Many of New York’s special education schools struggle with financial sustainability due to limited funding, increasing costs, and changing regulations. These schools also operate under a cost-based reimbursement system with few avenues for profit. Together, these factors also make it difficult for these schools to plan for the future. However, with proper budgeting and financial planning, special education schools can achieve long-term sustainability and continue to provide high-quality education for students with disabilities. In order to create a suitable budget and financial plan special education schools should:
1.) Develop a comprehensive budget plan
The first step in achieving long-term sustainability for special education schools is to develop a comprehensive budget plan. This includes identifying all sources of revenue, such as state and federal funding, grants, and donations. It also includes outlining all expenses, such as salaries, facility costs, and educational materials. By creating a detailed budget plan, special education schools can get a clear picture of their financial situation and identify areas for improvement.
2.) Use key data points to inform budget decisions
Special education schools should be aware of what drives their costs and revenue and use this data to inform budget decisions. For example, because special education schools operate under a cost-based reimbursement system, student enrollment is a key driver of both revenue and expense. Student enrollment dictates how much revenue the school will receive, the level of related services that will be incurred, and the number of classrooms needed; which in turn determines the number of teachers, teacher assistants, and other staff to be hired. Schools are reimbursed based upon their prospective rate, which is reconciled upon the completion of their consolidated fiscal report. If programs overspend their rates, they are not reimbursed for the overages, and if they underspend, the underspending needs to be returned. As a result, it is essential for schools to have a strong understand of their revenue and expenses and project out their costs throughout the year to ensure appropriate spending patterns. Special education schools also have an opportunity to make a small profit in fee-based programs such as special education itinerant teacher services and evaluations. Therefore, schools should look for ways to control costs within these programs to create discretionary funding. By using data to make informed decisions, special education schools can ensure that they are allocating their resources in the most effective way possible.
3.) Establish financial goals and metrics
In addition to developing a comprehensive budget plan, special education schools should establish financial goals and metrics. This includes setting targets for revenue and expenses, as well as tracking key performance indicators (KPIs) such as student enrollment and retention rates. Despite being constricted by a cost-based reimbursement system, schools can achieve slight profitability through their fee-based programs and by taking advantage of the 1% corridor. Under the 1% corridor, SED will not reconcile tuition based programs whose spending is within 1% of their prospective rate. This affords schools the opportunity to underspend by up to 1% and retain the small profitability to cover losses in other programs or improve overall fiscal strength of their organization. By establishing financial goals and metrics, special education schools can measure their progress towards long-term sustainability and adjust their strategies accordingly.
4.) Build strong relationships with stakeholders
Special education schools should build strong relationships with stakeholders such as families, community organizations, CSE/CPSE, their RA, their line accountant at the rate setting unit, donors, politicians, and more. By collaborating with these groups, special education schools can identify funding opportunities, gain support for their programs, and build a strong reputation in the community. Developing these relationships can also be a great way to increase enrollment. Increasing the community’s awareness of your school may lead to families going straight to your school should their children, or their friends’ children, need special education services. In addition, by keeping lines of communication with your programmatic and fiscal staff at SED, this will assist in expansion, modifications, and waiver requests.
5.) Seek out cost-saving opportunities
Special education schools should seek out cost-saving opportunities wherever possible, especially with respect to non-direct care costs. This includes leveraging technology to reduce administrative costs and negotiating favorable rates with vendors. In addition, some vendors also offer special savings to not-for-profits which should be taken advantage of when possible (for instance Techsoup for software).
6.) Monitor and adjust the budget plan regularly
Finally, special education schools should monitor and adjust their budget plan regularly. This includes reviewing revenue and expenses on a regular basis and adjusting the budget plan as needed when student enrollment changes to ensure long-term sustainability. Performing budget to actual analysis on a monthly basis can assist schools in understanding fluctuations in expectations and allow schools to make mid-year corrections. By regularly monitoring and adjusting the budget plan, special education schools can stay on track towards achieving their financial goals. In addition, throughout the year, programs with tuition based programs should prepare mock CFR’s to make sure they understand how spending per care day aligns with their prospective rates and to better understand if non-direct care or total cost screens are being hit.
In conclusion, achieving long-term financial sustainability is essential for New York’s special education schools. These schools often find themselves heavily constrained by the fact that they operate within a cost-based reimbursement system. However, by developing a comprehensive budget plan and closely monitoring key data throughout the year, these schools can achieve long-term financial sustainability and continue to provide high-quality education for students with disabilities.
Adam Brigandi, CPA, MBA
Supervisor
Adam is a Supervisor who works with both nonprofit and special education clients. His auditing experience allows him to assist in vital audit functions such as systems testing and analysis.