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Recently we met with John Somerset from Somerset Education who will be presenting an ������ workshop, ‘Financial Governance for IndependentLeaders’ on Friday 19 June in Wellington. ��The programme will be of interest andrelevance to Boards, new and aspiring Principals, and other senior leaders keento strengthen their financial literacy. ��John’smission is to empower schools with financial confidence and strategic insights. ��In this article he shares his thoughts on schoolfinancial health.

Independent schools arebalancing a variety of financial responsibilities. ��There are a number of stakeholders withfinancial expectations that Independent Schools need to meet including thosepaying fees to the school, the government because they provide public money byway of grants, bankers as they provide loans and they have shareholderexpectations, but most importantly, the community because the government haseffectively outsourced some of their education responsibilities to a privateprovider.

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There are many who believe thatindependent schools should not be subsidised by government and that the fundsprovided to these schools could be better spent in the government schoolsystem. On the other hand, there are those who believe that the governmentshould provide equal funding for every child of school age irrespective ofwhich school they attend. So it is a contested matter.

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There is a growing fear that privatisation and globalisation are breaking down the traditional accountability arrangements that give us confidence in our governments. Therefore the threat of financial failure of an independent school exacerbatesthat fear. Public accountability theory raises a need to ensure fundingprovided to private players is appropriately spent and achieves schoolingobligations ultimately responsible for by government.

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Given that the provision ofgovernment funds to independent schools is contested, confidence in the waythey are operated is an important public accountability issue. School closureshave an adverse effect on social good and undermine consumer confidence in the independentschools’ sector.

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Financial failure/insolvency isthe greatest risk for independent schools. If an independent school fails, thiswill undermine community confidence in the Independent sector and thereforecould have an impact on all independent schools. If the community losesconfidence, this may adversely affect enrolments in independent schools becausecaregivers will not want to risk having their children’s education disrupted bythe sudden closure of their school. ��All this will undermine public confidencein the use of government funds which would likely result in political tensions.

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Prevention is much better thancure. John recommends annual participation in the Financial Survey forSchools (FSS) that he has been running for over 30 years. This is an annualfinancial health check of your school (like gong for an annual checkup withyour doctor). The FSS calculates up to 60 ratios for your school, comparesresults with similar schools and, assuming you participate each year, you canalso compare the trend in key ratios for your school. It is identification ofadverse trends and responding in a timely manner that is the best safeguard forschool financial health.

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Other important times to meetwith a financial governance consultant such as John is when the school isplanning significant capital expenditure which usually involves increased debt. There are financial tools that can assess the financial risk of what the schoolis proposing and strategies can be developed to help mitigate that risk. Farbetter to do this BEFORE embarking on the project because at that stage it isstill on all paper. Once you sign the contract and borrow the money, it is muchmore difficult to manage the risk.

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If you have a significantreduction in enrolments this will adversely affect the school’s financialhealth and depending on the amount of debt the school holds, a school couldquickly find itself in financial stress. It is times like this where it is important to contact a consultant. ��

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Australian and New Zealand independentschools are very similar in many ways. The main difference is that New Zealandschools, on average, receive significantly less government funding thanAustralian schools which on average receive 50% of their recurrent funding fromgovernment grants. But the positive for New Zealand schools is that you are notas exposed to the risk associated with governments playing around with thatfunding. Another major difference is that school fees in Australia are GST free, but New Zealand schools need to charge and remit GST on your fees.

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Financial literacy training for Principal and Senior Management and Board members is the most important action a school can take to ensure financial adeptness

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To register for this seminar visit .

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