FINANCIAL MODEL & SUSTAINABILITY

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1 FINANCIAL MODEL & SUSTAINABILITY A good financial model makes the most of available resources so that you can keep the focus on your students.

2 Thoughtful budgetary planning will allow your vision to flourish. 2

3 High school budgets are detailed and complex. 3

4 A creative approach to budgeting makes room for new student learning opportunities. 4

5 THINGS TO THINK ABOUT What is the current school finance situation in the community you wish to serve? What funding streams for youth and education are available to you? How flexible are they, and are there any rules and constraints for these funds? What is the total cost of implementing your school model? How will you use resources creatively to fulfill your mission? How do you expect to use money strategically during the development year prior to opening your school? How about for the first five years of operations? How will you ensure that your school is financially sustainable? What funds beyond per-pupil allocations do you anticipate needing over the long term? How will you secure them? Who has the financial expertise to make your innovations real? Are they willing to help or be a part of your team? 5

6 SCHOOL BUDGETING IS A SCIENCE AND AN ART 6

7 FACT: An effective budget uses funding flexibly to prioritize student learning.

8 Innovative school models must use resources in unconventional ways. Developing a school budget is at once an analytical and creative process. You use analytical skills to estimate total revenues, including per-pupil allocations, special education funding, state and federal dollars, and other private or public support. Consider how flexible each of those sources will permit you to be, and where you might be able to seek waivers. When put into practice, each of the key elements of your model has budgetary implications. Take staffing innovations. If you plan to offer stipends to teaching fellows or compensate teacher leaders at higher levels; bring on paid nontraditional educators; or invest in coaching, mentoring, and other learning experiences for teachers, you ll need to identify a budget for these things. Same with youth services, arts experiences, or community-based learning. And don t forget upfront costs needed to purchase specialized equipment, reconfigure space, or create a technology-enabled learning platform. THINK ABOUT If you win, how will you distribute XQ funding over your developmental year and the first five years of operations? Will you invest more heavily upfront, or will you spend more evenly across the grant period? School districts produce reams of financial data to check off the right boxes on accounting and compliance reports required by states and the federal government. Typically missing is any financial analysis that follows the money into the school building to the classroom. Yet the classroom is where the mission-critical work happens and where the conversion of resources into services affects student performance. MARGUERITE ROZA, Breaking Down School Budgets The budget projections for your school will depend a lot on how quickly you expect to grow, what investments you will need to make at the outset, and what ongoing expenditures you expect. During the first five years that a school is in operation, enrollment numbers will most likely grow, driving up both your spending and your budget allocation. Spending more in one area means spending less somewhere else. What trade-offs do you anticipate? How will you manage them? BEST BUDGETING PRACTICES Resources from the Government Finance Officers Association (GFOA) explain how to structure your budget process around student achievement goals. SOUND BUDGETING This presentation from the New York City Charter School Center explains budget assumptions, revenue streams, and cost centers. A sample five-year budget is included. EXPLORE BREAKING DOWN SCHOOL BUDGETS This blog post by researcher Marguerite Roza for EducationNext explains why it s important to follow the dollars into the classroom to craft an effective budget. SUPPORTING SCHOOL-LEVEL DESIGN The financial planning templates in this Public Impact tool kit illustrate how some schools use budgeting to enable innovative staffing models. READ 8

9 FACT: Financial accountability is key to immediate and long-term success.

10 You can t serve your students if your finances aren t clear, clean, and sound. Managing a school s finances requires precision, capacity, and a commitment to accountability. Your leadership team must have the financial competency to manage the day-to-day budget and to plan for the future. Budgetary reporting needs to be clear and transparent. If your school has an independent governing board, the board is responsible for overseeing the school s finances, including all contracts. Your board members must have the capacity and expertise to oversee the finances actively, and you need to implement procedures and routines for regular substantive reporting and review. THINK ABOUT Strong financial practices will help you justify your budget in future years. How will you demonstrate financial accountability? How will you explain your budget priorities? UNDERSTANDING THE FUNDING THAT IS AVAILABLE TO YOU Learn about the various sources of public funds that are available to high schools in your state and locality, and familiarize yourself with how you can use them. All come with stringent guidelines and constraints, but most also allow more flexibility than many people realize. Waivers from certain restrictions may be available, if your rationale is strong. And you might be able to get assistance from your local district in qualifying for certain funding streams, such as federal Title I. Before you start planning your school s financial functions, you should familiarize yourself with your state s finance regulations, reporting calendars, and auditing processes for public schools. These are available from each state s department of education. In addition to the principal, some schools hire a CFO or other staff member to manage finances this decision may or may not be right for your school, but it s something to think about. FINANCIAL BEST PRACTICES This quick inventory of best financial practices, responsibilities, and safeguards is available through the New York City Charter School Center. BOARD CAPACITY BoardOnTrack spells out the purpose and responsibilities of the finance committee of a charter school board. A FRAMEWORK FOR OPERATIONS Review pages 9 through 11 of A Framework for Operational Quality, a report from the National Consensus Panel. SMARTER SCHOOL SPENDING GFOA offers this library of free tools, including budget planning and communication templates. Although intended for districts, it offers useful examples for all schools. 10

11 FACT: A sustainable funding model must be built into the design of your school.

12 Public dollars are core to your school s budget. How will you raise and allocate funds responsibly? Every school needs to be financially sustainable, regardless of what philanthropic grants or waivers it receives at the front end. A public high school is entrusted with millions of dollars of public investment in the education of young people. The way school finances function is ripe for innovation instead of viewing funding as just a means to an end, imagine mixing and matching standard allocations creatively with public and private resources. Maybe student work experiences can be supported through federal, state, or local incentive funds. Maybe you can build partnerships with agencies that provide health or youth services. Arts and sports programs, college counseling, technology access, and career exploration are other features that you might be able to fund externally. THINK ABOUT What fundraising capacity will you need on an ongoing basis to maintain your innovation? How will you meet your budgetary needs if partners or funders drop off? There is an important distinction between financial management and financial leadership. Financial management is the collecting of financial data, production of financial reports, and solution of near-term financial issues. Financial leadership, on the other hand, is guiding a nonprofit organization to sustainability. KATE BARR AND JEANNE BELL, An Executive Director s Guide to Financial Leadership Each winning XQ school design will get support during the developmental year, from design to launch, and over its first five years of operations. This flexible funding will give XQ schools the latitude they need to allocate resources like money, time, and talent differently to personalize instruction, stretch community assets, and connect students more dynamically with their own learning. Ultimately, though, we expect each school to become financially sustainable without XQ s support. EIGHT-POINT GUIDE TO FINANCIAL LEADERSHIP Nonprofit Quarterly offers savvy advice on budgeting, managing risks, and other business practices that can help build toward sustainability. WHAT DO WE KNOW ABOUT NONPROFIT SUSTAINABILITY? The RAND Corporation provides a literature review on nonprofit sustainability. DONORS INVESTING IN TEACHER TOWN USA This report shows how a group of local donors set out to transform the teaching profession in Tennessee. CORPORATE PARTNERS TO NONPROFITS This article in Harvard Business Review details the benefits and risks involved in seeking corporate partnership, and offers some questions an organization might ask when seeking funding from the private sector. 12

13 What your school ultimately delivers to students depends on how you allocate your money. Your budget is where the rubber meets the road. Now that you ve thoroughly imagined what your school is going to look and feel like, it s time to ground it in reality. By carefully thinking through the budgetary constraints and possibilities of your super school as well as imagining breakthrough ideas for financial models you will be able to truly envision how your school is going to be built and how much it will cost. 13

14 GET INSPIRED RESOURCES ON SOCIAL IMPACT BONDS Social impact bonds are a new funding model that combines private and public sector funding. They ve been experimented with on a range of programs across the US, from preschools in Utah to prison reform in New York City. How might this prompt you to think differently about school funding? IN SEARCH OF THE HYBRID IDEAL The Stanford Social Innovation Review offers a survey of social entrepreneur business models that combine profit and purpose. EXPLORE READ 10 NONPROFIT FUNDING MODELS The Bridgespan Group, a nonprofit consulting group, scanned the field of nonprofits and came up with 10 funding models that might help you think differently about matching mission with finance. EXPLORE INSPIRATION FROM AMERICA S LARGEST WORKER-OWNED BUSINESS What does it look like when employees own the company they work for? What if teachers, or families, owned their school? Read more in this article from Fast Company. EXPLORE 14

15 GET INSPIRED LESSONS FROM CROWDFUNDING Crowdfunding is the process of opening up funding to anyone and everyone. Using online platforms at scale, it has funded Hollywood films, tech inventions, and numerous nonprofit startups. Learn how crowdfunding works in film and the arts in this article from The Guardian. LESSONS FROM A FREE LEARNING APP How does entrepreneur Luis von Ahn provide his language-learning app Duolingo to the world for free? Check out his innovative business model in this TED talk. EXPLORE READ FIND EDUCATION SPENDING IN YOUR STATE When it comes to school and per-pupil spending, every state is different. Find your state here and understand the implications of its spending trends on your financial model. PRIORITIZING TEACHER EFFECTIVENESS Check out this video from Education Resource Strategies on how to budget for teacher development. EXPLORE EXPLORE 15

16 BUILD A FINANCIAL MODEL THAT DIRECTLY DRIVES STUDENT LEARNING 16