THE SCHOOL'S FINANCIAL SITUATION

A reader of my blog recently sent this question, "Just a thought to consider as you blog - some parents may wonder where does EDS stand financially in today's environment?"

Great question and I appreciate the suggestion. Here is my short response. If any of you are interested in more detail or further explication, please send your questions. I'll do my best to respond.

Where does EDS stand financially in today's environment? There are two categories of response for this question -- 1) how are our operating funds doing and 2) how are our investments (endowment) doing?

OPERATING: We are in a healthy, positive position. Like most independent schools, because we collect the majority of our tuition at the beginning of the year, we generally have a positive cash flow situation. By the end of our fiscal year (June 30) this becomes largely depleted, as we pay salaries, utilities, etc., even after we have stopped collecting tuition revenue for the year. However, for at least the past five years, we have still finished the year in a positive cash position. This means that we have not had to borrow money against future earnings to pay bills the way many businesses do. Therefore, the current credit crunch has not directly affected our operations. We expect this will be the case for the current fiscal year, as well. We have also finally paid off the last building fund, so we are not carrying any debt of any kind.

For your information, the school finances are overseen by the Finance Committee of the Board of Trustees. The Finance Committee is composed of the Board Chair, Vice-Chair, Secretary, and Treasurer, the Rector, and the Headmaster as an ex-officio member. This group meets monthly with the business manager to review in great detail the financial reports of the school, including a monthly balance sheet and budget update. The Treasurer then reports to the full Board of Trustees ten times per year. In addition, the school secures an annual audit from an independent accounting firm. We continue to receive a clean bill of health from that audit.

For the past several months, the Finance Committee has explored various options for protecting our cash and putting it to work. I'll keep you posted as that develops.

2) ENDOWMENT INVESTMENTS:
The EDS endowment is invested in a variety of vehicles with several different management firms. This is overseen for the school by the Investment Committee of the Board of Trustees according to Policies and Guidelines approved by the Board and in accordance with NAIS Principles of Good Practice (National Association of Independent Schools: www.nais.org). According to the EDS Endowment Fund Policies and Guidelines, the Board can utilize 4.5% of the 3-year trailing average of the value of the fund. This is about average for private school endowments and, over time, should allow for the funds to generate good support while still growing. The trailing average mechanism helps minimize the peaks and valleys of investment earnings over time. Our overall investment strategy is fairly conservative, with a healthy balance of various kinds of equities, bonds, and cash. The investment committee meets at least three times per year to review performance, policies, and procedures.

Obviously our endowment has suffered from recent declines in the market. However, remember that the endowment is a long term investment strategy. We expect that our conservative and diversified approach over time will yield steady positive results.

If you are interested in further explication or greater detail of any of these issues, please feel free to contact me.