good cash-flow management matches up revenue to expenses on a month-to-month basis. Another benefit is that it will allow you to invest excess cash more wisely to maximize potential interest earnings.
Finally, each school board should have a three-year or five-year rolling budget. The first year of a three year plan is your current operating budget, with realistic projections for years two, three, etc., making up the final part of this budget plan. This budget is helpful in making plans for the future and allocating future revenue increases for new projects, materials, staff, etc. It becomes your guiding tool for the future and allows you to share a realistic vision with the school’s stakeholders (parents, staff, parishioners, donors) about where the school is headed in the future.
With these budgets in hand, the next task is to calculate the true cost per pupil. All too often, members of the board and parents of children in the school think that the cost per pupil is the tuition charged. However, the tuition charged usually does not include all costs related to educating a child. I urge you to take the time to thoroughly analyze all expenses related to the school, including salaries, building costs, curriculum materials, etc.
Your real per-pupil cost is what I call your parents’ “perspective number.” It helps them understand and realize two things: (1) the real cost of education per student and (2) the value they are receiving at your school.
Once the three types of budgets have been prepared, and the true cost per pupil has been calculated, the board is ready for its next major challenge, informing the school families about the finances of their school. Here, it’s a matter of being both totally open with the financial matters, while at the same time taking care to present the budgets, the cost per pupil, and the tuition in a way to reflect the benefits received from a private or faith-based education.
Perhaps the best way to illustrate this is to consider, “cost versus investment.” A good education in a faith-based school is truly an investment in the future of the children involved. If parents have a true understanding of the finances necessary to operate a quality school focused on the intellectual, emotional and spiritual needs of their children, they will be more supportive of the overall operation of the school. They will be more willing to make the necessary investment for the benefit of their children. Once parents understand the true value that their tuition dollar represents, you can move the discussion with parents from “Why does faith-based education cost so much?” to “This is a good value and wise investment in my child.”
I recommend that parents be given a good understanding of the financial benefit they receive from the support of the church or sponsoring agency. Most schools that I have visited typically present tuition as a single-figure-cost item and at the same time offer discounts for multiple children.
You will often see tuition presented in the following way:
Tuition Rates for Example School for 2006-07
One child $3,900
Two children $7,300
Three children $10,200
Four or more children $12,000
When tuition is presented in this way, the families do not get a full understanding of what it actually costs for their child’s education. I recommend that the tuition be presented in the following way:
Educational Investment in Your Child(ren) at Example School for 2006-2007
Number of children Tuition Actual cost per pupil
1st child $3,900 $6,300
2nd child $3,400 $6,300
3rd child $2,900 $6,300
4th child $1,800 $6,300
Total for 4 or more $12,000 $25,200
By presenting the tuition in this way, parents begin to realize the value of their investment in the education of their child(ren). They also better understand the investment that your church or sponsoring group is making in their child(ren).
Budget preparation, cost-per-pupil calculation, and presentation of financial information to the school’s stakeholders are three important matters for your school board and finance committee to carefully calculate and thoughtfully plan.
Doing these things correctly is an important part of your investment in your school and the financial investment in the children your school educates. The education of your entire school community regarding the financial operation of your school is an important responsibility. If done correctly, it will result in a much more informed and supportive school community when future tuition increases or special projects are shared with them.
David Byrnes is the president and CEO of FACTS Management Company, www.factsmgt.com, which has served faith-based education for more than 20 years with a commitment to enhancing the financial stability and affordability of private and faith-based schools nationwide.
