Episcopal early childhood programs come in all shapes and sizes, from a small, half-day program with one classroom and two teachers to preschools with more than two hundred students and forty employees. But whether large or small, rural or urban, they face similar challenges. NAES here offers seven practices that we believe will strengthen any Episcopal preschool that exists in relationship to an Episcopal parish or cathedral.
1. Establish a school committee or school board to oversee school operations and planning.
NAES has multiple resources about the role and importance of early childhood program school boards. Small preschools (perhaps under 30 students and five or fewer employees) may have a school committee, rather than a larger and more formal school board. Whether a school committee or school board, these groups serve to focus a diverse set of eyes solely on the school’s mission, operations, and sustainability. As outlined in NAES Principles of Good Practice for Governance in Episcopal Parish Day Schools, the school board should be composed of a blend of parish and school members, including the rector, director, members of the vestry, parishioners, and current or former school parents.
Occasionally, and with all good intentions, a decision is made to disband or eliminate the preschool committee or board. Perhaps there is a desire to streamline operations. Perhaps there has been conflict between church and school and the vestry feels it needs to “take control.” Perhaps there is simply a sense that, in a single corporation entity, it just doesn’t feel right or even necessary to have a separate preschool committee or board.
However, as we will see below, preschools (like all schools) are complex organizations that require sustained and skilled attention if they are to thrive. Charging a group to give the preschool the attention it requires is one important way that vestries can better insure that their beloved preschool not only survives but thrives.
2. Budget the school on an academic year.
The Canons of the Episcopal Church require parishes to have a January-December fiscal year and, since the vast majority of preschools are one legal entity with their parish, many conscientious rectors, parish treasurers, and church business officers assume that the school should operate on a similar fiscal year as part of a single, consolidated budget.
On a practical basis, however, it is most appropriate for the school’s budget to be based on an academic year and, in fact, it is common practice even in single corporation churches and schools. Why?
Student enrollment is the single greatest driver of school revenue, and salaries and benefits are the single largest expense. Students enroll for an academic year at a set tuition rate, and faculty and staff are hired for an academic year with compensation set for that same time period. An academic year budget allows effective management of the school’s income and expenses along with accurate visibility to the school’s actual month-over-month operating position.
An academic year budget provides accurate visibility to the school’s year-over-year “P and L.”
Because the school’s budget is not “buried” within the parish’s calendar year P and L, parish and school leaders can accurately assess whether the school is operating on a break-even basis, with a surplus, or at a deficit. Revenue and expenses can be tracked year-over-year – such as enrollment, tuition revenue, faculty/staff compensation, and accumulated surpluses or deficits – to gain a longer-term view of the preschool’s trajectory and sustainability.
An academic fiscal year for the preschool allows the Church and school to have transparent, timely, and proactive conversations about how to handle a surplus or deficit generated by the preschool. Surpluses are often allocated to an appropriately sized operating reserve for the preschool – for “rainy day” needs, a budgetary shortfall, or an immediate capital expenditure. Such a reserve protects the parish from dipping into its funds to cover such needs. Should there be a deficit, church and school can make an intentional plan about how that deficit will be covered, by whom, and how replenished.
3. Segregate parish and school funds.
Many Episcopal parish preschools do not have their own bank accounts and, instead, operate as a ‘department’ of the parish. From a parish perspective this may make sense for a host of reasons: the preschool is legally part of the parish, the parish has ultimate responsibility for the preschool’s finances, and no other program of the church has its own bank account. Parishes are often counseled to limit if not eliminate multiple bank accounts and instead to manage all of the parish’s programs through a consolidated chart of accounts.
While this may make sense from a parish perspective, NAES recommends that the preschool’s funds be segregated from those of the parish for four important reasons:
- The financial operations of a school, including preschools, are financially complex and drastically different from those of parishes. Because the school runs on an academic year, the timing of the school’s cash flow and expenditures will differ radically from those of the parish. A segregated account consolidates in one place the financial inflows and outflows associated with the preschool.
- Segregated parish and school monies makes it far less likely that school income or expenses will be mis-categorized or mis-allocated. The school’s cash flow and cash position are easily tracked. Tuition payments and arrears are easily monitored.
- School’s charge a fee for service.Tuition dollars are paid by parents for the cost of educating children. These funds are not “fungible” for underwriting non-school-related expenses. It is vital that tuition dollars are allocated to and used for the school.
- Donations and fundraising revenues must, by law, be expended for the purpose for which they were donated. Funds raised by a golf tournament, book or bake sale, 5K run, or annual fund in behalf of the preschool must be used for the benefit of the preschool.
- Funds must be physically transferred between the preschool and parish. This avoids questions regarding how funds are used, a bone of contention endemic to church-school relationships.
4. Document the church-school financial relationship.
It is an NAES best practice to formalize the church-school financial relationship in writing. What is the school responsible for? What is the parish responsible for? What are any shared expenses and how will they be determined? How often will this be reviewed? Such a document provides guidance for vestry members, treasurers, business officers and parish administrators, rectors, directors, and school boards. and is particularly important given that parish and church leaders change over time.
As outlined in NAES’s article, Shared Expenses Allocations, all Episcopal schools including preschools, should pay for the cost of operating the school to the greatest extent possible. NAES advocates a shared-expense approach whereby the expenses that should be fairly and appropriately borne by the school are part of the school’s annual budget. In virtually every case, this will mean some kind of cost-sharing with the parish, typically items such as cleaning services, snow removal, a shared HVAC system, shared utilities, and shared personnel.
It is perfectly appropriate for the school to write a check to the parish for such school-related shared expenses. Physically transferring funds from school to church (or vice versa), creates an accurate accounting of “who is paying for what” and can avoid the all-too-often debate about whether the parish is underwriting the school or vice versa.
5. Clarify reporting structures for shared staff.
Episcopal churches and preschools often share staff. It may be a sexton or janitorial staff, a parish CFO who also handles the school’s finances, or a parish administrator who provides school administrative support. A common question arises for these staff members: to whom do I report?
The Preschool Director is a unique lay employee who leads a complex, secularly regulated, professional educational program, and often the parish’s largest program. With the support and oversight of a school committee or school board, the Director is (and should be) responsible for all aspects of school operations, including admissions and enrollment, health and safety, developing and managing the school’s budget, and hiring, supervising, and terminating preschool staff.
It is extremely important that the preschool Director be given significant authority in relation to the preschool budget. NAES often sees a situation whereby the Director is not given appropriate authority over the preschool budget and, particularly when there are consolidated church-school accounts, may be second-guessed or even over-ridden by the parish business office. Churches and school that share business office staff must clarify the lines of authority very clearly and document that authority with written financial policies and procedures.
Likewise, if the parish and preschool share a sexton or janitorial staff, the rector and director must work together to make clear which duties will be assigned to the school, which duties will be assigned to the parish, how work requests from the parish and school will be managed, and how those person or persons will be evaluated and supervised.
6. Collaborate, communicate, repeat!
Rectors and vestries are often concerned that the kind of separate operations described in this article will lead to mission drift, disconnection between parish and school, and the proverbial “tail wagging the dog.” These legitimate concerns are why NAES is a passionate advocate for robust church-school communication and collaboration.
From the composition of the school board or committee, to regular meetings between rector and director, in-depth reports to the vestry, visibility of the preschool to parishioners and vice versa, and a clear understanding of how the preschool lives out the mission of the church – each of these demand a degree of church-school partnership that requires extra time and attention and, yes, extra meetings! But it is well worth it. Absent church-school connection and collaboration at the highest levels – rector and director, vestry and school committee – parishes and preschools can, in fact, become “ships that pass in the night.”
7. Most importantly, identify your shared mission and nurture relationships.
Yes, Episcopal parishes and preschools are very different operations that need to operate a bit differently. But they make wonderful mission partners. The Episcopal Church has been educating young children for generations. The particular kind of human formation that happens in an Episcopal preschool remains as relevant today as ever – child centered, spirit-and-grace-filled, educationally excellent, and truly loving of all of our neighbors. When parish and school leaders come together to name and claim the ways that the preschool lives into the gospel values of the Episcopal Church, missional ties bind the preschool and parish together, even as they go about their business in different ways, with different constituents, and even on different days of the week! It begins with the foundational belief that each of us is a beloved child of God. It begins with relationships between rectors and directors, school boards and vestries, faculty and lay parish employees. Modeling the love of God in our church-school communities is one of the great gifts we can give one another as, together and sometimes apart, we serve the youngest among us.