Yes, MCS Is In “Deep Financial Trouble”
Total Expenses. According to the figures submitted by MCS to the IRS for FY 2007, MCS’s total expenses of $1,894,272 exceeded its revenue by $195,247. This loss is nearly four times the loss reported in FY 2006 ($50,369), and represents a dramatic reversal from FY 2005, when revenue exceeded expenses by $201,127.
Management Expenses. For FY 2007, MCS management expenses for 200 students totaled $270,495. For FY 2005, management expenses for 178 students totaled $195,114. On a per child basis, FY 2007 management expenses were $1352 compared with $1096 per child in FY 2005, a 23% increase per child in just 2 years.
Fundraising. In FY 2007, MCS raised $80,954, while its cost of fundraising was $98,172. Put another way, in FY 2007, MCS spent on average $1.21 for every dollar it raised. In FY 2006, MCS raised $88,173, 8.9% more than in FY 2007, at a cost of $79,911. In FY 2005, MCS raised $112,520, 39% more than in FY 2007, despite fewer students, at a cost of $71,827.
Assets vs. Liabilities. In FY 2007, MCS purchased the parcel next door. As a result, at the end of FY 2007, MCS had total assets of $5,493,879, of which $4,601,011 was in real estate and $892,868 was in other assets. Since we all know what has happened to the value of local real estate since 2007-08, let’s conservatively estimate that the value of MCS’s real estate assets has declined by 15%, or $690,150. Accumulated depreciation in FY 2007 was $156,172 and it is now more than a year later, so reduce total assets by another $156,172 in accumulated depreciation to arrive at an estimated FY 2008 asset value of $4,647,557. Total liabilities in FY 2007 were $4,735,537 and they remain constant or decline only slightly in FY 2008. Using these figures, MCS’s current total liabilities exceed the current value of its assets by an estimated $87,980. The bottom line is it is quite likely that MCS is now close to or in fact “under water,” with its current total liabilities exceeding the value of its assets. MCS could conceivably earn or fundraise its way out of this predicament. But as the figures above show, it is doing just the opposite: over the past two fiscal years, MCS has lost nearly $250,000 and its fundraising has declined significantly.
Cash on Hand. At the end of FY 2007, MCS had $254,449 cash in the bank, less than a month and a half in expenses, down over 50% from FY 2006’s $513,489 and down 71% from FY 2005.
Board Governance. In April 2007, the MCS Board of Trustees adopted a new set of bylaws which stipulate that the Board "shall consist of eight to fourteen members." As of June 30, 2007, the Board had six members. As of June 30, 2008, despite the new bylaws this Board passed over a year earlier, the Board still had just six members, the same six Board members it had the year before. It's clearly time for new leadership that can return the school to financial health.
Labels: Charlottesville, Montessori
(updated September 2007)