Making Philanthropic Investments Last: The Role of Financial Sustainability
[eJP note: This is the first in a series of pieces on the Jim Joseph Foundation’s Education Initiative. This piece shares insights and lessons learned about the institutions’ financial sustainability plans for programs supported through the Education Initiative. See below for more.]
By Dr. Mark Schneider
Dr. Yael Kidron
American Institutes for Research
Launched in 2010, the Jim Joseph Foundation’s Education Initiative has supported the development and expansion of 18 degree and certificate programs as well as leadership institutes at Hebrew Union College-Jewish Institute for Religion (HUC-JIR), The Jewish Theological Seminary (JTS), and Yeshiva University (YU).
The Jim Joseph Foundation provided the resources needed for program development, staffing, student tuition assistance, and marketing/recruitment activities. The investment was substantial – each institution received $15 million over a period of up to six years. As part of its independent evaluation of the Education Initiative, American Institutes for Research (AIR) assessed how well the three grantees not only delivered high quality programs, but also how well they planned to sustain these programs into the future after the Jim Joseph Foundation’s investment wound down.
As part of its activities, AIR researchers reviewed the institutions’ financial sustainability plans for each of the programs supported by the Education Initiative. Financial sustainability requires careful planning, typically using a dynamic document that is reviewed and revisited periodically. Such a document – the financial sustainability plan – describes strategies to contain costs and to cover them through fundraising and program revenues.
Informing Financial Sustainability Plans Through Break-Even Analysis
A common tool in financial planning is break-even analysis, which identifies the circumstances in which costs and revenues are balanced. We developed a program-level Break-Even Analysis Calculator, allowing program administrators to project revenues and expenditures by changing variables such as tuition, numbers of students, and staffing levels.  This interactive tool can be used to:
- Identify the resources required to implement a program, including personnel, facilities, equipment, and materials, whether they are paid for directly or contributed in-kind, and subsequently to calculate program costs.
- Explore ways to reduce costs.
- Identify the effects of different levels of tuition and scholarships.
- Calculate fundraising needs and demonstrate to potential funders why their help is needed.
Review of Financial Sustainability Plans
We created benchmarks for reviewing the financial sustainability plans submitted by each institution. The four criteria described below are based on the assumption that financial sustainability is a process, not an end. In other words, although the process aimed at achieving financial sustainability may not yet be completed, the financial sustainability plan helps develop a road map so that programs can follow into the future.
Assessment Criterion I: Key Informational Elements
We saw financial sustainability plans as facilitating communications and planning within an institution. For this purpose, we expected each program plan to articulate its rationale – how does the program fit into the vision of the institution in its efforts to support the field of Jewish education? How consistent is the program with the institution’s view of current needs and anticipated future trends? Similarly, we expected each plan to identify how long the program should be continued (we do not assume every program will last forever) and we expected a timeline for anticipated fundraising activities. In our feedback to the grantees, we recommended that each financial sustainability plan includes a detailed budget, budget assumptions, and analysis (e.g., break-even analysis) that spells out the calculations and assumptions on which current decision-making is based.
Assessment Criterion II: Feasibility
It is critical that the financial sustainability plan is feasible. For example, if the break-even analysis identifies a break-even point, but the circumstances under which this will be achieved are unreal, the analysis will not serve its purpose. To make the case for the viability of long-term plans, authors should include as many specifics as possible. Projections of philanthropic contributions should include names of funders, projected amounts, and at the very least, an overview of fundraising plans. Projections of tuition revenue should include enrollment estimates, market demand assumptions, and description of strategies to align tuition discounts with measurable student needs (rather than using blanket across-the-board tuition discounting policies). Finally, plans should include an assessment of organizational capacity (e.g., the availability of qualified staff with relevant expertise), which is key to successful implementation.
Assessment Criterion III: Need
Higher education institutions sometimes choose to run programs at a loss, as a service to the field or as a marquee program that can promote institutional capacity and reputation. But financial sustainability plans highlight the costs of such a strategy, allowing institutional leaders to better judge the level of their investment and the return. To ensure that such decisions are based on valid assumptions and consensus among chief officers in the institutions, effective financial sustainability plans should address the need for the program along multiple dimensions.
Assessment Criterion IV: Commitment
Programs can be sustained over the long-term when institutional leadership (the president, provost, and the dean) are committed to support the program through allocation of funds, sharing of infrastructure, and active participation in targeted fundraising efforts. Additionally, financial sustainability planning benefits from use of proven strategies and processes for ongoing review and revision of the financial sustainability plan.
Supporting the Continuation of Higher Education Programs in Jewish Education
HUC-JIR, JTS, and YU developed financial sustainability plans that took into account multi-year projections of costs and revenues. This involved hard work and time – and many of the questions we asked them to address were new to academic leaders who have not often been held to financial standards. All three grantees of the Education Initiative were torn between offering their very best to the field of Jewish education and making promises they were likely not going to be able to keep within the limitation of financial resources. This is understandable.
But spending money and time to ensure the financial health of programs over the long-term is something that grantees need to do. Crafting implementation plans that can be sustained over the long run is a new and difficult task that grantees must increasingly face – and it is something that the Jim Joseph Foundation is committed to, in order to make sure their philanthropic investments produce long term results.
 Contact Yael Kidron at YKidron@air.org for more information about the Break-Even Analysis Calculator
Dr. Mark Schneider is a Vice President and an Institute Fellow at AIR. Dr. Yael Kidron is a Principal Researcher at AIR.
This is the first in a series of pieces on the Jim Joseph Foundation’s Education Initiative by Drs. Mark Schneider and Yael Kidron of American Institutes for Research (AIR). The Education Initiative consists of three major grants of $15 million each to support graduate programs of education at Hebrew Union College-Jewish Institute of Religion (HUC-JIR), The Jewish Theological Seminary (JTS), and Yeshiva University (YU). AIR is the independent evaluator conducting ongoing assessment of various aspects of the initiative.