Article by Genevieve Madigan
How can independent school boards and heads quickly gauge the financial health of their institutions in ways that support data-informed strategic planning for the future? NBOA and the National Association of Independent Schools are working together toward the answer.
Every business officer knows the details of his or her school’s budget and understands how its various parts interact. Likewise, the boards and heads with whom they work must understand these budgets and other financial data in order to plan strategically. To facilitate those goals, NAIS and NBOA plan to use the Composite Financial Index, which will allow schools to develop a composite score of their financial health at a point in time. The Composite Financial Index, used by colleges and universities for more than 20 years, will be based on four core financial ratios:
- Primary reserve: a measure of the school’s financial flexibility
- Viability: a measure of the school’s ability to cover debt with available resources
- Return on net assets: a measure of the school’s overall asset return and performance
- Net operating revenues: a measure of the school’s overall operating performance
A driving motivation for NAIS and NBOA is to ensure that the gauge and related resources will work for all types of independent schools.
The Composite Financial Index is part of an NAIS initiative funded by the Edward E. Ford Foundation. Recognizing the importance of the partnership between boards, heads and CFOs in schools’ strategic financial planning, NAIS asked NBOA to co-develop the gauge, which will also include supporting resources. This spring and summer, the organizations are convening heads and CFOs from member schools to validate the model and to provide advice, direction and feedback.
The strategic and generative conversations boards, heads and CFOs have are so critical to school success. We want to make sure these partners have a common language and a framework to make the best decisions.
Donna Orem
NAIS
A driving motivation for NAIS and NBOA is to ensure that the index and related resources will work for all types of independent schools. “This new approach to thinking strategically about an institution’s financial health will help individual schools better plan for the future,” said Jeff Shields, NBOA’s president and CEO. “But we also hope it will move the entire independent school industry toward greater financial sustainability.”
“The strategic and generative conversations boards, heads and CFOs have are so critical to school success,” noted NAIS President Donna Orem. “We want to make sure these partners have a common language and a framework to make the best decisions.”
After further beta-testing of the Composite Financial Index, NBOA and NAIS will share the results of the collaboration with their respective members.
Genevieve Madigan is NBOA’s vice president, professional research and development.
Download a PDF of this article.
