The Summer Program at Portsmouth Abbey

In February 2014, Tim Seeley reflected on his recent conversation with the headmaster of Portsmouth Abbey School. Seeley had been running the school's summer program since 2012. The summer program had seen profits and enrollment improve for two years, but then drop unexpectedly in the summer of 2014, the cause of which was still unclear. Given its disappointing recent performance, the future of the program now seemed uncertain. Students are tasked with compiling a comprehensive budget for the school's summer program taking into consideration revenues from tuition income and the program's fixed and variable costs. Is the school asking enough in tuition for each of its different class of students (boarders, day students, and internationals) based on the services they use? Excerpt UVA-C-2358 Jun. 8, 2015 The Summer Program at Portsmouth Abbey In early February 2014, Tim Seeley reflected on his recent conversation with the headmaster of Portsmouth Abbey School. Seeley had been running the school's summer program since 2012. The summer program had seen profits and enrollment improve for two years, but then drop unexpectedly in the summer of 2014, the cause of which was still unclear. Given its disappointing recent performance, the future of the program now seemed uncertain. Although Seeley knew the program had usually been profitable, he was concerned about whether it was worth continuing. The headmaster and his team had decided that the program was only worth continuing if it could reliably bring in $ 50,000 in profit. Seeley's gut told him that it was possible, but to prove it would require some detailed analysis. Seeley was undecided about how to begin his analysis of all the associated revenues and costs of the summer program, because unfortunately in the past, sophisticated accounting and record keeping had not been used, and, therefore, the true financial picture of the past few years was incomplete. Athough total revenues, total expenses, and the enrollment breakdown were recorded in aggregate, no one had tracked the details of how much money each student brought in versus what each student cost. In addition, in an effort to transform the summer program into a profit center, certain items had been added to its profit and loss statement that had formerly been covered by the larger school. Thus it was difficult for Seeley to accurately track costs from year to year and to know where the money was spent. Furthermore, without a complete record of the costs, it was extremely difficult for Seeley to effectively plan a budget and then successfully execute it, particularly when enrollment had dropped. That needed to change if the program was going to be successful in the future. In addition, while he waited until he had a more informed prediction about enrollment that would allow him to avoid over budgeting, he worried that the school's teachers and staff would lose patience and make other commitments for the summer if he didn't offer them contracts for the summer program soon. Therefore, he wanted to make staffing decisions as soon as he could. As he sat in his office, Seeley pulled out what information he did have and started to prepare a budget. . . .