The Brief

Our client is a leading Australian independent school that regularly places in the top 10 schools for academic results in Victoria.

The client needed to assess various funding options for a proposed major facilities redevelopment project. The options being considered included debt funding, sale of assets, donor contributions, and school operating surpluses.

The immediate requirement was for a financial forecast model to project the school’s operating cashflows, and to scenario test the impact of various funding options over 20 years. 

The key requirements were:

• Ability to stage the development over a 10-year period
• Consolidating the operating forecasts of multiple campuses
• Assessing the maximum borrowing capacity under various operating scenarios
• Stress testing in the event of economic downturns
• Reporting of model outputs and key findings to the school finance committee

Our Approach

Parity worked closely with the CFO of the school to gain an understanding of the proposed redevelopment project and its costs, along with the school’s operations, its capacity to increase fees, and the availability/valuation of surplus assets. Parity also analysed historical enrolment data in conjunction with ABS census and demographic data to project future enrolment numbers.

A 20-year 3-way integrated model was developed, which incorporated the proposed redevelopment plans along with the school’s forecasted operating financials and various funding options. Parity worked with the CFO of the school and senior finance committee members to test run over 100 separate scenarios.

“The modelling and scenario testing provided the finance committee with a deep understanding of the risks and benefits associated with each financing option.”

Outcome

The modelling and scenario testing provided the finance committee with a deep understanding of the risks and benefits associated with each financing option. 

The school had clarity as to:

• The maximum debt the school could reasonably afford to take on with/without selling surplus assets
• How to best stage the project
• The amount needed to be raised by external donors
• The likely impact of an economic downturn and consequently how to manage this risk

Based on Parity’s recommendations, the school was able to prepare a clear funding plan.