FINANCIAL MANAGEMENT
Financial Management in International Schools By Gregory A. Hedger, Ed.D. , Director & Cameron Janzen, Chief of Operations The International School Yangon
The purpose of this short article is to share some information and insights we have generated related to the financial management of small to medium size international schools. In doing this, we will discuss ideas around setting the climate for proactive financial management, ways to improve financial predictability, and tools we have developed to support principle-based budgeting and budget management. In doing this, we speak from the experience of effectively managing two schools from deficit budgets with no reserves, to balanced budgets with substantial reserves, generating financial returns in one new school start up over a period of four years, and managing finances effectively through crisis situations through scenario planning. Effective financial management in international schools has to begin with setting the climate. This begins with role clarity with the Board of Trustees and has to rest on the ideal of transparency. This means keeping the Board informed at all times about successes and challenges. In doing this, it also means developing the sense of the Board owning the budget as a whole, while the head of school owns the implementation of the budget once it has been approved. Policies and procedures that define this relationship are key. At ISY, we work closely to develop the budget. Once we feel confident about it, we begin to meet with the Board Treasurer to review the budget. The Treasurer questions and challenges us on various aspects of the budget, and occasionally encourages change. Once the Treasurer is satisfied with the budget, he takes ownership for guiding it through the finance committee, and ultimately the full board. In doing this, it becomes the Board’s budget, and we become the custodians of its delivery. This becomes accepted at all levels. Another important aspect of developing the financial climate is addressing silos within the school. We constantly remind staff that there is only one budget, the all school budget. Individual divisions and departments have spending guidelines based upon budgetary lines, but they do not have ownership of a budget of their own. All major expenditures are discussed based on what is best for the whole school, as opposed to what is best for one division. As with the Board, we believe that part of establishing a financially effective climate includes keeping everyone aware of the financial situation of the school. We communicate this through State of the School addresses, where we share financial information and discuss plans for addressing concerns, whether those may include staff cuts, pay increases, or cost cutting measures. This commitment to transparency ensures that everyone is informed and prepared to share the burden as needed. 12 EARCOS Triannual Journal
Finally, we believe in promoting a realistic picture of what to expect. A generally accepted adage is that from the time something new is initiated, it takes about three years before you begin to see results. This is especially true when it comes to financial initiatives. We frequently remind people of this in an effort to keep expectations appropriate, and then provide means to measure progress as we strive for results. This brings us to the topic of financial predictability. Most international schools only have one source of income - tuition fees. As a result, it is important we be able to predict this source as accurately as possible. We do this by removing variables that can make predictions unreliable. For example, we require early payment of tuition, usually at the start of the fiscal year. Discounts are never given for early, or full year payments (as opposed to payment by semester). However, there are added processing fees for multiple payments. We clearly state that refunds on tuition are not given for any reason, and then adhere to that. Discounts are not permitted - even for multiple children from the same family. It costs the same to educate all children. If we did not need the tuition from all of the children, we would not charge the tuition that we do. One challenge some schools confront is families who move around from school to school. We address this through financial barrier--upfront costs, like a capital or enrollment fee--that is paid when a student enrolls. This is not refundable. Doing this creates an incentive for parents to avoid changing schools for trivial reasons. Finally, we have eliminated salary steps for faculty. We hire faculty based on education and experience at six different levels. Once hired, pay increases are based on inflationary increases only. This avoids creating a large automatic cost escalator that may not be in alignment with increases in revenue. Over the years, we’ve developed a number of ideals and tools that help us with our financial management. First, we promote the ideal of principle driven finances. All of our financial decisions are based on the mission of the school, and we communicate that constantly. We even go so far as to have line items in the budget dedicated to mission-based expenses. We are committed to the ideal of no deficit spending, and constantly communicate the sense that we are stewards of the school’s funds, which means the funds of the community. Through these principles we are able to generate a sense of trust with the community around the finances of the school. We go beyond ideas though and produce tools to guide us and our community. For example, we have generated a budget matrix to help guide the Board in making decisions
