Catholic schools have three groups of financial stewards: the president or principal, the board and the business office. Each role is a guiding star in the constellation that is private school operations, serving different functions in financial oversight. In the human business of education, schools operate most smoothly when those stars are aligned on a shared vision, desired outcomes and how your organization will thoughtfully strive toward your goals.
Alignment doesn’t always happen organically. It takes work and trust that everyone is focused on what is best for the students and the school. In addition to aligning your strategies with the school’s Catholic mission, it is critical to create a single source of truth to measure outcomes and align on which metrics are critical to each person’s role.
Teacher and staff turnover not only disrupts school operations, but it can also degrade families’ confidence in the education you provide their children. The president or principal is responsible for monitoring employee retention and attrition rates while nurturing a sense of community that makes faculty and staff take ownership of and pride in their school.
Families have more educational choices than ever—public, private, magnet, charter or even homeschooling—and attracting new students costs more than retaining current enrollees.
Catholic schools are uniquely positioned to build a culture of belonging for students and their families, which is critical to long-term sustainability.
The adage “You need to spend money to make money” is true. With tuition as the number one source of funding in Catholic schools, a leader should know what the school spends on student recruitment and if admissions marketing is driving enrollment. What is the return on investment (ROI) for those efforts in terms of the number of new students enrolling and the amount of tuition those students pay?
Since tuition revenue only covers 70–80 percent of a Catholic school’s operating costs, fundraising is crucial. Donated dollars can supplement faculty salaries and fund financial aid programs, create endowments, enable infrastructure improvements and help the school invest in its future. While it may not come intuitively, school leaders should work with their business office to understand the cost of marketing, staffing and materials to raise each dollar.
The annual budget is the principal framework for business operations. The school board has a fiduciary duty to approve or provide guidance on budget proposals while factoring in past performance and projected income and expenses. This is crucial to ensure business continuity.
The board should have a strong understanding of current global, national and local economic conditions. When tuition and inflation outpace family income, a school’s financial sustainability may be threatened. For example, if the largest employer in the area had layoffs and the board decides to raise tuition anyway, the school may struggle to enroll enough students. If they need to pull students from outside the area to survive, the cost to attend calculation must include not only tuition, uniforms, books, technology, etc. but also transportation and/or lodging.
The flip side of the cost-to-attend calculation is how much the school spends to educate each child. NBOA: Business Leadership for Independent Schools estimates a median gap between net tuition and fees revenue per student and the total operating expenses per student of over $4,000. That gap needs to be filled somehow. Each school’s cost to educate varies, and it must be factored in when creating the school’s budget, financial aid strategy and fundraising goals.
The business office is responsible for outbound cash flow management including payroll, employee benefits, facility maintenance, utilities, technology, marketing, insurance and other expenses incurred through regular school operations.
Net tuition revenue (NTR) is realized after subtracting financial aid awards from gross tuition revenue. This is an essential metric for the business office as it is the school’s number one source of income—an estimated 74 percent according to the NBOA—compared to fundraising in the number two spot at 4–10 percent.
Beyond NTR and fundraising, diocesan contributions, auxiliary programs, interest, investments and miscellaneous sources contribute to a school’s gross income. The business office is tasked with managing school funds so that the operating income—the total when subtracting operating expenses from gross income—stays in the black and the school does not lose money every year.
While the business office is listed last in this article, the people and systems in that office often provide the reports other school leaders use in their roles. This critical function requires accurate data from your school enrollment, academic and financial software. Best practice is for those to be fully integrated to provide a single source of truth. Purpose-built fund accounting software can help.
Once everyone agrees on the metrics above, they can work together to attain their shared goals for enrollment, the annual fund and the reserve fund. Catholic schools are better prepared for long-term financial sustainability when their financial stars are aligned.
EnrollmentEvery school should have a goal for student enrollment by grade and tuition revenue. Be sure to factor in the percentage of full-pay vs. partial-pay families.
Annual FundThe annual fund is the backbone of all school fundraising. It helps cover expenses and can fill the gap between net tuition revenue and operating costs. The more a school has in its annual fund, the more programs it can offer.
Reserve FundReserve funds can address unexpected and emergency expenses. For example, many schools use reserve funds to purchase new software and equipment to enable remote learning or to rebuild after storm and fire damage.
Charlie Lytleis the manager of solutions consulting at Blackbaud.
charlie.lytle@blackbaud.com
Kimberley Martinis the senior content marketing manager for Blackbaud.
kimberley.martin@blackbaud.com