9 minute read
The Impact of the Pandemic on Mission and Governance
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. 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
about the budget. It is difficult for Board members to know what an appropriate amount to spend on select items should be. The matrix draws upon data collected to show averages from other schools, and targets for us to shoot for. It identifies how much of the budget is appropriate to go for salaries and benefits, as well as what is appropriate to expect for annual tuition increases. All of the items in the matrix are identified and approved by the finance committee and reviewed annually.
Through the years, we’ve identified a few other key data tools for financial transparency and planning, including:
An in-depth budgeting timeline that clearly identifies every step of the budgeting process, the role different people play in contributing to the budget, and different roles and responsibilities. This document is important for understanding the amount of work that goes into the budget, as well as the level of input. Benchmarking. We have worked with the Board, and with faculty, to develop a list of schools in the region and the country to benchmark against. We benchmark tuition and fees, as well as salaries and benefits. We keep this list of schools small so we can generate qualitative data and be as complete as possible. For example, we know that simply looking at salaries doesn’t give a complete picture. So, we do qualitative interviews with these schools to better understand the cost of living for them, the value of various benefits, and the quality of living. This helps us generate a savings potential figure, which in turn gives us a realistic sense of how well our school compares to others on this important criterion. Going back to our matrix, we have determined the level we at which. We would like to be as compared to others. This, then, drives budgeting decisions. Again, returning to the idea of breaking down silos, we have a very clear spending authorization table, which requires at least two signatures on all expenditures. This requires a deeper understanding of how our funds are being spent. We have put into place a cloud-based financial management system that is easy to understand and gives everyone quick access to information on income, expenditures, and the budget. This permits greater transparency, ease of access, and personal responsibility for the finances of the school.
Beyond the tools mentioned, we have also worked to improve the finances of the school through some simple investment procedures, and well as procurement guidelines. For example, we rarely let cash sit in a bank account. All cash collected that is not immediately needed is put into safe short-term investment vehicles. These are approved by the full board and monitored through regular reports to the finance committee. These investments reflect an investment strategy developed with One of the great dangers in international schools is developing relationships with vendors that do not ensure the best prices or the best product. These relationships, often quite comfortable relationships, can develop over time for a variety of reasons and may seem to be good for the school, when in fact they do not represent the best management of school resources. We believe in a rigorous procurement schedule, where all services are put out for tender based on a regular schedule--in our case, every four years. Even in-house services, such as maintenance, are put out for tender so we have a point of comparison as we look at our overall expenses. We put out requests for proposals every time something is up for tender, and then use a committee approach to approve the voice of the vendor. This permits us to make sure we are getting the best price and service for our community, maintain transparency, and to be able to require certain ideas that are important to us, like the use of environmentally sustainable products, or enforcement of fair labor practices. Procurement procedures are not just about finances but also about promoting what we believe in as a community.
Finally, we believe it is important to always plan for challenges. Every year, our leadership team reviews and updates decision making matrices that are built around what we will do in certain crisis situations. While we cannot plan for every situation, this does establish certain principles to be employed in a crisis. For example, we are clear in how communication is handled in a crisis, how certain resources are used, and individual roles and responsibilities. A big part of this planning includes the generation of different financial scenarios. In the most recent COVID 19 situation, we had four different financial scenarios developed to discuss with the Board. These scenarios included triggers for different decisions that would help us mitigate the overall impact of various threats. This type of planning has helped us maintain a sense of overall security for the school’s financial resources.
Managing the finances of an international school can sometimes feel like a daunting task. We believe it can be manageable by adopting a number of important attitudes, practices, and tools. Ultimately, this means collecting data, promoting transparency, and always being as prepared as possible.
About the Authors Gregory A. Hedger, Ed.D. has been the Director of The International School Yangon, in Myanmar, since 2016. Cameron Janzen is the Chief of Operations at The International School Yangon.
E-Connect
Stay in touch with many current ideas and trends in education at EARCOS Connect Blog.
Welcome to EARCOS E-Connect.Teachers, counselors, and administrators are extremely busy people. You don’t always have time to search for articles, blogs, videos, and books that will educate and enhance your practice. This blog offer links to relevant educational discussions, articles, book reviews, and videos that you may find informative and useful.
