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Dear Pathway Families: We all know these have been trying times over these last couple of years

. The economy and our expectations have been reset to these new times. Previous models of running businesses and non-profit organizations have become obsolete and need to be revamped. Our failure to change and seek a new way will mean the eventual end to the institutions we know and love. Pathway is at that crossroad that requires out of the box thinking. The vision and strategy team of the board has been brainstorming and researching avenues to point our school in a new direction and get Pathway back on track to growing our enrollment so we can enhance our facilities, our sports programs and our curriculum. Bottom line, we have struggled to get to the next level. More on that later…… Several weeks ago we had a PTF meeting and laid out the financial burdens facing our school. We informed you we needed $200,000 to “right” the ship. We were very blessed and many of you stepped up and made donations or pledges for a total of $40,000. As much of a blessing that was, you all know that falls short of our needs. So the vision and strategy team continued to meet and pray for direction. We have a plan that has bubbled up from those discussions and prayers and that proposal was presented last night at the PTF meeting. I will do my best to describe the model but feel free if you have questions to contact Terri Shaffer, Chad Clark or Tim Lawson to discuss further and answer any questions you may have. With the need for cash to relieve the stress of meeting operating budget and to retire some of the debt the school has incurred, any plan proposed needs an infusion of cash in the form of cash in hand or future operating expense avoidance (i.e. one of our wonderful staff members teaching for no salary so that their salary is the expense being avoided from our current operating budget). However, after discussing with several families, for someone to invest in the school further, they want some assurance that the school is going to be run in a fiscally sound manner and that their investment will be used wisely. In other words they want some say or a “vote” in how it is spent….thus the first opportunity to think outside of the box. The enclosed board structure was created to allow the investors in the school to help fiscally run the school and allow the current model of parent volunteers to provide the foundation of school spirit, morale, growth and spiritual direction. The proposed structure would have an Investment Board of individual or families that will loan the school $50,000 (or $25,000 over a two year period) to allow the school to get back on its feet. This loan to the school could be bought out by future investors or the school may retire the loans in the future should the finances support it (i.e. let’s say in 4 years one investor wanted to get out. We would find another investor that would loan the school $50,000 and that $50,000 would go to pay off the loan of the investor looking to get out. There is no return on this investment. Investors are just investing in Christian Education). Therefore, we are looking for 7 to 9 of those investors that can make that loan or a staff member that can teach for no salary (the expense avoidance). The investment board would have the following responsibilities: 1) to assist the school administrator in the creation of and approving the school budget; 2) working with the vision and strategy committee to provide a roadmap for future growth and the infrastructure to support that growth. To clarify, this investment board is not owners of the school. They are merely making an investment in Christian education and Pathway and this investment is not an

entitlement for anything other than they get to serve on a board and help fiscally run a sound school. If you are interested and have the means for this type of investment, please contact Terri, Chad or Tim to discuss. Second, we do not want to lose what we have in the parent volunteers and the energy and spiritual direction they can provide by keeping Pathway a “Parent Run” school. Therefore, we would tweak the current mode,l but in spirit, it remains intact. The school administrator will be the appointed chairman of the volunteer board and it will be made up of 7 to 9 parent volunteers that will head up the following committees: Vision and Strategy, Marketing, Fundraising, Facilities, Parent Fellowship, Curriculum, Spiritual Direction and Finance (to assist the administrator to operate within and develop new proposed budgets). The current finance responsibilities will be shifted to the new investment board which will free up the volunteer board to focus on the other important matters of running the school and making it a learning institution like no other. As a footnote, the current board has spent 75% of their time over the last couple years focusing on financial matters while the other important matters of the school have suffered. This shift will have a huge impact on giving the new volunteer board the freedom to run the school where it matters, in the classroom. Lastly and most importantly, this new model includes the hiring of a new administrator or “Head Master”. The plan is to hire an experienced head master that has grown a school from our size and taken it to the next level from a curriculum and student enrollment standpoint. We have already posted a job opening ad and have received 8 to 10 candidates. Of those, we feel there are 3 or 4 worthy of further discussion. We are in the process of assembling a hiring committee consisting of board members, staff and parents to conduct the interview process and make a final recommendation for a hiring decision. We are looking to make this hire as soon as possible. What about Sheena? Sheena is aware of our plans and has informed the board she is behind the board and open to whatever role she has in the new structure. Her new role has yet to be determined and will probably depend on the strengths and weaknesses of the new head master of where it would make sense for Sheena to focus her attention. This is a lot of information to absorb so what does the Board request of you? First, your prayers. Pray for direction from God and that everyone at Pathway will embrace God’s vision for the school, whatever that vision may be. Second, provide feedback to the board on the new proposed structure. We need positive and negative feedback so that we can fine tune a plan that will embrace and address as many of the concerns from the parents as possible. Third, enroll your child. If you still want your child at Pathway for next year, show us by your enrollment. This proposed model or any model means nothing if we the parents don’t support it with enrollment. We know the enrollment deadline is fast approaching and you may have lots of unanswered questions. So that we can get a feel for where our parent base stands, we are proposing the following: If you want your child (ren) at Pathway next year, enroll before April 30 but registration fees are not due until May 31 (and still receive the early enrollment discount). This way, you can get your questions answered, we can further fine tune our new model and have an idea of student count for the next school year but you have not committed your registration fees until all these details are worked out.

Once again, please pray for Pathway, our students and wonderful staff and that God will impart his will and direction on our hearts so that we may all be obedient children to our Father in heaven. God Bless! In His service: Pathway Board

Contact Information with questions: Chad Clark - chad@handcraftedloghomes.net Terri Shaffer - tshaffer@weighstation.net Tim Lawson – timl@ccs-inc.com

Pathway Christian Academy 3 Year Plan
PCA Investors Yr 1 Yr 2 Total from investors $200,000 $200,000 Yr 3 $0 In cash, debt or services

Debt Service Back operating debt NBB for Land interest payment Parent Loan Parent Loan Parent Loan Brian Blake (balance on buildout) Shah (balance on land improvements) Buildout of current space

$66,000 $36,000 $0 $0 $0 $24,000 $0

$0 $36,000 $0 $0 $0 $24,000 $50,000

$0 $36,000 $40,000 $50,000 $50,000 $12,000 $61,742 $25,000

debt service only ($610,000 Note) Towards infrastructure cost on Flanagan (no set payback period) Towards infrastructure cost on Flanagan (no set payback period) Towards infrastructure cost on Flanagan (no set payback period) Infrastructure costs on Flanagan $375,000 being paid by building purchase - terms on remaing $25,000 TBD

Total Debt Service $126,000 $110,000 $274,742 Excess towards operating expenses Income FPE (full paying equivalent) Scholarships FPE for scholarship students Adjusted FPE Teacher and Staff students Total Students Average Tuition Tuition Income Fundraising excess income from investments Total Income $74,000 Yr 1 75 30 21 96 15 120 $4,700 $90,000 Yr 2 90 35 24.5 114.5 18 143 $4,935 $0 Yr 3 120 40 28 148 20 180 $5,182

by yr 3 the school should have grown to support yr 3 debt, but if not, may need special fundraising to pay off last portion of debt or request additional capital from investors

$451,200 $565,058 $766,899 $50,000 $74,000 $45,000 $90,000 $40,000 $0

$575,200 $700,058 $806,899

slowly reduced dependency on fundraising

Expenses Staff salary and benefits per month $34,000 $40,000 $44,000 Total $408,000 $480,000 $528,000 Operating Expenses per month $14,000 $18,000 $20,000 Total $168,000 $216,000 $240,000 $576,000 $696,000 $768,000 -$800 $0 $4,058 $38,899

Total Expenses Excess Income Amount needed for debt service Shortfall/surplus

$0 $274,742 -$235,843

* Plan includes hiring a new position of Headmaster (experienced at school growth)

Pathway - Confidential

4/13/2010

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PCA Board Structure

The Finance Board will consist of 7 – 9 members who provide financial support to the school via non-interest bearing bridge loans. They will be responsible for large financial decisions of the school and to assist the headmaster and Vision and Strategy Committee in setting the vision for the school. The intent would be for future parents to “buy out” the original investors loans or for the school to prosper and “buy out” the loans.

Chairman TBD

PCA Finance/Investment Board

TBD

TBD

TBD

TBD

TBD

TBD

TBD

TBD

The Volunteer Board will consist 8 committee chairs of dedicated parents that work with the headmaster in the running and spiritual direction of the school. The headmaster will chair this board. The headmaster is hired by the Finance Board. The headmaster will have full ownership in the running of the school and will be in charge of staff, budget proposal and spiritual direction.

Headmaster Vacant

Volunteer Board
(similar to current board)

Vision and Strategy Committee

Marketing Committee

Fundraising Committee

Facilities Committee

Parent Fellowship Committee

Curriculum Committee

Spiritual Direction Committee

Finance Committee