4 Big Financial Challenges Facing Private Schools in 2019
Financial management can be tricky for private schools, especially when it comes to areas like fundraising, endowments, audits and strategic planning. That’s why we had four private school experts cover each of these topics in a webinar for private schools. Here’s a summary of each segment from panelists…
➡ Table of Contents ⬅
If you’re doing awesome in your school’s fundraising – kudos! The reality is that fundraising is one of the toughest challenges that private schools face every fiscal year. Ernie Paszkiewicz, CPA, a private school auditor and board member with 40+ years of experience, has seen this struggle first-hand.
In the webinar, Ernie talked about several considerations that private schools need to take into account before launching a fundraising campaign, including:
- Having a case for support
- Having strong leadership to instill confidence in your stakeholders
- Targeting your requests for donations (i.e. not fundraising just to fundraise)
- Having a plan and following it
- Remembering there is no single silver bullet solution
Fundraising for private schools has changed a lot from the time that Ernie was a student at his alma mater, a private school in Baltimore, Maryland. “I can remember when I graduated, the big thing was spaghetti dinners as school fundraisers,” Ernie said in the webinar. “Then it went to phone-a-thons and now the big thing at my alma mater is the school’s gala, auction and raffle.” Fundraising is always changing, and your school has to change with it.
“I can remember when I graduated, the big
thing was spaghetti dinners as school fundraisers.”
When it comes to developing a list of target donors, Ernie recommends taking a hard look at your mission. Your donors are going to be those who have a passion for what your organization does. But before you ask a donor for a gift (especially a large gift), first you need to build up your relationship with that donor. Ernie calls this relationship building “friendraising.” By making personal connections with your school’s donors, it becomes easier to ask them to support your school financially.
A good number of alumni don’t donate to their alma mater. Some schools see this as an ongoing challenge, but Ernie prefers to see these potential donors as low-hanging fruit. You already know these people have a connection to your school. The challenge is getting them involved again and reestablishing your relationship, which can often be easier than trying to engage a stranger who has no real connection to your school.
Raising money for your school can come in many different forms like annual giving campaigns, capital campaigns and endowments. In Ernie’s option, fundraising ideas are only limited to your imagination of what will interest your target audience.
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Endowments are common at most private schools. Of the attendees at the webinar, 75% of attendees said their school had an endowment fund. Despite this, schools often wonder how well their fund is being managed. As the director of wealth management at GGM Wealth Advisors, Michael Little, CFP®, knows how important investment management is for endowments.
To start with the basics, an endowment is a “grant to provide continuing support or maintenance for a non-profit organization” (Merriam Webster). That just means that your school has an invested pool of money that can help sustain the organization over time. There are several recommended principles for effectively managing an endowment from Commonfund, including:
- Determine the objectives of the endowment
- Set up a payout policy from the endowment
- Determine an optimum asset allocation
- Select managers to implement your allocation
- Provide for systematic review of risks and monitor costs
Of the attendees at the webinar, 75% of attendees
said their school had an endowment fund.
When it comes to selecting an advisor to manage your endowment, Mike had some advice for webinar attendees. “Transparency is important when you’re looking for an advisor,” he said, “Find someone who is willing to hold themselves accountable to some benchmarks.” Your investment advisor should be doing at least the following:
- Within each area of the asset allocation policy, provide recommendations for the specific allocation
- Report on the background economic conditions and how they impact the particular strategic recommendations for the asset allocation
- Report on the returns of the investment managers and make recommendations for changes and new areas of investment
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There are a lot of stressful moments that can crop up in an annual audit. In her 15+ years of experience providing audit services to nonprofits, Lisa Johnson, CPA, said the schools that have the least stressful audits are often the most prepared. Then again, when we asked webinar attendees if their last audit was “stress-free,” nearly half said no.
Lisa said the path to a “stress-free” audit isn’t as hard as a school might think. In her presentation, she highlighted the following steps to prepare for an audit.
1. Be Ready
That means planning ahead, asking your auditor what they need and when they need it by and getting your files organized. If for whatever reason, you can’t produce the documents by the agreed upon date, communicate with your auditor. The whole process will run more smoothly if the lines of communication are kept open.
2. Have Realistic Expectations
Your school’s audit engagement letter is a great place to look when confirming your expectations of your auditors. This letter outlines the responsibilities of your auditor and your internal team. It’s also important to set a realistic timeline for your audit services to help take away the stress of wondering “will this be done in time?”
“One big mistake schools make is only
calling their auditor when it’s time for the audit.”
3. Minimize Your Risks Year-round
Schools with a year-round mindset often have less stressful audits. “Your audit isn’t something you should start thinking about the month before fieldwork starts,” Lisa said. “You need to be thinking about your audit throughout your entire fiscal year.”
Having a “year-round mindset” can mean things like:
- Reviewing your accounting and procedures manual and assessing if policies and procedures are being followed
- Taking the approach of full disclosure when it comes to new or unusual transactions
- Discussing new programs, agreements and contracts during the year or during planning stages
4. Be Prepared to Deal With Any Control Deficiencies
Auditors are required to apply risk standards during the audit to determine if there are any internal control deficiencies. That means your school should anticipate getting a draft SAS115 letter from your auditor to summarize any internal control matters. Your management team will then need to prepare a written response to each finding and summarize how the matter will be corrected.
5. Stay in Touch
“One big mistake schools make is only calling their auditor when it’s time for the audit,” Lisa said in the webinar. Call your auditor during the year and ask if there are new accounting pronouncements or changes up ahead so there are no surprises after year-end. (Ideally, your auditor will keep you abreast of these changes.) You’ll be surprised what will crop up in just a few months. Plus, understanding new guidance will have an impact on your next audit and future financial reporting.
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Looking forward to the future can be tough for some schools, especially when you get mired in day-to-day tasks. That’s where strategic planning can help. In his 20+ years in public accounting, Richard Wolf, CPA, has facilitated strategic planning for nonprofits throughout the Mid-Atlantic region.
But let’s dig into what strategic planning is first. Strategic planning is, “a systematic process of envisioning a desired future, and translating this vision into broadly defined goals or objectives and a sequence of steps to achieve them” (BusinessDictionary). For most schools, that means answering two major questions: where are we now and where do we want to be?
Strategic planning can help your school plot its future. The process can help set a clear direction for your school, increase effectiveness of your operations and improve your school’s understanding of its mission and vision.
Of the attendees at the webinar, 63% of attendees
said their school had a strategic plan.
“There are lots of trigger points for kicking off a new strategic plan,” Richard said in the webinar. “The biggest one is usually a significant change in the school’s leadership.”
Then again, many schools avoid strategic planning, fearing the time or money it will take to get started. As a strategic planning facilitator, Richard has heard many bad reasons why organizations say they don’t need a strategic plan. Despite this, strategic plans are often great ways to rejuvenate your team’s efforts and ensure your school is on track to meet future goals.
However, strategic planning isn’t something you can fit into your school’s next board meeting. Richard highlighted the 11 steps of the strategic planning process in the webinar:
- Decide who will be involved
- Determine the scope
- Determine a timeline
- Choose a facilitator
- Plan ahead
- Facilitation pre-work
- Strategic planning session(s)
- Develop a written plan
- Approval by the board
- Implement and monitor the plan
- Update the plan
Schools typically move through these steps under the guidance of a strategic planning facilitator. A facilitator is ideally an outside consultant, with experience leading facilitations and an ability to offer fresh insights and engage everyone in the planning discussion.
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Published on July 09, 2019