• Audrey Hametner

ACCOUNTING IMPLICATIONS FOR THE IMPACT OF COVID-19 IN EDUCATION

Schools around the globe are now beginning to plan for how to manage their operations for the fall of 2020 with the increased expectations on the safety and security of their students and staff. One glaring consideration for senior leadership is how are they going to fund the new requirements.


In the UAE, school fees have been on the decline, even prior to the COVID-19 outbreak. Premium schools have been forced to offer deeper concessions to parents who have been moving their children to high-performing mid-priced schools.


In the third term of the 2019/2020 academic year, the global pandemic has forced schools to scramble to a DLE model (Distance Learning Education), and appease parents by offering even more discounts to retain their revenues and student headcount. Increased, unbudgeted expenditure has been required to get devices into the hands of students without access at home, and software purchases that would normally take months to test and prepare for had to be requisitioned quickly with lightening-speed training for staff, students, and parents.


How is all of this being accounted for?


No one would have expected that school budgets would need or have the additional reserves to withstand such pressures on spending. With the fierce competition for students in the UAE, how are schools going to account for the cost of this pandemic, and who will bear the long-term repercussions? These are some of the questions being considered not just in the UAE but in many other parts of the globe.


How to manage extra-ordinary SG&A costs is a hot topic right now in the finance departments of some of the biggest educational institutions today. The cost savings incurred by not having students on campus is not enough to offset the incredible costs incurred by schools who have not had the opportunity to negotiate favourable rates on equipment and software in place. Adding to the mounting costs, liquidity concerns, deteriorating credit and pressure on salaries, schools are facing incredible pressures to meet the demands to stay afloat. In the case of four new school openings expected in the fall of 2020 in the UAE, the board and leadership team face the task of managing the up-front opening costs in the wake of the pandemic.


Key Considerations:

· What are the implications for finance departments across the globe?

· How are teams re-organizing their reporting and accounting to manage the devasting turn?

· What governance structures are in place to ensure that the Audit Committees have sufficient oversight, and Auditors will advise these organizations accordingly?

The statement of disclosure about COVID-19 for the period covering the 2020 pandemic will need to follow internationally recommended guidelines and be accepted by the board.

How Is Your Team Handling It?

Currently, there is a myriad of views and resources available to help guide teams on the way forward but arguably how the teams on the ground will be supported to perform their tasks is key.


· How is your finance war-room organized to relay and manage the information being communicated to your teams? For example, is accounts payable following protocol and correctly identifying the impact of COVID for your school?

· As the day to day financial operations of your school persist, how is the quarterly or annual consideration for the assumptions and estimates relating to COVID implications being managed?

The question of going concern will be a hot topic as the pressures on cost mount and the considerations of parents contribute highly to revenue projections. FP&A is an ongoing and challenging task during the best of times; doing it effectively during this global pandemic should be centre stage as the pandemic persists.


Partnering now to protect their future


To learn more about how your organization can begin to structure the reviews and manage the changes involved, contact THG Advisory.

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