New School Seminar

1. New School Seminar Private Licensed Schools

2. Contents • Foundations – Statute, Regs, and Memos • Board and staff roles • Form PDE-3775 • Fees • Form PDE-1003 • Facility • Type of Ownership • PDE-5004 Forms • School Name

3. Contents Continued • Surety • Finances • Ethics Statement • Records Retention Agreement • PDE-340 Forms • Catalog • Enrollment Agreement • New Program Applications • Admissions Representatives

4. Handouts • Regulations • New School Application • Internet Sites

5. Legal Authority • Statute • Regulations • Board Policy Memos

6. Internet Resources • Public Website: http://www.pde.state.pa.us/pls • Financial Forms - ftp://ftp.state.pa.us/pub/PDE_PUBLIC/PLS Financial/

7. Staff Role • Determine if application is complete and acceptable for Board review • Give school feedback with 10-day “cure” period

8. Staff • Staff can answer questions and provide guidance and insight into Board requirements and standards. • Staff cannot teach applicants to develop a syllabus, prepare basic financial statements, or operate the school.

9. Staff • Ed Rech • John Galganovicz • Bob Kline • (717)783-8228

10. Consultants • Accountant • Attorney • Educational/Administrative

11. Role of Board • Approve • Approve Pending • Defer • Deny

12. Fees • $200 – This Mandatory Seminar • $1500 – Application Fee • $700 – Each Additional Program • $500 – Site Visit • $300 – Admissions Representatives

14. PDE-3775 • Follow PDE-3775 • Use as a check sheet for submission • Include in application

16. PDE - 1003 • Complete all information • Must have valid mailing address and phone number. • Fax and/or e-mail will speed communications

17. PDE-1003 Red Flag • Be sure the address, fax, phone number, and e-mail that you provide are active. Otherwise, important correspondence or communication about your application might not reach you!

18. Facility • Must have Certificate of Occupancy • Floor plan with measurements

19. Type of Ownership • Corporate registration from Department of State, Corporate Bureau • Partnership agreement • Personal financials if sole proprietorship

20. School Name • Fictitious Name registration from Department of State Corporate Bureau unless the school name is exactly the same as the name of the corporation.

22. PDE-5004 Forms • Needed for each corporate officer • 3 Letters of recommendation – one from a bank

23. Surety • Surety Bond • PTAF • Irrevocable Administrative Trust

24. Financial Statements • All schools are required to submit financial documentation as a component of the license application (24 P.S. § 6507).  • The financial documentation is required in order to demonstrate that the school has the financial solvency that will be required to successfully launch the operation and prevent negative consequences for students (22 Pa. Code § 73.53). • Each application must include documentation that demonstrates that the school is appropriately capitalized, that accurate assessments have been made regarding operating costs, and that the individual, partnership, or corporation that owns the school is solvent and has the financial capacity to support the operation.

25. Financials Con’t • The Financial Review Committee reviews the financial statements and supporting documentation before each Board meeting.  A license cannot be issued until the Financial Review Committee approves the financial condition of the applicant school. • Submit actual financial statements specific to the school on the PDE-2006 form.  This statement should be only for the school site that is applying for licensure (i.e. stand alone statement). The financial statements should not include other schools and reflect actual results. • All financial documentation must be less than six months old on the Board meeting date at which the application will be reviewed

26. Financial Reports for New School Applicants • PDE-2006 • Pro Forma • Parent Company Financials • Proof of Capital * New School Financial Statements must be audited or reviewed

27. PDE-2006 • Forms and instructions located at: ftp://ftp.state.pa.us/pub/PDE_PUBLIC/PLS%20Financial/ • A guide for the FRC to assess the financial strength and solvency of a school / institute • Measures the current condition and ability to operate in the future through: • Income Statement (page 1)- Revenue and Expenses • Balance Sheet (page 2) – Assets, Liabilities and Stockholder’s Equity • Disclosure Information (page 3) – Methodologies, Terms of Significant Notes, Parent Company Information, Pending regulatory/legal Issues and Explanations • Key Indicators (page 4) – Individual program information

28. PDE-2006 and GAAP • All financial information must conform with Generally Accepted Accounting Principles (GAAP) • The common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information. • Imposed on companies so that investors have a minimum level of consistency in the financial statements they use when analyzing companies for investment purposes. GAAP cover such things as revenue recognition, balance sheet item classification and outstanding share measurements. • Still Room for interpretation and different methodologies within GAAP

29. Accrual Accounting • Key concept of GAAP is Accrual Accounting • An accounting method that measures the performance and position of a company by recognizing economic events regardless of when cash transactions occur. The general idea is that economic events are recognized by matching revenues to expenses (the matching principle) at the time in which the transaction occurs rather than when payment is made (or received). This method allows the current cash inflows / outflows to be combined with future expected cash inflows / outflows to give a more accurate picture of a company's current financial condition. 

30. Memo #72 • Board requires audited or reviewed financial statements for new school applications.

35. Finances • PDE-2006 – ACTUAL, REAL, income statement and balance sheet • MUST balance • May not be completely zeros • At least 4 months of operating capital

36. Financials Con’t • Financial statements provided for new school applications are expected to meet the following criteria: • A current ratio of 1:1 (current assets to current liabilities) • A positive net worth, accompanied by a reasonable debt to equity ratio • Net profit in one of the last two fiscal years • Sufficient cash reserves to support 4 months of operation without depending on tuition revenue. • Accurate and realistic reflection of the revenue and expenditures anticipated prior to opening and the first 12 months of operation post opening.

37. PDE - 2006 • ftp://ftp.state.pa.us/pub/PDE_PUBLIC/PLS Financial/ • Both form and instructions on this site • Use Annual Form

38. Owner Financials • All applicant schools must demonstrate the financial solvency of the owners.  If the school is a proprietorship (single owner) or partnership, the application should include personal financial statements.  If the school is owned by a corporation, corporate financial statements must be provided.  Audited or reviewed statements are appreciated, but not required, unless the committee specifically requests an audited or reviewed statement.

39. Evidence of Capital • 4 Months of Operating Costs • In Name of School

40. Pro-Forma Projection • Projection for first 12 months of operation • Be realistic – include all possible expenses • Include the costs of advertising • Include attrition • It is ok if there is no profit immediately

41. Proforma Projections • Provide a pro-forma financial statement that accurately and realistically reflects the revenue and expenditures anticipated prior to opening and the first 12 months of operation (post opening.)  This pro-forma statement should include all costs associated with the operation of the school, including facilities, utilities, advertising, printing costs, staffing, staff benefits, insurance, and all other expenses.  Failure to accurately anticipate reasonable expenses or unrealistic revenue projections can result in deferral or denial by the Financial Review Committee. 

42. Financial Summary • PDE – 2006 is the PLS form for your income statement and balance sheet – this is real • Proforma – required projection of income and expenses for first year • Capital – evidence of capitalization of school • Parent financials * New School Financial Statements must be audited or reviewed

43. Additional Help • Consult an accountant • Attend quarterly financial seminar • April 15, 2009 • July 15, 2009 • October 21, 2009

44. Disclaimer re Financials • Information is provided to guide schools and applicants in financial planning and financial reporting.  However, the Board and the Financial Review Committee may look at any other indicator to determine stability and are not limited to or bound by the criteria outlined in this presentation.

46. Ethics Statement • Serious commitment • Read carefully and comply • Signed by owner or director

47. Records Repository • Should be with another Private Licensed School in Pennsylvania • Must have signature for both schools • No fee may be required after closure • Service fees may be charged to students • Samples

48. Sample Repository –NO FORM PROVIDED