Article by Elizabeth Dabney
From the May/June 2021 Net Assets magazine
To finance significant expenditures for the upkeep of a school’s plant assets, independent schools can establish a separate budget called Provision for Plant Replacement, Renewal and Special Maintenance, or PPRRSM. Replacing major building components like heating systems, plumbing systems or roofs are a good use of PPRRSM funds. The rule of thumb is to keep a PPRRSM balance of 3% of total plant replacement cost.
Among 306 independent schools that participated in Business Intelligence for Independent Schools (BIIS) data collection for the 2019-20 school year, 58% of schools had PPRRSM funds. Funding of a PPRRSM reserve was reported by 60% of day schools and 53% of schools with a boarding component. More than two-thirds of schools with more than 800 students enrolled had PPRRSM funds (67%), while about half of schools of other sizes had PPRRSM funds (53% of schools with fewer than 300 students, 58% of schools with 300-499 students, 52% of schools with 500-799 students).
Overall, schools’ PPRRSM funds amounted to 4% of their facilities’ current replacement value in 2019-20. PPRRSM funds covered 5% of facility current replacement value for day schools and 2% for schools with boarding, even though the average current replacement value at schools with boarding was more than double the average current replacement value at day schools. Schools with fewer than 300 students and schools with 500-799 students each covered 2%, schools with 300-499 students covered 3% and schools with more than 800 students covered 6%.
However, only 29% of schools had enough funds in their PPRRSM reserve to cover 3% of the current replacement value of their facilities (31% of day schools and 21% of schools with boarding). Forty percent of schools with fewer than 300 students could cover 3% of the current replacement value, but the average current replacement value of their facilities was less than at larger schools. The percentage of schools of other sizes that were able to cover 3% of current replacement value varied from 24% at schools with 300-499 students to 18% at schools with 500-799 students and 33% at schools with more than 800 students.
Both the percentage of schools reporting having PPRRSM funds and the average PPRRSM fund balance have been on the rise in recent years. The percentage of schools with a PPRRSM reserve increased from 52% in 2017-18 to 58% in 2019-20. The average PPRRSM fund increased 160% over the same time period.
Funding a PPRRSM reserve is one way to manage the costs associated with preserving an important part of your school’s value — its physical assets. Having a policy that directs the use of these funds and keeping a detailed, up-to-date inventory of specific facilities’ needs can help you make the best use of a PPRRSM reserve.
If being physically apart during the pandemic taught us anything, it is how critical sharing a well-maintained physical space is to our school communities.
Download a PDF of this article.
All In: Total Cost of Ownership at Independent Schools (May/June 2019)
The High Price of Neglecting PPRRSM (October 2015)
The Perils of Procrastination in Facilities Management (May/June 2016)
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