COVID-19 – Independent school bursar virtual symposium

Last week, Sarah Ediss and Coral Curtis hosted a virtual meeting for independent school bursars to discuss the issues the sector is facing during these unprecedented times.

Fees

One of the key issues for bursars for immediate decision, together with their Head and Governors, was the level of Summer Term fees which will start after the Easter break. Schools are expected to still be in “lockdown” for several weeks into this term and questions are being raised by parents as to whether their child will receive the same quality of education while this is delivered virtually.  The rounded learning experience usually provided by Independent Schools via before and after school clubs, trips and extra-curricular activities certainly won’t be able to be delivered online. What level of discount will parents expect from fees in respect of these additional elements of their schooling?  Where a school usually provides boarding facilities, this further adds to the complications.

The majority of parents are likely to be understanding and will want to ensure they secure a place for their son or daughter for the forthcoming school terms by continuing to settle their fees. However, some parents, who may have lost their jobs as a result of this crisis, will not be able to pay. It is also likely that income from International Students will be significantly depressed in 2021. This poses a huge challenge for bursars while they attempt to model their cashflow.

The bursars discussed one solution to the debtor problem might be to implement an interest free payment plan to spread the cost of the fees. A few independent schools have already offered this, and the feedback has been positive.

Cashflow forecasting

Financial modelling will be more important than usual for Independent Schools. Bursars should model various fee discount scenarios. Then overlay this with the impact of slow paying parents and a reduction in pupil numbers for those who cannot afford to continue a private school education. Some schools will have sufficient reserves to allow them to react comfortably to the crisis, whilst for other schools social distancing measures could have an unsustainable outcome.

We have seen positive stories of schools being offered the support they need from their lenders including loan repayment holidays and overdraft facilities for the short term. During this difficult financial time, it is crucial that bursars are in close contact with their Bank Relationship Manager. Some banks are stepping in and making the first contact with customers to offer financial support.

It may be possible to negotiate a repayment holiday for bank loans in order to ease cashflow. This will however require documentation such as prior years’ statutory accounts, the latest management accounts and cashflow forecasts. It will be important to have these ready to speed up the negotiation process with the bank.

Reduction in expenditure

School closures could provide an opportunity for certain costs to be cut during this period. Bursars should be reviewing their expenditure budgets to see what can be removed or reduced. During our meeting, the bursars suggested reviewing supplier contracts to minimise costs as much as possible. Any regular supplies which are no longer needed could potentially be “frozen” for a limited time.

It is also important to perform a review of staff and potentially use the “Job Retention Scheme” and build this into the revised cash flow forecast along with the reduced costs. The Government has introduced the concept of ‘furlough’ and the ability to claim a grant for 80% of salary costs (up to a maximum of £2,500 per month) for employees who are no longer working at the school. This could be particularly important in relation to non-teaching staff. However, bursars acknowledged that it was important to obtain the right legal advice before starting any consultation process.

Working together

Despite this time of crisis, the conversation remained positive throughout our meeting and there was an overwhelming sense of support for each other within the sector and a willingness to offer ideas to get through this pandemic together. Schools will certainly emerge from this with different strategies to support income generation and the provision of education in the future and new risks on their risk registers.

If you would like to discuss any of the topics explored in this article, please contact Sarah Ediss, Accounts and Audit Partner, or Coral Curtis, Audit and Assurance Senior Manager.