Your school thrives on engaged parents. However, some families can request information from your office that exceeds your expected level of engagement. Recently on the Business Manager e-list, one school asked how to handle an uncommon financial request from one of its parents: five years’ worth of “financial records.”
While transparency with the community is to be encouraged as a way for the school to demonstrate responsible stewardship of resources, vague requests that come from parents seemingly out-of-the-blue prompt some second-guessing of assumed policy.
There are two parts to consider when faced with this sort of request: legal and best-practice. The first question you should answer is whether a school is legally obligated to share financial information with its constituents—and how much information must be shared.
Many private-independent schools in the United States are established as 501(c)(3) tax-exempt nonprofit organizations. As such, they are required to file form 990 with the Internal Revenue Service (IRS) and make the filings from the last three years available for public purview.
The 990 form requires core financial information which answers most questions parents might have, including:
- how much money came into the school, and from which sources;
- how much money the school spent, and on what;
- the school’s Board members;
- how much the school spends on compensation, specifically its top ten salary expenditures; and
- whether the school’s programs—which allow it to maintain its nonprofit status—have changed in any substantial way.
If your school is a nonprofit, your 990 forms will be made publically available for anyone to access for the last three years. If you look for your school’s public financial records on the online nonprofit database Guidestar in February 2016, for example, your school’s 990 forms filed for 2012, 2013, and 2014 would all be available to read.
If your school is not a registered nonprofit, then it is under no legal obligation to reveal its financial information to the parent’s casual request. Even if your school is a nonprofit, five years’ worth of 990 forms are not required to be public; it’s up to you to decide whether to make those extended records available.
That takes us to the second part of this request: What constitutes best practice in the pursuit of the desired transparency? After all, your school has nothing to hide. Failing to give the parent at least some of the school’s financial information could look “fishy,” and lead to distasteful—and untrue!—rumors about the school’s financial stability.
But too much information, offered to those who may not be trained in the interpretation of charts and jargon, may lead parents to make false conclusions “based” on the official reports. There’s also the question of confidentiality, particularly when it concerns donor transactions.
So, in the case described in the e-list—in which a parent requests five years’ worth of the school’s “financial records”—start by offering your school’s last five annual reports. These reports contain broad financial information (donations, hard income, current and planned expenditures, etc.) coupled with a context in which a layperson can understand the relevancy of the number provided.
Should the parent ask for more specific information, you in turn can ask questions that enable you to guide the parent toward the best information.
Depending on the parent’s end goals for that information, you may suggest that the parent to check out the school’s Guidestar page, which should contain the last three years’ of 990 forms for them to peruse. If your school policy permits it, you could even forward them the two “missing” years of 990 forms that are no longer public to round out the request for five years’ financial records, for transparency’s sake.
In other cases, you can point the parent toward your Financial Committee who see the details of the ins and outs of the school’s income and can best explain the relevant, nonsensitive information.
In the end, parents’ curiosity can be satisfied through the annual report and the public 990 forms. Whether more information should be shared beyond those documents is a matter for individual schools’ policies—and their legal counsel—to decide.
Additional ISM resources:
The Source for School Heads Vol. 11 No. 8 What Do You Know About Financial Reporting?
Additional ISM resources for Gold Consortium members:
I&P Vol. 29 No. 7 Your School's Annual Report: A Strategic Financial Plan Reporter and Institutional Promoter
I&P Vol. 37 No. 8 Strategic Financial Planning and Your School's Budget: Companion Documents
