ISC Insights

In This Issue:

• Spotlight on ISC Services: Endowment Planning

Guest Interview with

Scott Wilson

ISC recently interviewed Scott Wilson, Headmaster at Brookstone School in Columbus, GA, regarding his current research interest and recent publication examining the topic of funding at independent schools.

Q: What particular financial difficulties do you think most independent schools face? Do they differ among independent schools in different geographic locations? (Do Southeastern schools generally face different financial issues than do those in the north?)

A: The primary financial challenge that we (Southern schools) face is affordability. While most families in our market can reasonably afford for one child to attend our schools, all but the wealthiest families become stretched financially when they begin to pay for two or more children. $30,000+ after taxes is a lot to consider especially when adequate public schools or less expensive private/church-based schools exist in the same market.

Q: How do you recommend independent schools should teach people in their community (Ex. Parents, faculty, organizations, etc.) about the importance of giving?

A: The primary obstacle is that the general public cannot fathom that schools need funding on top of already high (perceived) tuitions. We combat this (or attempt to) by invoking best practices and performance of our peer schools.

Q: What kinds of incentives, if you think any should be used, invite more charitable giving?

A: Being able to direct a charitable gift to a particular area of interest. This flies in the face of "the school's highest priorities" but it has become an effective way of fund-raising.

Q: What simple practices and/or changes can independent schools implement to become more financially efficient?

A: Schools can be more aggressive in finding efficiencies within their operations. Many schools over-staff during good times then subsequently find themselves financially strapped when enrollment, fund-raising, and revenues slip. Schools can be more creative at finding profit centers (summer programs, etc...).

Q: Why do so many independent schools get in trouble financially?

A: Many factors: Assuming more debt than they reasonably should; charging more than their market can bear (subsequently losing enrollment); Living with financial inefficiencies (non-productive employees); think short-term rather than strategically.

Q: In your opinion, what are some successful funding models or programs?

A: These are difficult to identify because the marketplace is so different from city to city and from school to school. Hammond School (Columbia, SC) has gone from terrible operating deficits to full enrollments and operating surpluses by maximizing all of their resources.

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Focus on Financial Sustainability

School is now well underway but does the financial outlook of your school seem uncertain? According to NAIS, financial sustainability has been identified as a key area of focus for independent schools in the 21st century. In this month’s issue of Insights, we at Independent School Counsel want to help you tackle the issue of becoming more financially efficient at your school. By finding new pathways in doing business and thinking “outside the box”, your school can become more entrepreneurial in prolonging and maintaining the financial fitness of your organization. Is your school losing ground? Make use of the following resources in order to get to a more competitive position in the marketplace!

Anticipating Financial Trends

The following NAIS report provides a snapshot on national annual and capital giving by school type, school size, and geographic region for the fiscal year 2004-2005.

Link to article

Source: National Association of Independent Schools. (2004-2005). Annual & Capital Giving Statistics in NAIS Member Schools.

Develop your school’s fundraising efforts by anticipating financial trends and responding to them proactively. This article is an excerpt from the book—Philanthropy at Independent Schools, 2nd Edition.

Link to article

Source: Colson, Helen. (April 2002). What 10 Trends Mean for School Fund Raising.

Constructing Financial Solutions

The following article thoroughly examines how schools use bonds to establish financing goals. Successful bond issues complement a school's long-term financial strategy, as well as fulfill immediate needs. Click on the link to find out how tax-exempt bonds can make debt work in your favor.

Link to article

Source: Procknow, Charles E. (2001). The ABC-Ds of Capital Financing. Independent School: Curriculum Conundrum, Fall 2001.

The following link takes you to a report that examines the process behind setting up and implementing a "capital campaign" at private K-12 schools. It offers advice for setting up a comprehensive development program, discusses planning issues such as conducting a feasibility or planning study, and explores what to expect while conducting a capital campaign.

Link to article (PDF)

Source: Roach, Arthur H. Fundraising basics for private school facilities. National Clearinghouse for Educational Facilities, Washington D.C.).

Unlike gifts to a capital campaign, planned gifts are typically made when the donor is ready and when the time and gift vehicle fits the individual donor's circumstances and need. The following article describes 8 aspects that schools should think about before starting a planned giving program.

Link to article (PDF)

Source: Fritz, Joanne. (2006). Top 8 Things to Think About Before You Start a Planned Giving Program.

Spotlight on ISC Services: Endowment Planning

5 Thoughts on Building an Endowment

By: Jay Howard, CFRE, ISC Consultant

Note: This article is aimed at small to medium size schools.

The average medium-sized NAIS member school in the Southeast has an enrollment size of about 800 students and an endowment of about $8.5 million. How does your school measure up? Source: www.NAIS.org

Name of School	Total Endowment
Episcopal High School (VA)	$115 million
Baylor School (TN)	$65.5 million
Montgomery Bell Academy (TN)	$54 million
Isadore Newman School (LA)	$30 million
Saint Mary’s School (NC)	$19.2 million
Charlotte Country Day School (NC)	$16.8 million
Forsyth Country Day School (NC)	$13.3 million
Ravenscroft School (NC)	$11.2 million
University School of Nashville (TN)	$7 million
Chattanooga Christian School (TN)	$6 million

Why do we need an endowment? All schools have three sources from which to fund current operations; tuition and fees, annual fund giving, and endowment income. No school can afford to ignore any one of these resources. These monies can be used to fill budget shortfalls or enhance programs. To help with building an endowment program, here are five things to consider:

1. Focus on bequests.

The vast majority of dollars that build an endowment comes from estate gifts and specifically from bequests. Bequests as part of a will are easy for donors to understand and do not require that they give up control of their assets during their lifetime. Most significant school endowments started with a substantial bequest.

2. Start them young.

If you can get recent graduates to get into the habit of thinking about your school as a philanthropic priority by donating to the school's annual fund, then you will have laid the foundations for substantial giving through an estate gift in later life.

3. Seek gifts to endow faculty, programs and scholarships.

The trend in philanthropy is for donors to give for a specific purpose (Ex. endowing support for faculty positions or academic/athletic programs). Today’s tuitions are often beyond the reach of many well-qualified candidates. Scholarship funds, such as financial aid, help make a private school education a reality for many deserving students.

4. Include information regarding estate planning in all your correspondence.

The goal is to have your constituents begin to think of your school as accepting estate gifts and as being worthy of support in perpetuity. Include ideas on estate planning in newsletters, alumni magazines, thank-you letters and even in e-mail signatures. One of these outlets may begin a dialogue that leads to a substantial endowment gift.

5. Appeal to the entire school community.

Alumni, parents, grandparents, trustees and friends all have a stake in your school. Start by asking your trustees to include your school in their estate plan. After all, they are your biggest stakeholders. You never know when something you say or do will resonate with your community in a way that will lay the foundations for substantial giving.

Development work is a process that never stops. With genuine and sincere stewardship, sometimes the least likely donor candidate will be just the one to surprise you. A final word of advice: always ask for a specific gift amount that is a stretch but reasonable, given a donor’s financial circumstances.

For more information on these and other ideas about how to build your school’s endowment, contact the ISC team at 678-259-8476.