The Principals Fund 2022 Q2 Schools Financial Review

During Q2 2022, partner schools on our school fee collection programme collected R451,395, an increase of 21% compared to the same period in the prior year.

Term 2 is historically the lowest fee collection period for the year. Nevertheless total fees increased for the comparative period to the prior year. For further context, here is a summary of the status of the school at present, including the date at which our  involvement with the schools began:

The first point highlighted from the above information is the vast difference in financial performance with and without a specialist financial services provider such as the Principals Fund (PF) (through SchoolAccountant). 

PF started with Thomas Wildschutt and Wespoort Primary in July 2021. Therefore, in the comparative period of April to June 2021, the school was unassisted from a financial point of view. The impact, when compared to the period of April to June 2022, is an increase of 94% and 126% respectively. While the absolute increase is dependent on the total value for school fees and the number of learners at the school, in this case the increase still amounts to R70,756 across the two schools, an increase of approximately R23k per month.

Secondly, it is notable at Rosmead Central Primary that the increase in fee income is not extraordinary, and is marginally in line with the increased fee per learner. On a sample of one, this could indicate, in line with our earlier thesis, that there is limited potential to increase school fee income over time, given that parents have a limited and constrained income themselves. We will continue to monitor this development.

In order to get a fuller picture of school fee collection, below are the results for the partner schools year to date. As our data for comparatives is not yet good enough to understand payment performance in a great level of detail (i.e. which month we should expect which parents to pay), we look at the YTD figure to get a sense of whether we are improving overall. These results are presented below:

From these results it is clear that, in comparison to any prior period, including pre-COVID, the impact of a professional financial services provider for a school is immense for the school.

It also gives an indication that a low performing school can double its school fee income with proper financial management.

Finally, in the context of the school, it is important to understand total income for the school. I.e. to make real changes at a school, what do the Principal and Senior Management Team have to work with in order to effect change.

The total income and expenditure for the quarter is presented below:

The major difference in income and spend between the periods presented is the impact of the Teaching Assistants (TA) programme (the TA programme works through the department distributing the funds for the TA salaries to the school, which then pays the TAs directly each month). This results in an increase in income for the school, and a corresponding increase in expenditure. This is clearly visible in both Rosmead Central Primary and Wespoort Primary. Thomas Wildschutt offsets the TA income against its cost, and the income is therefore not presented in income, but under costs. Noteworthy that during this period of high inflation, income received from the Government by Thomas Wildschutt declined by 3% on a per learner basis.

The second outcome of interest is the variation in income received from the parents (i.e. school fees and other income per learner together), which increased materially at each school at a per learner level, as fundraising and after school activities picked up post COVID.

The third outcome to note is the variability in total income between the schools, including the effect of large differences in school fees per learner. It is the intention of the norms and standards allocation to normalise the resources available between schools in different socio-economic conditions. The challenge is that this system only works when school fees are relatively small. The norms and standards, together with other allocations, can supplement where school fees are less than approximately R3,000 per learner per annum. As we see with Thomas Wildschutt, where the Government allocation decreases (as it is a quintile 4 school), the school fee income is unable to cover the deficit, resulting in lower income per student. Therefore, at a certain level of school fees, school fees are so disproportionately large as a percentage of total income as to render the norms and standards allocation of minimal effect to equalise resources.

Finally, it is important to put the surplus results in context. All schools ran a surplus this quarter. Schools receive their government allocation of funds in April and October each year. Therefore, they are required to run a surplus in terms 2 and 4, to account for the deficit they will run in terms 1 and 3 (when there is no government income during the period). A poor level of financial planning or understanding of this context can result in schools running out of money, and therefore failing to pay salaries. Hence the need for clear and simple financial accounts through which to manage the school properly. 

Thanks!