Welcome to another school year, and welcome to a new set of opportunities and challenges.
The 2022/23 year is sure to be an interesting one. With COVID still a disrupting force, the impact of inflation, rising interest rates, worsening economic and market conditions, staff shortages, and lagging enrollment due to decreasing population trends, there will definitely be challenges in the upcoming year. The need for proper budgeting and cash management will be even more important this year, as schools face these challenges. Over the last few years, with the pandemic and changing regulations, school leadership has been reactionary. With all the challenges of the current year, school Boards and management will need to think more strategically, focusing on such long-term questions as:
- What can we do to mitigate the decreasing enrollment brought about by declines in children? (In 2010, children made up 22.8% of the population in the tri-state area, which dropped to 20.9% in 2020, and is expected to be down to 19.8% in 2025)
- In order to compensate for declines in enrollment, schools are going to have to amp up their fundraising activities. What are we doing to increase our fundraising activities, especially given the trend in on-line giving?
- Is our leadership representative of the students and families we serve?
- Over the last two years, the COVID pandemic has disrupted student education. What are we doing to close some of the educational shortfalls experienced during the COVID pandemic?
- In order to be effective, schools need support from their Board. What are we doing to keep the Board engaged and what level of training are we providing to the Board?
- How are we going to differentiate our school to attract students and how are we going to incorporate the technology trends (remote/distant learning, enhanced technology, etc.)?
Furthermore, schools need to stay cognizant of opportunities that exist. In response to the COVID pandemic, the federal government made trillions of dollars of relief available through the CARES Act and ensuing legislation. While some of the CARES Act funding, such as the PPP loans and related forgiveness, are over, there still are a few programs left for schools to tap into:
ERTC Funding:
There are two sets of regulations, the 2020 regulations and the 2021 regulations.
For those schools that are eligible, there is still an opportunity to file for a refund.
Childcare Stabilization Grant 2.0:
These funds were made available through the New York State Office of Children and Family Services (“OCFS”) and are available for eligible child care programs, which include OCFS licensed or registered programs, enrolled legally exempt group child care programs and NYC permitted group child care (as defined in Article 47 of the New York City Health Code) programs that were licensed/registered/permitted/enrolled by January 1, 2022. This includes Head Start, Early Head Start, daycare, Pre-K, and similar programs. 75% of the Child Care Stabilization Grant 2.0 must be spent on workforce support expenses. The portal closes on November 30, 2022 for application and expenses are eligible through September 30, 2023.
Healthcare Worker Bonus (“HWB”):
Another NY State incentive program, the HWB is a required program for eligible program. The regulations for this program will not be out until October, so stay tuned.
In addition to some government funding that’s still available, there are other opportunities for schools. During the pandemic, many schools moved from in-person learning to remote learning. As a result, they may have overpaid their worker compensation, as the rates for in-person services are higher than remote. Schools may want to see if there is an opportunity to claim a refund.
On an accounting front, because after all we are an accounting firm, there are a few accounting issues that schools need to be aware of:
- The New York Prudent Management of Institutional Funds Act (NYPMIFA) requires the Board of a school to review investments to determine if they are prudently invested and to also review endowments where the Board has chosen to allow the endowment corpus to be expended. The Board needs to determine, based upon their analysis, if the endowed funds should be accrued (the endowed funds not distributed) or appropriated (approved distribution of endowed funds). See here for more information about the NYPMIFA requirements.
- New accounting pronouncements regarding leases (effective for years beginning after December 31, 2021 unless the school has public debt) and gifts-in-kind of nonfinancial assets or services (effective for years beginning after June 15, 2021). The new lease accounting standards can be cumbersome to implement, so we recommend that you start the process soon. See here for the article from our Volume 5 issue of the Report Card.
Finally, from an operations and compliance perspective, this month new regulations were put in place within NY State whereby nonpublic schools, including yeshivas, will face stricter enforcement of longstanding requirements that they provide academic instruction that is “substantially equivalent” to that provided by public schools. Under these regulations, nonpublic schools would have to demonstrate how they meet academic standards; for example, recognition from accrediting agencies or support provide support to public school officials in their community that they offer adequate instruction in English, social studies, math, and science. Furthermore, private schools must employ teachers competent in those core academic courses and instruction must be in English. By December 1, 2023, private schools must demonstrate that they meet one of the alternate pathways, or choose to have an LSA review. The initial review would be conducted by no later than the end of the 2024-2025 school year, though a school may request additional time to demonstrate substantial equivalency. Non-compliance could result in loss of state and federal funding and even shut-down of the school. For most schools this will not be a heavy lift, but anytime new regulations are released it always pays to document compliance.
We understand that these are difficult times, so we are here to help if you need it … and we will be back with our next issue in the Spring.
Kenneth R. Cerini, CPA, CFP, FABFA
Managing Partner
Ken is the Managing Partner of Cerini & Associates, LLP and is the executive responsible for the administration of our not-for-profit and educational provider practice groups. In addition to his extensive audit experience, Ken has been directly involved in providing consulting services for nonprofits and educational facilities of all sizes throughout New York State in such areas as cost reporting, financial analysis, Medicaid compliance, government audit representation, rate maximization, board training, budgeting and forecasting, and more.