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Business Intelligence for Independent Schools: Everything a Trustee Should Know

ISACS Trustee DayChicago, IL

November 9, 2017

Jeffrey Shields, FASAE, CAE Nearly 20 years of experience working with business officers

in higher education and independent schools NBOA President and CEO since 2010 NBOA serves 1,365+ US independent schools and 250

other schools and orgs around the globe, 17 FTE, $6million budget, headquartered in Washington, DC

Previously Senior Vice President, National Association ofCollege and University Business Officers (NACUBO)

Certified Association Executive (CAE) Fellow, American Society of Association Executives

(FASAE) Trustee, Online School for Girls (currently) Trustee, Georgetown Day School (2013-17)

Jennifer Hillen, CPA, CGMA Director, Accounting and Tax Programs and Interim Director,

Professional Development, NBOA 3.5 years in public accounting at Ernst & Young 8 years as Controller and Associate Director of Finance and Operations

at Harpeth Hall School in Nashville, TN (all girls school with 690 students in grades 5-12)

Created and teach Stewarding Donor Dollars: Financial Reporting for Contributions for business and development professionals

Non-profit board positions include the Junior League of Nashville (President-Elect) and the Vanderbilt Childrens Hospital; volunteer service includes Leadership Nashville, Young Leaders Council, the W.O. Smith Music School, LEAD Public Schools, and Association of Junior Leagues International

Mary Kay Markunas Interim Director, Member Resources and Research 2.5 years on staff with NBOA 12 years as a DFO at The Avery Coonley School, Pre-K

8 day school (outside Chicago, IL) Faculty, Long Range Financial Modeling and Essentials

of the Business Office (NBOAs online courses) Previous careers include corporate finance and

engineering consulting Board service with high school music parents association

1,365+ member schools

What would you like to get out of this session?

Independent School Finance: Myths and RealitiesNot-For-Profit does not equal For-Loss (a tax status and not how to run our schools)

Being mission driven doesnt mean we cant or shouldnt plan to have a financial surplus to re-invest in our mission To maintain our value, and retain and attract families, we must have a long-range plan to invest financial resources into our facilities and

programsThe independent school business model isnt ideal

In most cases, schools dont charge what it costs We staff up long before we know how many students will be enrolled Our budgets are balanced through fundraising and endowment draws

We are in the ultimate people business People make up 80% of our budgets The people we hire need to be the very best they can be and we have to invest in them

We too often equate quality learning with class size An easy metric for parents to understand, and that differentiate us from other PK-12 providers, is smaller class sizes However, the real differentiator is the quality of our faculty and the flexibility in our methodologies Small class size is an expensive model to maintain if that is all we offer ITS NOT!

Were all on financial aid Unless your tuition is equal to the actual cost of attending your school, all of your families are on aid.

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Problem solver Systems thinker A Realist/pragmatist Credible consultant Honest Broker

The Evolving Role of the Business Officer*

Understands budget is the financial expression of the schools mission and priorities

*Adapted from By The Numbers and Beyond: Independent School Business Operations, published by NBOA, 2015

SourceMaterialSource

Material

Governance as Leadership

Type III: Generative

The Three Modes of Governance

Fiduciary

Whats wrong?

Problems are to be spotted

Boards decide by reaching resolution

Strategic

Whats the plan

Problems are to be solved

Boards decide by reaching consensus

Generative

Whats the question?

Problems are to be framed

Boards decide by grappling and grasping

FINGERS OUT!NOSES IN

BEST Trustee Advice You Will Get All Day!

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Stewards of the public trust Must always act for the good of the school rather than

for the benefit of themselves Exercise reasonable care in all decision-making Do not place the school under unnecessary risk

Source:

The fiduciary role of the Board of Trustees

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Understanding financial basics Setting up and monitoring key financial indicators Ensuring adequate control mechanisms Approving the budget Overseeing the organizations legal obligations

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Fiduciary Role in Action

The Boards Fiduciary Role: In Depth

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Many forms of conduct permissible in a workaday world for those acting at arm's length are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.

Judge Benjamin Cardozo (1928 New York court opinion)

CareAct with prudence and in good

faith Loyalty

School before individual Obedience

Ensure pursuit of schools mission

NBOAnet

Fiduciary Duties of the Board

Evaluate HOS performance and review/set executive compensation Conflict-of-interest disclosure Approve the annual operating budget Attain an independent audit Ensure compliance with IRS exempt-organization requirements

(primarily, 990 filing) Review investment policies and performance Review/update/create/assess strategic plan (depending on where you

are in the cycle) Other duties as assigned (fundraising, etc.)

Fundamental Annual Board Duties

NBOAnet

Formal, written review of performance every year Annual goal-setting process Regular review of compensation Use of external salary benchmarks Full board approval of the compensation package

Executive Compensation

Source:

NBOAnet

Complete annual conflict of interest disclosure Conflicts of interest include:

Financial Interests Payments for services: vendors, attorneys, contractors, etc. Other business relationships

Non-Financial Interests Competing fiduciary obligations Competing employment obligations Family relationships/conflicts

Conflicts of Interest

NBOAnet

Annual Operating Budget

Fiscal YearBegins

Fiscal YearEnds

July Aug Sept Oct

Nov Dec Jan Feb

March April May June

July Sept: Review of final prior-year financial performance; overall budget parameters set for following year and key assumptions made between business officer and finance committee

Oct Nov: Division and department requests collected

Nov Dec: Benchmarking analyses completed with comparative peer data; creation of proposed budget by business office

Dec: Finance Committee reviews proposed budget, including next

years tuition, financial aid, & salary increase pool

July June: Budget-to-actual monitored by business office with significant variances reported to Finance Committee



Jan: Full board votes on proposed budget

Oct Nov: Division and department requests collected

May June: Revised budget finalized after enrollment contract binding period

Primary drivers:TuitionSalaries and benefits

Other considerations:Financial aidDebtAnnual fundProgramming decisionsRisk management/securityCapital assets/needs

Significant Budget Inputs

Few or no assets on-hand for emergencies Reduction in permanently restricted net assets Underwater endowment funds Asset imbalance Extremely high A/R balances Deficits or increase in expenses outpacing income High interest rates (esp. on short-term debt) Pending lawsuits Related party transactions

Independent Audit: Yellow Flags

NBOAnet

The words going concern (or anything other than an unqualified audit opinion)

Year-end and audit date are more than 120 days apart

Unexplained or unplanned, sustained, consistent net losses

Steady decline in net assets, revenue

Independent Audit: Red Flags

NBOAnet

Appropriate policies in place Related parties or conflicts of interest Foreign investments or other

transactions Unrelated business income (UBIT 990-T) Compensation reporting Highest paid vendors Fundraising: events, compliance,

contractors Grants paid Schedule O Reconciliation between audit and 990

990: What to Look For

Source:

Ten Considerations for Financial Sustainability Debt Management Reserves Revenue Integrity Financial Resources Investment Management Leadership Succession Reporting Capital Improvement Planning Financial Planning Strategic Planning

Board Committees:Fiduciary Responsibility

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Finance Investment Audit Retirement and/or Human

Resources Buildings and Grounds Development Strategic Planning

Board Committees with Fiduciary Roles

NBOAnet

Major budget/long-range financial modeling assumptionsTuition considerations/scenariosCompensation philosophies/parametersComfort level with debt

Long-range/strategic financial planning and sustainability Conversations that may blur the line between philosophical and

transactionalWhich programs to prioritize and howRisk managementGift acceptance policies or issuesReserves

Finance Committee

NBOAnet

Engages independent auditors and monitors their independence and performance

Assesses quality and integrity of financial reporting process, regulatory compliance, and internal control structure

Educates board for high-level understanding of financial statements and related risks

Aware of accounting/tax legislation as well as legal/regulatory requirements affecting independent schools

Audit Committee

NBOAnet

Establishes investment policies and practices (typically endowment-focused)

Manages relationship with third-party investment manager

Evaluates and reports investment portfolio composition and performance to full board

Investment Committee

NBOAnet

Financial Metrics

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Data-Driven Decision-MakingUtilizing data:

Perspective: to know what is going on with your school big picture

Prioritize: Allocate resources for maximum impact Context: Understand industry trends

Business officer shares results with: Head of School Finance Committee/Trustees Banks or rating agencies Auditor

The Financial Position Survey

There are 51 data points in entire study. Most of the items come from the annual audit.

A few come from the Admissions Office. Shadow Moodys credit analysis and rating

system they developed for independent schools. (Note: Moodys no longer issues an independent school industry credit report)

This presentation focuses on some of the most important ratios from the survey.

In 2011 NBOA began taking a comprehensive look at the balance sheets of independent schools. Hundreds of schools have participated and we are going to use the data from the day schools to show you how you can use it to quickly assess your financial health:

Enrollment

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EnrollmentThe number of students on opening day of the school year

Enrollment - Day

The combined picture is better than expected. The annualized rates of increase over the five

year period 2009 2014 surpass the decreases during the same period.

While overall, the trend continues to show a decline in overall

enrollment.

80%

60%

40%

20%

0%

Perc

ento

fsch

ools

no change

2) Enrollment

inc reased decreased

44%increased 58% 50%no change

60%12% 9% 10% 10%

44%decreased 32% 40% 31%

FY10/ 11 FY11/12 FY12/13 FY13/142010 2011 2012 2013 2014 2015 2016

10th Percentile 277 281 300 361 293 235 250Median 570 550 560 659 610 547 56790th Percentile 1,352 1,143 1,143 1,127 1,153 1,153 1,167Average 719 704 722 734 696 650 651

0

200

400

600

800

1000

1200

1400

1600

Midwest Day Schools

10th Percentile Median 90th Percentile Average

Application CoverageApplications

divided byNewly enrolled students

Application Coverage

Application Coverage is an admissions statistic. It is calculated by dividing the number of applications received in a given admission season by the number of new students who start school at the beginning of the new school year. A higher ratio means stronger demand. In short, the application coverage ratio shows the depth of the candidate pool.

2010 2011 2012 2013 2014 2015 201610th Percentile 134 136 133 132 138 140 133Median 189 195 202 176 168 186 17290th Percentile 400 411 284 302 279 390 459Average 230.3 230.2 220.1 206 195.1 228.1 228.8

0

50

100

150

200

250

300

350

400

450

500

Midwest Day Schools


Tuition: Pricing, Dependency and Discounting

2002 2016 (CPI Only) 2016 Actual Grades9&12Nat'l Day $13,795 $18,470 $22,784Nat'l Boarding $27,400 $35,304 $51,800

$-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Nat

iona

l Med

ians

Gra

des 9

and

12

Average yearly CPI increase for the past 12 years is 1.96%.

Has your school had a tuition increase in any given year that was less than 2%?

Its not just about affordability, but about managing expectations.

Tuition Increases: CPI versus Reality

Source: NAIS and US Bureau of Labor Statistics

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How Tuition Dependent is your school? Tuition revenue includes tuition and related mandatory/optional fees for the regular school year. Other earned revenue includes revenue from facility rental, summer school tuition and fees, summer camp/program fees, and other revenue NOT included above. Annual giving and fundraising includes funds contributed/donated from all sources. Funds drawn from the school's accumulated surplus/reserves Funds drawn from the school's endowment Interest and investment income All other sources

Net Tuition & Fees per student

Net Tuition & Fees (net of FA and TR) per student

If the financial aid budget expands or enrollment falls, net tuition and fees can easily stagnate or decline despite tuition increases. While mission-driven increases in financial aid are perfectly acceptable, using this indicator will help ensure efforts to meet the schools mission dont derail the school overall.

2010 2011 2012 2013 2014 2015 201610th Percentile $6,128 $6,562 $6,301 $7,092 $7,742 $7,996 $8,048Median $11,796 $12,411 $13,025 $14,571 $12,950 $13,174 $13,39890th Percentile $18,784 $18,892 $19,648 $20,100 $20,324 $21,558 $21,887Average $12,243 $12,558 $12,930 $14,051 $13,622 $14,422 $14,583

$0

$5,000

$10,000

$15,000

$20,000

$25,000

Midwest Day Schools


Total Tuition Discount as a Percent of Gross Tuition & FeesFinancial aid + tuition remission

divided byGross tuition and fees

Total Tuition Discount (FA+TR) as a percent of Gross Tuition

While this topic is similar to financial aid as a percent of gross tuition and fees, keeping track of tuition remission as a portion of the total discount is important. Providing the appropriate amount of tuition remission relative to the schools mission should be monitored by the administrators and Board.

2010 2011 2012 2013 2014 2015 201610th Percentile 12.6% 12.4% 14.2% 13.6% 14.1% 11.7% 13.3%Median 16.9% 19.5% 16.2% 18.0% 17.6% 17.5% 20.0%90th Percentile 18.1% 18.8% 21.3% 19.1% 18.4% 19.1% 20.4%Average 17.6% 18.2% 18.6% 18.0% 17.1% 17.7% 19.1%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Midwest Day Schools


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61.1%

17.5%

About the same allocation

14.4%

More aid was awarded toreturning students

7.0%

More aid was awarded tonew students

Not sure/no response

Financia l Ai d Alloc atio n Trends , 20 15N = 561

In 2015, most respondents (61.1 percent) reported that financial aid allocation was about the same as prior years. This deviates from previous survey trends, as less than 14 percent of respondents from each of the studies between 2009 and 2013 ranked allocation as about the same. In those years, respondents were more likely to indicate that more aid was awarded to new students.

1. Operating Margin 2. Capital Spending3. Expendable Financial

Resources per student

Three additional metrics:

Operating MarginUnrestricted revenues minus unrestricted expenses

divided by Unrestricted revenues

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Operating Margin

Operating margin is unrestricted surplus or loss divided by total unrestricted revenues. At most schools the budget goal is to break even or to have a small surplus. A surplus can be used to build reserves or pay for deferred improvements.

2010 2011 2012 2013 2014 2015 201610th Percentile -29.90% -17.80% -15.50% -16.20% -8.70% -13.10% -23.90%Median -3.60% -4.70% -0.70% -0.30% -0.40% 0.90% -0.90%90th Percentile 16.40% 12.30% 10.00% 11.30% 7.90% 10.30% 7.80%Average -5.30% -4.30% -1.90% -2.10% -0.80% -0.40% -4.80%

-40.00%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

Midwest Day Schools


Capital Spending RatioCapital expenditures

divided byDepreciation 56

Capital Spending Ratio

2010 2011 2012 2013 2014 2015 201610th Percentile 13.50% 13.60% 37.80% 19.20% 15.90% 23.50% 30.10%Median 42.50% 67.90% 94.80% 77.30% 60.60% 72.50% 99.40%90th Percentile 817.80% 202.40% 290.30% 410.00% 214.60% 427.80% 931.70%Average 338.30% 136.00% 159.80% 135.30% 95.40% 228.10% 282.20%

0.00%

100.00%

200.00%

300.00%

400.00%

500.00%

600.00%

700.00%

800.00%

900.00%

1000.00%

Midwest Day Schools


Expendable Financial Resources per studentUnrestricted net assets

+ Temporarily restricted net assets- Temporarily restricted net assets for capital projects- Property, plant & equipment (net of depreciation)+ Plant debt

Expendable Financial Resources per student

2010 2011 2012 2013 2014 2015 201610th Percentile ($744) ($1,111) $177 ($1,926) ($1,019) $997 $2,083Median $10,810 $11,561 $8,103 $12,160 $8,146 $14,209 $11,10490th Percentile $40,252 $35,678 $34,305 $45,143 $41,953 $44,155 $39,948Average $15,938 $15,498 $13,631 $16,823 $14,550 $19,667 $17,824

($10,000)

$0

$10,000

$20,000

$30,000

$40,000

$50,000

MIdwest Day Schools


Case Studies

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XYZ Day School increased tuition by 20% and their enrollment dropped precipitously by over 75 students. During the first week of school, the board chair called an emergency meeting and informed the head of school (HOS) and CFO that they had three weeks to cut $750k out of the budget. They further recommended that the budget cuts should come from an immediate reduction in faculty (the HOS and CFO did not concur with this strategy given the time of the school year). Taking matters into her own hands, the vice chair called a meeting of the boards executive committee and immediately went into executive session removing both the HOS and the CFO from the board room. The vice chair continued this practice during subsequent meetings of the board during discussions related to budget reductions caused by a lower-than-anticipated attendance for the school year.

What, in your judgment, are the governance issues at play in the scenario?

What would you do differently if you were the board chair or vice chair?

What could be done so this situation does not occur in the future at XYZ Day School?

Is there ever a time, such as during transition, when the boundary between governance and management shifts or becomes blurry?

Case Study 1:

At ABC School for Girls, the head of school was in a precarious position with her board of trustees due to several years of declining enrollment, financial troubles and high turnover in trustee leadership. A group of influential donors with close ties to the school banded together and communicated directly with trustees and demanded that the school get its financial house in order. In turn, one of the trustees contacted the business officer and requested the salaries for all staff and faculty. The HOS, wanting to appear cooperative, approved the request against her better judgment. The list was subsequently circulated to other trustees and the powerful group of donors. The donor group agreed to make a substantial contribution to the school contingent upon a salary freeze for three specific senior-level administrators.


What would you do differently if you were the board chair or a trustee?

What could be done so this situation does not occur in the future at ABC School for Girls?


Case Study 2:

At IOU Preparatory School, there seem to be some trust issues between the head of school and the board such that important leaders, including the CFO, are getting caught in the fray. There is disagreement among the trustees as to who should make certain budget decisions mid-year. Some trustees feel any deviation from individual line items within the operating budget requires board approval, while others feel that changes that are not material or are simply transfers from one line item to another should be handled by the head or even only the CFO. The finance committee and full board to not operate under a strategic and/or long-term financial plan. What, in your judgment, are the governance issues at play in the scenario? What should the boards relationship with the budget be once approved? How should deviations from the budget

once approved be handled? Consider the role of the full board, finance committee, and board chair in your response.

Describe the ideal governance versus management responsibilities involved in the creation and approval of the annual operating budget.

Should the board adopt a strategic and long-term financial plan? (Consider: How should they go about doing so successfully? What should the plan cover? Who should be involved in that process?)


Case Study 3:

At PBJ Boarding Academy, many current board members have served several consecutive terms and seem to have become stagnant in what they are doing for the school. In addition, the board members do not reflect the overall diversity of the current students or alumni (diversity in a broad sense of the term to include gender, age, culture, origin, race, religion, etc.). As a result, the head of school and board chair decided to launch an outreach effort to recruit board members from the wider PBJ Academy community. Newer board members find it difficult for their voices to be heard and they are worried that the schools policies and procedures are outdated or even putting the school at risk of losing its tax-exempt status, but are being told they should stay in their lane. The board doesnt see the audit or 990 before they are filed. The new CFO is not included in every board committee meeting and is not asked for and, therefore, does not feel it his place to bring financial reports or concerns to the trustee table.


What would you do differently if you were the board chair or a trustee?

What could be done so this situation does not occur in the future at PBJ Boarding Academy?


Case Study 4:

At DMC Marble School, there is a first-year head of school serving alongside a first-year board chair, following the retirement of a long-term beloved head of school and departed board chair. The new head of school has asked the business office not to provide any benchmarking data to the board because of the questions that could arise that he is not yet able to answer. The CFO is uncomfortable circumventing the head, but knows this isnt right. There was a lot of board turnover when the recent HOS retired, so remaining and new board members arent aware of what they dont know and could or should be asking of the head and CFO to provide.


What data is important for the board to see? Consider in your response the full board as well as committees and internal school data and trends along with peer benchmarking.

What are some tools to ensure that a new board chair and new head of school are successful?


Case Study 5:

Logan Academy is in the silent phase of a new capital campaign they are about to launch that will fund endowment as well as a new performing arts center for the school. A major donor has decided that the schools priority should be athletics before performing arts because they feel that athletes have been underserved and sports teams impact more students. You understand that their bias could be because their students are strong athletes and students who are not as interested in the arts, however, the board and administration see the importance of a state-of-the art performing arts center in attracting the future demographic you believe most likely to come to your school and a facilities needs assessment indicated that a performing arts center should be the first priority. That said, the athletic and wellness facilities will need to be addressed very soon and are not currently state-of-the-art. This donor has offered to make a lead campaign gift of $5 million if the school will agree to build an athletic and wellness center before or at the same time a performing arts center is constructed. While you hate to turn away such a significant gift, theirs is not enough to support the desire they have, since an athletic and wellness center will cost at least $10 million and you worry that pursuing both projects at once will split donors. You do not feel this donor will make any campaign gift if not specifically directed to an athletic facility. The director of development, CFO, and head of school have come to the you as trustees with this predicament and need the board to determine the best course of action.


Would it ever be in a schools interest to prioritize a donors wishes that may conflict with plans already in place?

What if the donor had suggested that the athletic and wellness center could take the place of the focus on endowment in the next campaign, rather than fighting against the performing arts center?

In this scenario, it could be argued that the donor is attempting to direct the mission of the school and its programming. How should that be handled by trustees? When should that be embraced and when shouldnt it be?

What are some potential ways to attempt to redirect the donor and/or the schools campaign plans so this gift isnt lost?

Case Study 6:

Value, Value, Value Understand your schools market, value proposition and align resources where they will have maximum

impactData (knowledge) is power Understand data and help other school leaders make decisions based on itInvest in your facilities and facilities maintenance May be the most tangible way to demonstrate your schools value within an increasingly competitive

marketplaceNet Tuition is the only number that truly mattersHelp ensure other school leaders, faculty and staff understand this and how the schools priorities and decisions impact itSchools need business officers to be leaders and strategic partners Competent financial management is baseline but will not ensure long-term financial sustainability

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Know Before You Go

www.facebook.com/NBOAnet www.plus.google.com/+NBOAnetwww.twitter.com/NBOAnet

Contact UsJeffrey Shields, FASAE, CAEPresident and [email protected]

Mary Kay MarkunasInterim Director, Member Resources and [email protected]

Jennifer Osland Hillen, CPA, CGMAInterim Director, Professional Development, Director, Accounting & Tax [email protected]

www.nboa.org

Supplemental

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Audit Committee Due Diligence Checklist (Y/N) School operating within our stated mission and philosophy School providing the curriculum and services the school

community expects Board kept informed about all of the major issues facing the

school Identified the biggest business and financial risks we face as a

school Adequately managing those risks Regular financial reports issued to the board including balance

sheet and income/expense budget comparisons Balanced budget with operating surplus (not deficit) Adequate systems in place to monitor income, disbursements,

and other financial transactions, including timely detection of errors and irregularities

On track with the budget and/or understand the nature of significant changes

Restricted gifts handled properly In compliance with the terms of grants and/or contracts

In compliance with policies, laws, and regulations All taxes and related forms remitted as required Pending or threatened litigation reviewed by outside counsel Information systems and data adequately safeguarded Crisis plan(s) in place and communicated to the board and other

appropriate individuals or groups within the community Trustees, HOS, and other major individuals in positions of

authority signed conflict of interest statements, with potential conflicts identified and resolved

Board carefully reviews the performance of the school head and undertakes a formal evaluation annually

Head of schools total compensation, along with total perquisites, monitored by the board, and board chair reviews the heads expenses regularly

Pleased with the performance of our external auditor Received a management letter and an unqualified opinion from

our external auditor All issues the external auditor identified are resolved

Audit Committee Finance Committee

(a) reviews the financial statements of the school and other official financial information provided to the public;

(a) oversees the preparation of the annual budget and financial statements. The finance committee ensures that budgets and interim financial statements are prepared;

(b) has oversight for ensuring that reports are received, monitored, and disseminated appropriately;

(b) oversees the administration, collection, and disbursement of the financial resources of the school as well as the policies and procedures related to the financial resources;

(c) provides oversight of the schools systems of internal controls, including overseeing compliance by management with applicable policies and procedures and risk management

(c) advises the board with respect to making significant financial decisions;

(d) oversees the annual independent audit process, including the recommended engagement of the external auditor and receiving of all reports, and management letters, from the independent CPAs

(e) reviews the annual information returns, (IRS Form 990, related schedules, and forms) and recommends for approval, signature, and submission by the appropriate officer. The audit committee engages (on the boards behalf) and interacts with the external auditor or auditing firm; and

(e) oversees the preparation and implementation of the governance policies referenced in the Form 990: conflict of interest, document retention, whistle-blower, review of executive compensation, endowments, investments, and so on; and

(f) reviews the schools procedures for reporting problems. The audit committee may exercise primary responsibility to review the whistle-blower policy and process, anti-fraud policies, and policy and procedures related to the discovery of errors or illegal acts, whistle-blower hotline, and other communication methods and determine the process for special investigations

(f) should ensure that joint membership between the audit committee and the finance committee is appropriate and meets local laws and regulations.

Audit Committee

Finance Committee

(a)reviews the financial statements of the school and other official financial information provided to the public;

(a)oversees the preparation of the annual budget and financial statements. The finance committee ensures that budgets and interim financial statements are prepared;

(b)has oversight for ensuring that reports are received, monitored, and disseminated appropriately;

(b)oversees the administration, collection, and disbursement of the financial resources of the school as well as the policies and procedures related to the financial resources;

(c)provides oversight of the schools systems of internal controls, including overseeing compliance by management with applicable policies and procedures and risk management

(c)advises the board with respect to making significant financial decisions;

(d)oversees the annual independent audit process, including the recommended engagement of the external auditor and receiving of all reports, and management letters, from the independent CPAs

(e)reviews the annual information returns, (IRS Form 990, related schedules, and forms) and recommends for approval, signature, and submission by the appropriate officer. The audit committee engages (on the boards behalf) and interacts with the external auditor or auditing firm; and

(e)oversees the preparation and implementation of the governance policies referenced in the Form 990: conflict of interest, document retention, whistle-blower, review of executive compensation, endowments, investments, and so on; and

(f)reviews the schools procedures for reporting problems. The audit committee may exercise primary responsibility to review the whistle-blower policy and process, anti-fraud policies, and policy and procedures related to the discovery of errors or illegal acts, whistle-blower hotline, and other communication methods and determine the process for special investigations

(f)should ensure that joint membership between the audit committee and the finance committee is appropriate and meets local laws and regulations.

Slide Number 1Slide Number 2Slide Number 3Slide Number 4Slide Number 5Slide Number 6Slide Number 7What would you like to get out of this session?Independent School Finance: Myths and RealitiesThe Evolving Role of the Business Officer*SourceMaterialGovernance as LeadershipThe Three Modes of GovernanceSlide Number 14Slide Number 15Slide Number 16The Boards Fiduciary Role: In DepthSlide Number 18Slide Number 19Slide Number 20Slide Number 21Slide Number 22Slide Number 23Slide Number 24Slide Number 25Slide Number 26Slide Number 27Slide Number 28Ten Considerations for Financial SustainabilityBoard Committees:Fiduciary ResponsibilitySlide Number 31Slide Number 32Slide Number 33Slide Number 34Slide Number 35Financial Metrics Data-Driven Decision-MakingThe Financial Position SurveySlide Number 39EnrollmentEnrollmentThe number of students on opening day of the school year Enrollment - DayApplication CoverageApplications divided byNewly enrolled studentsApplication CoverageTuition: Pricing, Dependency and DiscountingSlide Number 46Slide Number 47Net Tuition & Fees per studentNet Tuition & Fees (net of FA and TR) per studentTotal Tuition Discount as a Percent of Gross Tuition & FeesFinancial aid + tuition remission divided byGross tuition and feesSlide Number 51Slide Number 521. Operating Margin 2. Capital Spending3. Expendable Financial Resources per studentOperating MarginUnrestricted revenues minus unrestricted expenses divided by Unrestricted revenuesOperating MarginCapital Spending RatioCapital expenditures divided byDepreciationCapital Spending RatioExpendable Financial Resources per studentUnrestricted net assets+ Temporarily restricted net assets-Temporarily restricted net assets for capital projects- Property, plant & equipment (net of depreciation)+ Plant debtExpendable Financial Resources per studentSlide Number 60Case StudiesSlide Number 62Slide Number 63Slide Number 64Slide Number 65Slide Number 66Slide Number 67Slide Number 68Slide Number 69SupplementalAudit Committee Due Diligence Checklist (Y/N)Slide Number 72