How IDEA Public Schools Manages Toward Financial Results
by Jon Schwartz and Alex Hernandez
IDEA Public Schools serves approximately 36,000 students across 61 schools and is focused on putting 100% of its PreK -12 students on the road to college.
Strong fiscal management is important for IDEA. The school system manages a $387 million budget and issues bonds to finance new school construction. IDEA services over $578 million in bonds and relies on the capital markets to build new schools.
IDEA’s fiscal position has strengthened even as it grows rapidly to serve more families. The organization’s bond rating recently increased from BBB to BBB+ and the Texas Education Agency gave IDEA an “A — Superior” rating for financial integrity.
So how does one of the top finance teams in the charter school sector manage towards results?
Because IDEA carries publicly-rated debt, the organization must carefully meet financial covenants (like 130 Days Cash on Hand and 1.35x Debt Service Coverage) and report to investors on a monthly basis. These obligations impose a level of financial discipline not required of other schools.
Annual Metrics and Performance Goals
The Finance team sets high-level annual goals each year and monitors Progress Towards Goals (PTGs) on a monthly basis (see example Finance PTGs).
However, each team also sets detailed performance goals. For example, the Accounting & Finance team has a goal of issuing Monthly Financial Reports by the 10th business day of the following month, the Budget team is committed to keeping 95% of school budgets on target, and the Accounting Operations team is charged with approving or denying purchase orders within 2 business days of manager approval. The table below offers examples of PTGs for each department.
Monthly Reporting
IDEA closes its books on a monthly basis and sends reports to the IDEA management team and bond investors. These interim reports include financial statements, a monthly income statement projection through fiscal year-end, key operating statistics by region, and a financial ratio analysis. See example Monthly Financial Report for the period ending March 31, 2017. In addition to the Monthly Financial Report, IDEA prepares a 1-page dashboard of Key Financial Performance Data for its board finance committee.
School Dashboards
Schools also receive a Monthly Financial Planning Reports to help principals track their discretionary spending and other key financial metrics.
IDEA uses Excel-based templates that are automatically populated by IDEA’s accounting system. However, the organization is looking to move off Excel and towards a cloud-based, dashboard solution to improve reporting to schools (see How Achievement First Moved Beyond Excel for Budgeting).
High Expectations and Monthly Monitoring
IDEA’s bond covenants guide the organization’s annual financial goals and the finance team works backwards to create a budget that will keep the organization on strong financial footing. Monthly reporting to key stakeholders (e.g., IDEA’s management team, board, and bondholders) means that the team must hustle to close its books each month accurately and on schedule. But this monthly cycle also provides regular data so the team can monitor PTGs, make mid-year corrections if necessary, and communicate with schools on a timely basis.
While most charter networks do not share IDEA’s scale or bond strategy, setting clear, annual financial goals and monitoring those goals on a monthly basis can put any school system on a path to strong financial health.
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