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What You Said: COVID-19 Financial Impact Pulse Check

By Jeffrey Shields posted 21 days ago

  

CEO Notebook |

Schools are meeting the moment, and enrollment trends are encouraging, but unforeseen expenses are putting a dent in those gains.

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Jeffrey Shields, FASAE, CAE
NBOA President and CEO

Social distancing, working from home and long stretches without seeing family and friends face to face may be getting to you by now. With the holidays approaching, it may get worse before it gets better. We at NBOA get it and are working to help you retain your sense of connectedness professionally. One of the greatest values of NBOA membership is to help business officers and business operations staff across the country avoid feeling alone on an island of business and finance at their school — and connect with others who speak their language.

From my point of view, part of keeping you connected is keeping our fingers on the collective pulse of the business officer community so that all of us understand not just what is happening at one particular school but at schools from coast to coast. With that in mind, in mid-October, NBOA conducted a third flash survey on the financial impact of COVID-19 on independent schools in an effort to determine what has been working and what hasn’t. Participation from a representative national sample of more than 200 independent schools provided an opportunity for trendspotting.

Here’s what you and your colleagues told us. I hope the data and context help inform your ongoing leadership and management during this unusual year and beyond that, help you feel professionally connected to your colleagues. And I hope it reminds you that we are all in this together.

Campus Status, Enrollment and Budget

In most years, this enrollment data would be great news. However, this is not most years. 
  • 87% of schools surveyed were open for full in-person or hybrid instruction on campus. Campuses remain closed at 13% of schools.
  • 39% of schools reported being fully enrolled (many of which have a wait list), and 37% of schools report being mostly enrolled with only a few seats to fill. 24% of schools report being under enrolled.

In most years, this enrollment data would be great news. However, this is not most years. Even though three-fourths of the schools report being fully enrolled or mostly enrolled,

  • Only 19% of schools anticipate a surplus in FY21, and 51% of schools are now anticipating a deficit.

This is directly attributable to the unanticipated operational expenses resulting from the COVID-19 pandemic, which is making budgetary management increasingly difficult this year. 

Top Pandemic-Related Expenses

To determine what particular unforeseen expenses are causing widespread operational deficits this year, we asked respondents, “In which area do you project the greatest additional expenditure or lost revenue in FY21?” The results, in order from greatest to smallest expense increases, include:

  1. Hiring additional faculty and staff
  2. Remote delivery of instruction: hardware/software/system purchases
  3. Tuition refunds and/or uncollectable tuition
  4. Additional school cleaning expenses
  5. Reconfiguring campus spaces
  6. COVID-19 testing and contract tracing
  7. Purchasing personal protective equipment (PPE) supplies

I asked my colleague, James Palmieri, NBOA’s executive vice president, which line items are jumping off the page and causing disruption to the bottom line. He noted the following:

Financial Aid Awards: 48% of schools reported an increase in financial aid awards up to 10% above FY20. 21% of schools reported an increase of 10-25%, and 5% of schools reported an increase of more than 25%. In total, financial aid is up at approximately 74% of schools, according to the sample.

Faculty FTEs: 35% of schools reported an increase in FTEs up to 10% above FY20. 4% of schools reported an increase of 10-25%, and 1% of schools reported an increase of more than 25%. In total, faculty FTEs were up at approximately 40% of schools, according to the sample.

Draws from Cash Reserves: 17% of schools reported an increase in their anticipated draw from cash reserves up to 10% above FY20. 9% of schools reported an increase of 10-25%, and 8% of schools reported an increase of more than 25%. In total, draws from cash reserves are up at approximately 34% of schools, according to the sample, and these percentages do not include draws from endowment and other investments which are also occurring at an increased rate.

Leadership and Governance

Most schools have revamped their academic calendar to provide more flexibility, and 88% of schools have added outdoor spaces to accommodate physical distances for learning and other activities.

The good news is that school leaders have responded quickly to meet the needs of families, faculty and staff. At 9 of 10 schools, the following has already happened or is in process:

  • Developed new programs to support students, faculty and staff during COVID-19
  • Invested significantly in more software and services to enable virtual learning
  • Invested significantly in more hardware (cameras, etc.) to enable virtual learning
  • Restructured classroom space to reduce average class sizes for physical distancing
  • Restructured common spaces (e.g., dining) to allow for physical distancing

Further, 77% of schools have revamped their academic calendar to provide more flexibility, and 88% of schools have added outdoor spaces to accommodate physical distances for learning and other activities.

Respondents also indicated confidence in their school’s governance:

  • 92% of respondents “agree” or “strongly agree” that their school’s trustees understand the financial challenges confronting their school and are governing at the appropriate strategic level.
  • 97% of respondents “agree” or “strongly agree” that their school’s senior administrators are responding appropriately to the COVID related challenges confronting their school.
  • 79% of respondents “agree” or “strongly agree” that their school has sufficient procedures in place to ensure business continuity in cases of major interruption to operations.
  • 79% of respondents “agree” or “strongly agree” that their school has a clear financial plan for dealing with the effects of the COVID-19 situation.

I hope you find this information useful as you continue to navigate what promises to be the most tumultuous year of your career. And, as always, turn to NBOA and your colleagues when you need to exchange ideas, find solutions or simply connect.

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Follow NBOA President and CEO Jeff Shields @shieldsNBOA.
From Net Assets NOW, November 3, 2020. Read past issues of CEO Notebook.
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