School Finance

1. School Finance Jim Jeffery, PhD Dean, School of Education Andrews University

2. You Might Be a School Principal if... • You have no time for a life from August to June. • You want to slap the next person who says, "Must be nice to work from 8 to 3 and have your summers free!" • When out in public you feel the urge to talk to strange children and correct their behavior.

3. You Might Be a School Principal if... • You refer to adults as "boys and girls." • You encourage your spouse by telling them they are a "good helper.“ • You've ever had your profession slammed by someone who would never dream of doing your job.

4. You Might Be a School Principal if... • Meeting a child's parents instantly answers the question, "Why is this kid like this?“ • You believe "extremely annoying" should have its own box on the report card. • You know a hundred good reasons for being late. • You don't want children of your own because there isn't a name you can hear that wouldn't elevate your blood pressure

7. What will we cover today? • 1:30 – 2:15 Lecture Portion • Why are we in the education business? • Financial Terms and Definitions (illustrated with actual financial statements). • Wages and Wage Factors. • 25 Major Points in Financial Management for ALL schools.

8. Case Studies/Discussion • Woodlands (K-8) Adventist School irregularities • Cherry Lane Adventist Academy (K-12) downsizing. Was it done the right way? • Wrap-up and Final Thoughts

9. Alfred McClure (Former NAD President) • Wrote an Article • “What’s a Nice Church Like Ours Doing in the Education Business”(The Journal of Adventist Education, Dec. ’98)

10. Some of his thoughts… • “Adventist education is incredibly expensive” • “Life would be a whole lot less complicated for many of us if we weren’t.” (involved in the education business)

11. The scope of Adventist Ed • “Aside from pastoral salaries, education is the largest single item in most conference budgets” • “The cost of education represents a financial ordeal for some local churches” • “…for the majority of our churches it is the largest single local expense”

12. On Average…. • The cost to local churches “runs from 33 percent to 50 percent of local funds; in some cases, it represents more.”

13. How much money is that? • In 1999 the NAD Gross Tithe was $622,714,668 • Of that total $231,102,777 was spent on Adventist Education K-16 (37.11%) • This represented Operating expenses, Capital expenses, Teacher training, worthy students

14. Total $$$ spent on SDA Education as a Graph

15. “Adventist education absorbs copious amounts of time. It is not possible to calculate the time spent on the boards”.. finance committees, budget committees, personnel committees, marketing committees..”

16. “Adventist Education is Expensive” “So what’s a nice church like ours doing in the education business?”

17. The Beginning • 1872 first official SDA school organized. • Reason? • The rationale that won the day was this: • “We must have schools to “prepare workers” – pastors, teachers, nurses, missionaries, and later, doctors.

18. Another Key concept • Elder C.E. Bradford (former NAD President) • Key concept in his mind was “nurturing the culture”

19. C.E. Bradford “Adventism is handed down both by example and by precept”

20. Adventist education/priceless “I’m sure all of us would give everything we own to make sure our children are with us in the kingdom” • A. E. McClure

21. Furthermore “I am convinced that when history records the defining moments of the Seventh-day Adventist Church, the decision to establish schools will be seen as one of the most dramatic.” • A.E. McClure

22. How important are Finances in an SDA school? Budget

23. Accepted Standards of Financial Reporting • To comply with accepted denominational standards of financial reporting 3 financial statements are normally required. • Trial Balance • Income Statement • Balance Sheet • These are included as HANDOUTS (Let’s look there now)

24. The Monthly Financial Statement (another VIEW) • Include with every financial report a summary page (like what follows) • So that everyone including those without an accounting background can understand

25. 2nd & 3rd Major Points • 2. Reduce the amount of financial detail to only what is needed by the board. • 3. Take time to teach board members how to read and understand the financial report. Here is an example of a Summary Page from a longer Financial Report (source DS Penner, The Financial Report Keep It Simple and Understandable, JAE, Dec/Jan 1999/2000 http://circle.adventist.org/files/jae/jae199962023405.pdf)

27. S.U.P.A • Simple (focused and appropriate to the discussion and time limitations) • Understandable (written in terms free of accounting jargon) • Professional (neatly formatted; easy to read) • Accurate (showing current numbers)

28. Essential info for any school that depends on tuition income Current

29. Cash Received

30. Amount Paid

31. Amount Earned by Students

32. Amount Spent by the Academy

33. Amount Owed by Academy

34. Amount Owed to Academy

35. Money in Checking Account

36. Age of Academy Debts

37. Operating Margin

38. One page summary The One Pager Cash Received Amount Paid by Parents Amount Spent by the Academy Amount Owed by Academy Operating Margin for the Year

39. 25 Do’s of School Finance Management (We will cover only the MOST Important)

40. 1. The school board should adopt a definite schedule of tuition charges, charges for special activities, registration and textbook rental fees, physical education fees, and so on.

41. 3. The purchase of major items of equipment and the outlays for improvement of physical facilities must be financed based on definite plans for the cost to be underwritten.

42. 3a. Any major outlay of funds by the school must be covered by a plan and voted by the school board.

43. 5. It is important that the school funds be kept in a bank account separate from those of the church.

44. 6. The basic rule which should be followed without exception is that all cash flowing into the organization must be receipted promptly. Cash should not be left in the school overnight (unless in a safe).

45. 8. All incoming cash should be entrusted to a single individual – the treasurer preferably – who is solely responsible for receiving, holding and depositing the money.

46. 12. All disbursements of school funds should be made by a check drawn on the school bank account. This rule should apply in ALL cases even where expenditures are made from petty cash funds.

47. 12a. Those disbursements made by petty cash funds, should be documented with a receipt and placed in the petty cash box. This allows the treasurer to reimburse the petty cash box and record the activity in the appropriately area for financial statement review.

48. 13. Generally, the school principal is authorized by the school board to make routine purchases without specific individual authorization of each transaction. This is understood in the school board’s approval of the operating budget.

49. 13a. The principal should communicate closely with the treasurer on large purchases that have been approved by the board. The treasurer needs this information for timing issues and available cash in the bank. Transfers may need to be made before acquisition.

50. 17. No blank checks are to be issued by the school and turned over to another party to be completed. No blank checks should be taken away from the school or written off the school premises.