Financial Review 2015/16
As he nears his 20th year as Bursar, Nick Shryane reviews the School's current financial position.
Last year, a now familiar, rather bland statement appeared in the statutory accounts: "Overall the School's financial performance was satisfactory". Although not inaccurate, it is a fine example of that peculiarly British attraction to understatement.
Having better than sound finances remains crucial to facilitating the School's strategic objectives: Harrow sets out to be an outstanding, world-class, full boarding school, and that costs money. The Governors nevertheless go to great lengths to keep the fees as low as they can and our policy has consistently been to generate enough fee income simply to cover the School's operating costs, (currently some £30 million) thereby avoiding even the slightest notion of 'profiteering' from parents. Corroboration from independence benchmarking surveys that we operate efficiently has also been a source of not inconsiderable reassurance.
Together with other sources of income from investment and trading activities (such as the letting of buildings), the School does produce a cash surplus sufficient to finance its routine capital requirements such as modest building improvements and IT hardware; as a charity any surplus generated is necessarily used by the school to enhance the education it provides.
Covering all that expenditure efficiently does not, though, address the problem at financing major projects. It has been commonplace for the press to highlight a 'facilities arms race' and blame it for the fee increases that have been experienced throughout the independent sector. While Harrow's fee has certainly increased, excessive expenditure on new buildings is not the explanation.
All the major projects undertaken since 2000, or which are currently in their planning phase, are all necessary. For example, the proposed Sport Centre will replace one which is rapidly nearing the end of its useful life and the new Science Centre is set to replace wholly unsuitable Victorian accommodation for subjects which really need modern facilities.
For almost two decades, the Governors have had an understandable aversion to borrowing, although a temporary adjustment to that policy in the current ultra-low interest rate environment is not unimaginable. At the same time, Harrow does not have a substantial endowment to (help to) meet the costs of major building projects and it is thus another School policy that such expenditure must be funded by charitable donations through the Harrow Development Trust (HDT). Thankfully HDT has been extremely successful and, as a consequence, parents' fees have neither been committed to meeting the capital cost of those projects nor have they been spent on loan interest. Few schools will be able to make that statement in 2016.
While the School's endowment has recently grown to over £40 million, the overwhelming majority is restricted to bursaries and scholarships. The income from the Harrow International Schools (last year circa £2 million) will ensure that the endowment for awards continues to grow at a healthy rate. However, in broad terms, as every endowed £1 million only funds one full-fee bursary in perpetuity, the scale of the challenge substantially to increase the endowment for bursaries is clear.
Nick Shryane, Bursar