Finding the right financial aid formula for your private school can help you award the perfect amount of aid to families and students in need. While budgeting can often be a difficult conversation within the administration and top leadership at your school, you must balance appropriate aid and your school’s financial health.
Start With a Mission
One of the first ways to balance financial aid responsibility for private schools is to focus on your mission and values. Look at your financial aid policy and try to match it up with the school’s mission. Your mission gives the school a purpose for existing while making it competitive with other private schools. Once you’ve made decisions about your financial aid policy, you can keep your mission in mind while setting an appropriate approach to your school and fair to financial aid recipients.
Questions Your Board Should Ask
Your board of directors should be prepared to ask vital questions before deciding on a financial aid policy. For example, you might ask questions about the following:
- Net tuition revenue: Once total aid is granted, what will the net tuition revenue be? How much of that will be available for per-student costs?
- Percentage of the cost: What percentage of the net revenue cost does this number represent?
- Actual cash value fluctuations: How has cash value increased and decreased in the past several years?
- Increases in aid budgets: How much has your financial aid budget increased? What increases are or were necessary, and how have they met the needs of current and new families and students?
- Long-term financial effects: What are the long-term effects of your financial assistance plan? How does it affect students from early to later grades?
Budgeting for Financial Aid in a Private School
Finding a reasonable budgeting plan helps you understand how to award financial aid to students in a timely and fair manner. A few areas to consider while creating a complete budget include the pre-budget phase, income-based budgeting, your mission and goals, and the details that help you organize your process.
1. The Pre-Budget Phase
Before you start the budgeting process, you’ll want to communicate with more than the financial personnel. The board of directors and senior leadership should be involved throughout the planning and implementation stages. Another useful step is establishing a detailed timeline of your budgeting process, including time for research, review, and feedback. Make sure you also document everything during this phase. This helps future participants understand their responsibilities and deadlines during the financial aid proceedings.
2. Income-Based Budgeting
Consider the possibility of income-based budgeting for those receiving financial aid assistance. Your school will budget based on each family’s income to create a fair and balanced policy. If you choose income-based budgeting, many of your goals will remain conservative, focusing on dependable and realistic expectations. Conservative budgeting may help you accurately create a process that allows personnel from all departments to receive input and cooperate effectively.
3. Mission and Goals
As stated previously, your school’s revenue and expenses are often tied to your mission and values. For example, some schools hire particular instructors and pick specific salaries based on student-to-teacher ratios. In other cases, your school can work to identify different expenses that could be reduced or eliminated altogether. You can apply these savings to more critical areas aligned with your mission and goals.
4. The Details
Making a detailed budget helps your school’s leaders work efficiently and make informed decisions. Try to think of information that other people may not understand. Including a thorough explanation of the budget throughout your documents helps others understand difficult areas of your financial aid plan.
Accounting, Internal Controls, and Financial Reporting
Another way to balance your budget and the school’s financial needs is to pay attention to accounting processes, internal controls, and financial reporting. Here are six areas to consider.
Many private schools, while non-profit, work like for-profit companies. There is increased competition among private schools, along with increased costs and scrutinous public entities making sure you operate correctly. Some private schools fail to report their financials accurately, resulting in misstatements or misclassification.
2. Revenue Recognition
Your school’s income may require different accounting needs depending on your specific source of revenue. Some accounting considerations that affect your revenue may include the following:
- Tuition income: This income is the amount received from tuition payments.
- Tuition payments: These are payments made in advance by students and written down as deferred revenue.
- Contributions: Record these kinds of revenue when received or pledged.
In many cases, private schools will maintain and audit their books and financial statements based on cash rather than accrual. However, a disconnect could happen between the conversion from cash to accrual, which is why closely monitoring your revenue streams is extremely important. Experts recommend you keep your books on an accrual basis using reports and monitoring systems.
Looking for assistance with accounting? MIP Fund Accounting software helps schools streamline their financial processes for long-term success.
If other donors have pledged money to your cause, you’ll want to practice proper accounting. Some pledges may include donor conditions or restrictions, and reviewing these terms is essential to follow the rules of the pledge. Unconditional pledges can be recognized as revenue, while conditional pledges will only be recognized as revenue once the conditions have been met.
4. Capital Campaigns
Some private schools use capital campaigns to raise money quickly. Remember that a significant increase in money may mean a lesser increase in cash. Schools use capital campaigns to renovate buildings, construct new facilities or create a new financial program.
5. Planned Giving
Other schools may want to use financial support through planned giving arrangements. Many non-profits, like private schools, receive benefits from various donors. For example, a planned giving arrangement called a split-interest agreement might be used during charitable lead, remainder, or gift annuities.
Endowments are a common way that private schools receive a steady income. Keep in mind that the Uniform Prudent Management of Institutional Funds (UPMIFA) often has requirements and regulations for non-profit endowments. Be sure you follow their guidance and standards set out for endowment spending.
Balance Financial Support for Private Schools With the Help of School & Student Services
For over 50 years, School & Student Services (SSS) has helped students find education through need-based financial aid solutions. Our company helps your private school collect the data it needs to create fair and equitable financial aid programs for your local students. Reach those families who would otherwise be unable to attend your school, and organize your aid information using online software. SSS offers a step-by-step process to help you bring more learners into your school, with a user-friendly dashboard to help you organize analytic tools and data reports. Contact us today to speak to an SSS representative, or call us at 855-230-7850.