Afton supports New York charter management organization by quantifying and communicating the fiscal impact and philanthropic need associated with long-term growth plans and facilities financing scenarios.
A Charter School Network (“the Network”) in New York City, serving a primarily Black and growing LatinX student population, operated three SUNY-authorized schools and had plans to expand their footprint. Run by a core team of members from the local community, the Network had achieved strong academic results for its students, outperforming the local district and state in both reading and math, and had become the high quality school option for families in the community.
With capacity to grow and with increasing demand for enrollment at charter schools in the local area, the Network needed support in developing financially sustainable long-term growth plans that would guide internal strategy, inform philanthropic asks, and support facilities financing opportunities and the application process for approval to open new schools. Afton worked with Ford Research & Solutions, Inc. (“Ford Research”) to develop a long-term financial projection and scenario model for the Network. From December 2017 through March 2018, Afton worked closely with leadership at the Network and Ford Research to develop a dynamic MS Excel-based model that is in alignment with Charter School Growth Fund (“CSGF”) requirements and Ford Research’s work in developing and iterating the Network’s anticipated growth plan over the next ten plus years.
The long-term financial projection model was constructed to provide for scenario, sensitivity, and affordability testing for various inputs – particularly wages, benefits and facilities financing options. This model was used to inform discussions leading up to a presentation that the Network delivered for CSGF in 2018.
Our Insights
One financial planning model can and should serve multiple organizational needs. Organizations produce a variety of different financial reports, often requiring multiple different systems and applications. Once the time is put in to develop a financial model that incorporates these different reports into one place using a common data structure, the organization should be able to use one model to drive internal strategy. The Network was able to use our model to understand the financial implications of different cost assumptions, drive conversations with lenders for facilities financing terms and options, apply for grant funding, develop board reports, and apply for the opening of new schools.
Quantifying the impact of different facilities financing scenarios can help networks understand what they can afford. We often work with growing organizations looking to expand into new school facilities. While many options for expansion exist – such as rent vs. own, build vs. buy, incubate an existing school building vs. not, etc. – each option has a unique fiscal impact on the organization. We build our forecast models to quantify the fiscal impact of different facilities financing decisions so that organizations can understand the impact, risks, and opportunities of each scenario. Our model tracked projected network-wide and site-level performance against new financial covenants (more specifically, Debt Service Coverage Ratios and Days of Cash on Hand), and we presented options for levers the Network could pull to meet new targets.
While the organization-total view is important, site-level detail adds transparency that can highlight key drivers of financial sustainability. The financial model developed featured a consolidated organization total view of Cash Flow, Balance Sheet, and Profit & Loss (“P&L”) forecasts. Site-level forecasts for each of the existing schools, the new schools, and the network office drive the organization-total view. This way each location/campus can be easily compared to understand not only site-level metrics and potential outliers but also to understand drivers of the organization’s overall financial performance. In our experience, we have seen that site-level detail can highlight intentional and known organizational decisions (ie. one campus with much higher per pupil costs due to serving a higher needs student population), but this level of detail can also highlight unintentional inequities and inefficiencies.