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The Net Assets podcast delves into the most pressing issues in independent school business and operations. Delivered by NBOA, the only national nonprofit membership association focused exclusively on fostering financial and operational excellence among independent PK-12 schools, each episode is based on a popular article in NBOA’s Net Assets magazine. Chief financial and operational officers alongside other leaders of school business share what inspires and challenges them as well as their approaches to problem solving and innovation. In each lively exchange, host Jeff Shields, NBOA president and CEO, teases out the human stories behind the printed story.
Sustainability is leaving a little bit of operating surplus left over in that budget at the end of the year so that when these things suddenly shift, you've got some capacity within there to move with the tide and not be completely caught off guard. Or worst case scenario, you're having to use next year's tuition just to get through the end of this year or to pay this year's payroll or those types of situations.
Speaker 2:Welcome to the Net Assets Podcast. Well, spring has finally arrived in Washington DC, and the days are longer, and I couldn't be happier. And I'm really pleased to be joined today by Kathy Ferguson, who is a partner at Armenino, a nationwide audit firm serving many, many independent schools. I'm sure she is familiar to many of our podcast listeners. And I also think it's notable to share with you that Kathy will be joining the MBUA board of directors on July 1.
Speaker 2:Welcome to the Net Assets Podcast, Kathy.
Speaker 1:Thank you so much, Jeff. I feel like we need, like, a round of applause. I'm so excited to be on the board.
Speaker 2:You like that intro?
Speaker 1:I did. That was fun.
Speaker 2:It's gonna get even better. If you like that, it's gonna get even better from here. But I have to start with the last time I saw you. You were hosting what I think is the now infamous Armadino night at the annual meeting, and it really has become a must attend event because of your energy and your enthusiasm. It's become really an annual meeting tradition, and I remember you with a microphone kind of conducting a a wine raffle of sorts.
Speaker 2:What's your favorite memory of that night or of those nights in the last several years?
Speaker 1:You know, I love the nightcap that we host at NBOA. It is fun. Everybody wants to come. We don't care if you're a client, not a client. We don't care.
Speaker 1:We invite everybody. It's the last night of the annual meeting, so people are willing to get uptired and still go to sessions because then they get sleep on the plane.
Speaker 2:That's right.
Speaker 1:One of my favorites is one of the CFOs from Hawaii. Very sweet, very like, he's very reserved. And a couple years ago, I grabbed him and I said, hey. Come on up here. And I grabbed him and had him climb up on a table with me to announce a wine winner.
Speaker 1:And he got off that table and looked at one of my managers and was like, I have never done something that wild ever. And I just loved it. I love the atmosphere of it. I love the people. It's great.
Speaker 2:And you're bringing individuals out of their comfort zone Yeah. Even more. So that's great. Now I wanna talk to you about your really interesting journey to your role as partner at Armenino. You've moved from schools into auditing, and that's a reverse for many of our business officers.
Speaker 2:So tell me what's the story behind that career transition and and really give me your professional journey to this date.
Speaker 1:Yeah. So it's a little backwards. Right?
Speaker 2:Let's say it's unique. Yes.
Speaker 1:I love that. So so when I first went school, I went school for early childhood. I loved education. I love children. I really have a lot of fascination with how much the brain develops from zero to five and how kids grow in that area.
Speaker 1:But I would always find myself in leadership roles. I would find myself in roles where I was running the organization, writing curriculum on the side, but really running organizations. My kids got a little bit older, and I went into the public school district. Public school district was nice. I spent about five years there, really kind of more so in accounting type of roles.
Speaker 1:And then I got a call from an all girls private school in Dallas, and they asked me to come join their team. And so I did that, and it was lovely. And I was around some amazing women that were great in the profession, many of them you know, that really kinda brought me along and mentored me in the profession. I got my CPA license, decided I was gonna go into public accounting for two years at their recommendation. They said, Kathy, we know what you can do, but the world really won't see your career path as solid unless you've done some time in public accounting.
Speaker 1:So I said, okay. I'll do two years. I'll come back. I like public accounting because I could see what this organization was doing and that organization, all these different things, what they were doing into controls and how they were doing things differently. And I found it fascinating.
Speaker 1:I love that every day I got smarter. Right? And then Armenino moved into Texas. They were a California based firm. They had a really big private school practice.
Speaker 1:They moved into Texas. And that very same year, they reached out and said, hey. We had a head of school at one of the other schools that I worked with said, if you want to grow in the independent school practice, you need to reach out to Kathy Ferguson. They did, and I came over to Armandino, and it was a different firm. It wasn't a traditional public accounting firm.
Speaker 1:It was really innovative and entrepreneurial. And I was like, this is great. They're thinking about things different, and I could still be part of private schools, which is near and dear to my heart. And so it's interesting. You said we were a CPA firm.
Speaker 1:I say that all the time, but a lot of my friends call us a consulting firm. About half the schools we work with are audit type, audit tax, but the other half are really consulting type engagements and a lot of AI implementations right now and other types of things. But, really, we work with about 300 schools. Half those audit, half those consulting.
Speaker 2:Well, there you go. I learned something today on the Net Assets Podcast. That's good to know. And I'm gonna take a guess that two of your early mentors in Dallas were Mary Pat Higgins at Hockaday. Yes.
Speaker 2:And I think we share a mentor in Melissa Orth, who was the longtime business officer at Greenhill School and former NBAA board chair. Does she know you're joining the board? That's interesting.
Speaker 1:I don't know.
Speaker 2:You might have seen it on LinkedIn. Yeah.
Speaker 1:They're both amazing. You would see them Walker and MBLA, and this was, you know, this was back 2008, 2009, and I was like, I wanna be them when I grow up.
Speaker 2:Wow. Good role models. Good role models. Now we talked about the nightcap, but how was your overall MBUA annual meeting experience? What did you hear from schools?
Speaker 2:Your sessions are always packed. They get rave reviews. But what stands out for you in the program in New York?
Speaker 1:Yeah. So it's interesting because traditionally, we were known as this audit firm, and I would say we do great work in audit. We do benchmarking. We do report card data. We do stuff.
Speaker 1:That's cool. But lately, we've really been more a lot of schools are leaning in on their AI journey and trying to bring a business partner along with them that can help them. And, you know, I sat in on a lot of AI sessions along the way, whether it's other local associations, national associations, and just listened. And there's a lot of fear out there, and there's a lot of, I don't know. But I think that our session is really uniquely different in that it talks about it's very normal when you first hear about AI.
Speaker 1:You're starting in this place of and you're just learning about it. It's just you're investigating. It's very normal for you to go, oh, I'm intimidated by it. I'm a little fearful of it. And that's part of the journey that's not abnormal.
Speaker 1:And I think not enough people get told your feelings are valid and they're not abnormal. And that doesn't mean that next year you can't be in the space of a great like Macey Green who's really become transformational in her use of AI at her school. But when you start in this boat, you think I could never get there. Yes, you can. That's exactly where most people start.
Speaker 2:Nancy Green at the Pinecrest School, in case people don't know that. So we have name dropped three very influential women business officers who've really made their mark in the profession. So when a lot of people hear about AI, especially in schools, we talked about students and faculty when I talked to business officers now, not today, but as it emerged over the last year or two, they think about risk. How do you get them over the hump of, well, what's the risk, Kathy? And I don't wanna expose my school to unnecessary risk.
Speaker 2:How do you work through that with them?
Speaker 1:Yeah. I think that there are two sides. It's the risk, and then there's also, like, are we replacing jobs? Am I gonna make Susie not have a job anymore? I think the risk side of it is, one, on the job side of it is showing them the possibilities.
Speaker 1:People want their people to be able to do the things they love, and they wanna take off their plate the things that are meticulous and repeatable and over and over they're doing and the things that they don't necessarily love. If we can find ways to do that and show them what is possible, they get excited. The next question is risk. Right? And they go, oh, but is this gonna open up my school?
Speaker 1:And I would say, sometimes it can, and we hear those stories. In the same way, if you don't have a good internal control environment, you might open yourself up to risk and you may hear a fraud or theft or those types of things. You're gonna put in proper controls. And part of that is not seeing a tool and seeing all the bells and whistle and just signing up for it, but talking to a business partner who can help you say, does this make sense? Is this good for my school?
Speaker 1:Have I put the right steps in? Did I buy the right software? I'll have one group that's using a ChatGPT in another, and one is using in a very unsafe way because the type of program they have versus the other that's using it in a very safe way because what they how they've invested in it and how they've utilized it.
Speaker 2:So you don't wanna use AI on top of insufficient internal controls. So you wanna make sure your internal controls are sound, and you can work through that with your auditor as you do this exploration. I'm really curious about what's been some of the impact that you've seen. We've protected jobs or it's not a job replacement solution. Yes.
Speaker 2:What what's the impact you've observed with business offices that have implemented AI?
Speaker 1:There are countless ways that they're being able to use it, and sometimes it's specifically with the business office. Other places in their school, they're using it too. And some of them are, you know, bank reconciliations, credit card reconcile like, doing some of that rote work. The place where I would say it's the most impactful, honestly, is the byproduct you don't expect, is the satisfaction and joy of the people that are using it. I've heard people say to me, Kathy, I've had this woman in this position for thirty five years.
Speaker 1:She's not embracing this. And then that'll be the exact same person that once they see what it can do and you set the process in motion, they're the biggest advocates of it because it really is impactful to their jobs. Sometimes it's just a file integration. Right? Like, we had one school.
Speaker 1:They were downloading applications. Every time a kid applied, there were 350 applications. They were having to put together all these files. Well, we have a bot doing that out. They come in in the morning, and it took them all day for somebody to sit and download or prepare files for applicants.
Speaker 1:It's done by the time they walk in. It reduced their time in half. Right? So using technologies to be smart, not to replace you, but to enhance you.
Speaker 2:That's really great. I love the case study. Everyone has that long tenured person in the business office that we really value and respect, but they hear AI and they say, oh my gosh, what's this gonna mean to my job? But what you've seen is it's enhanced job satisfaction. They come to work happier, and they're excited about the opportunity.
Speaker 2:That's phenomenal. I wouldn't have anticipated that.
Speaker 1:Well and some of and this is scary to some people, but some people they've named their bots. And I would say I have done the same thing personally. I've named
Speaker 2:bot's name, Kathy?
Speaker 1:Chloe.
Speaker 2:Chloe.
Speaker 1:Amazing. Let me just show you. I know this is gonna you're just gonna laugh at me, but I'm going to really quickly while I have you on here. I'm gonna say, hey, Chloe. I'm talking to Jeff Shields.
Speaker 1:Would you like to say hello? He's with NBAA. Hello, Jeff. It's great to virtually meet you.
Speaker 2:Wow. So Kathy just held up her phone, and her boss, Chloe, just said hi to me. So that's pretty impressive. You obviously have a very close relationship.
Speaker 1:I do. There are so many times that normally I would call a friend in that area to ask them something. I've gotten stuck. I did I buy the wrong thing? And Chloe's like, oh, yeah.
Speaker 1:I I got on the wrong bus going somewhere because I bought something from like, I was doing the Statue Of Liberty there in New York at MBLA. And I accidentally got on one of these street vendor buses instead of the statue tours, showed her a picture of the receipt. She was like, get off the bus. Get off the bus right now. Go two blocks.
Speaker 1:Dispute this with your credit card. Here's a link, and have a great day today.
Speaker 2:Chloe came through in New York City
Speaker 1:She did.
Speaker 2:And held you out. Well, no wonder you like her so much. This is fine. I'm gonna pick your brain about a couple other things that are happening. I'd love just to know what your insights are.
Speaker 2:I wanna talk about cryptocurrency. It seems like it's making a comeback, but you tell me. And what should schools know about the crypto market?
Speaker 1:Yeah. So my opinion on the crypto market is, yes, there is some volatility. Yes. There is some fluctuation in it. I've seen some schools lean into it, and then it got scary, and then everybody pulled out of it.
Speaker 1:Right? And so there's kind of this yo yo effect. I would say there is no reason, particularly it depends on the geography you're in, these different areas. Some of them are very highly driven, and you have a lot of crypto money and a lot of crypto donors. And so you don't wanna deter that.
Speaker 1:But in the same token, I would say if you're not comfortable holding on to it based on some of the history and what you see, you can still accept cryptocurrency as a donation, have that turned right away and pulled out until you're more comfortable, or you say, I wanna hold a small bit. But in the meantime, it doesn't mean you have to say none. You can say, we're gonna accept it. Let's get a platform to accept it. Let's turn it really quickly so that we pull out.
Speaker 1:And we have some that are looking at, do we have some investments in it that we hold in our investment market? That's a really advanced crypto user. But I would say more, the other benefit to accepting it for donations or tuition or those types of things is it shows your parents when they go online how your STEM programs are working out, same with when you put bots and other things out there, that you mean what you say. It's not just something that you're saying you're doing, but you're leaning into new technologies and new innovations.
Speaker 2:You know what's really interesting, Kathy? In both AI and now with crypto, we talked about these, it really helps that the school understands its risk tolerance. Do you think that's changed? Have schools become more risk adverse in your opinion, or it's just a fingerprint school to school to school, and you really just need to have that dialogue and assess where they are with regard to risk. What's your thoughts on that?
Speaker 1:I think it does vary from school to school, but also it depends on who do you have in your leadership and how much they've invested in that knowledge and expertise. We have a lot of schools saying, hey. No. It's cheating. Don't do it.
Speaker 1:Stay away from it. We're gonna block it. It really is not preventing it from being used at all. It's preventing it from being talked about being used. And I would say the best thing for you to do is to create a transparency in everything else.
Speaker 1:This is what you wanna do. This is how you avert risk. Create a transparency and a openness to the conversation of we wanna know how you're using it. Don't put people in a situation where they may say, oh, no. No.
Speaker 1:I'm not using it even though they are, or yes. I am using it and they're not. You want them to feel like they can be very honest with you, tell you how they're using it, brainstorm with you, that you're gonna come up with solutions. You're not gonna shut them down. I think those are the places that really do avoid risk better than those that are just trying to stop and just put Band Aids all over and say no one is allowed to use it.
Speaker 1:I think those are probably at more risk than those that lean into it to understand it.
Speaker 2:Another reminder of how transparency is so important to leadership and to business operations and how we conduct ourselves within our schools. I think that's a really, really great reminder. I'm gonna move on to one other hot topic, and that is ripping it from the headlines. What's going on with the economy? We're talking about is there rising inflation, talking about trade tariffs.
Speaker 2:We're talking about a potential recession. What are you advising schools to prepare for this uncertain economic future? It feels like it was just a few days ago we were talking about inflation and schools, and now here it is coming in again. Is the advice different? What do you advise schools at this juncture?
Speaker 1:You know, schools are such a different industry than anywhere else. They're one of the few places where we budget and we prepare to live in a zone that we can't afford to pay our bills, and then we're gonna depend on the contributions and the gifts from our parents to be able to make up our operating budget.
Speaker 2:You you've been to one of my sessions, Kathy. That's exactly how I start most of my sessions. Yes. We are like no other business that anyone knows. So with that said, what do we do when the economy is is uncertain or it feels fragile?
Speaker 1:You know, I've seen more and more of my business officers trying to build operating surpluses into their budgets so that when those expenses come up and they suddenly hit a big jump, it does not leave me in a place where I'm not sustainable. Like, sustainability is leaving a little bit of operating surplus left over in that budget at the end of the year so that when these things suddenly shift, you've got some capacity within there to move with the tide and not be completely caught off guard. Or worst case scenario, you're having to use next year's tuition just to get through the end of this year or to pay this year's payroll or those types of situations.
Speaker 2:And you are one of many, I'll call you a financial adviser, that talks about that, the value of creating budgets and operating budgets that you do generate a surplus so that you do have that cushion. It makes common sense, right? It seems obvious, but many schools still first of all struggle right there working really towards a break even very often, and sometimes trustees don't understand fully the value of generating a surplus. They say, we're a nonprofit. Why are we generating profits?
Speaker 2:Well, we're generating that surplus so when we need it, we can reinvest in the mission of our schools. That's why it's always prudent if you can to see if you could generate that surplus year over year for uncertain times.
Speaker 1:Yeah. Well and, you know, if you work with an association that has tools, I don't know, like a ten year forecasting kind of tool or something.
Speaker 2:That a shameless plug, Kathy? The MBOA long range financial model, and I'm going to give you a tease just for podcast listeners. We're about to unveil the long range financial model two point o in just a few weeks, And we're really excited. Look for that announcement because that's gonna be really exciting. I wanna go to a topic that I know is near and dear to your heart.
Speaker 2:And I wanna start by talking about the demographics of the independent school business office that we just released this past January. It showed that the gender pay gap, which used to be aligned with the national average, has grown significantly. Let me give you two data points. I'd love to hear your reaction. Between 2018 and 2019, when we last published the report, and twenty three-twenty four, the gender pay gap more than doubled from 20,000 and change to $45,000 and change.
Speaker 2:Women's pay did increase, but not as rapidly as men's. In 2324, women made on average a 136,000 and change a year, which is about what men made in 2019, twenty twenty four years ago. What are your thoughts on that? And there is a theory that women more often may work in smaller, less resourced schools, but I still wanna get your take on that.
Speaker 1:Yeah. I mean, it's it's shocking. Right? Like, those numbers, they speak for themself. And they give you data, not just the feels.
Speaker 1:It's not like this feels this way, but that report really gives you data behind it. And it's shocking. I would say, in my opinion, women don't advocate for themselves in the same way that men do. And even when you go through a nationwide search, you're sitting down and you're talking. You've got people on governance.
Speaker 1:You've got your head of school, and they're sitting down talking to someone for a position. A man can sell themself in a different way, or they typically do, and I know that's stereotypical, but they typically will sell themself differently than a woman. If there are 10 criteria to make a position, a woman might say, well, I've got most of these, but, you know, I still need this. I still need that. Whereas a man's really gonna speak to his strengths.
Speaker 1:And in that position is, I think, where sometimes you may look at those two candidates and say, well, this one we have to have. We have to have this person who is really they're they're expounding upon what their strengths are. I think they're gonna bring so much. It's a better sales presentation. And we as women, we have to not just say, well, that's just the way we are.
Speaker 1:We have to learn how to do that better so that we can really describe our value add and the business proposition that we offer. And also, I think those people in those positions have to realize there's a difference in communicating, and it's to to really narrow that gap.
Speaker 2:Well, what I really admire about you and what I know about you is this isn't just talk for you. Armenino has a gender equity initiative to retain more women in accounting, and you've played a really key role. You are a partner at Armenino. Tell me how you first got involved in that initiative and what your role is today, and and what's the impact it's having on the workforce?
Speaker 1:Yeah. So I got involved with our it's our bridge program. I got involved before I even made partner. One of the few that was on the board that had not made partner yet. And I will say, when you look at public accounting, it's not always the most diverse when you look at the partnerships.
Speaker 1:You look at the partner group, you pull it up. A lot of times, you know, I I hate to say this. I'm gonna say this. You tell me if we can't say this, but a lot of times we'll say it's male, stale, and pale. And it is.
Speaker 1:Wow.
Speaker 2:Well, I appreciate your stab at poetry, but I think our audience knows what you mean.
Speaker 1:Yes. But what I would say is there are different reasons for some of the diverse issues. Right? Like, African Americans enter into CPA practices, but they also graduate at about three percent at about a rate of three percent. So we really need to work on that particular group at the entry level and getting more people to graduate as CPAs to be able to come into the practice.
Speaker 1:But women, on the other hand, versus men come into the CPA profession at a rate of about fifty fifty. So they're coming in the door at the same rate. However, what we found was that it was about fifteen percent. Some firms down to thirteen percent, some as low as tens. Really, very few as high as 20 were making partner.
Speaker 1:When you looked at their partnership, if you've got 14% partners that are female versus male, but they came in at fifty fifty, the question is why? Is it because they're not getting seats at the table in the conversation? Is it because a lot of business is done, you know, at night caps that really are only other partners inviting people? Or is it because women are advocating for themselves? All this would be you know, it's a lot of the way that NDOA does things.
Speaker 1:You look for real data, not just what feels like it's right. And we stopped in and said, before we make any decisions, we're gonna do some data. And so that's the part I stepped in to help with is what's the data behind it? What's the data at other firms? What's the data at our firm?
Speaker 1:Let's do some surveys. Let's do some analysis. Let's really bring that together. And one of the big things that we found was this advocacy issue, is one of the ways that we could have an immediate impact was to get voices in the room to have these conversation. Because if leadership is all male, it's all male voices in that room that are having the conversation.
Speaker 1:So we developed an executive access program. At the time, I was in the inaugural class, the very first class of this. Matt Armenino was my executive sponsor, and there were lots of ways that he could advocate for me. I will say it's not necessarily they're not sponsorships. It's more that it's not mentoring.
Speaker 1:A lot of programs are mentoring. Give me advice. Tell me how to do things. This is more of, I want you to sponsor me as my advocate. I want you to speak well of me, you have to know me.
Speaker 1:So he had to get to know me and know that he believed in me so that he could then go into the room and say, I want her. She's great. Have y'all talked to her? And there were so many rooms he could sit in that I didn't. I mean, even things like I would post a LinkedIn article and say, Mac, can you advocate for me by leaning in with your voice on this article?
Speaker 1:And suddenly, a lot more people in the firm knew me. I made partner very, very quickly. But I've also seen other young women. It's not just one person. Right?
Speaker 1:We have very few young women in and many of the people on this call, they know when they think of their public accounting days, there were not young mothers who were still staying in public accounting. They opted out. We now have many young mothers. I have several on maternity leave every year, and it just it makes my heart happy every time they come back from maternity leave because it feels like a win.
Speaker 2:That's such a great story, and it's such a great lesson in how you can look at a situation and say it's not gonna change by itself. We can make it change. We can make a different reality if we think about it in a smart way and then put some muscle behind it. Right? I think that's really empowering.
Speaker 2:Kathy, that's the end of our time together today, and I am so grateful for your time, your energy, and your insights. I'm really looking forward to having your dynamic voice and expertise around the MBUA boardroom very soon. It'll be here before you know it, but it's really just been great speaking with you, Kathy. Thanks for being a guest on the Net Assets Podcast.
Speaker 1:Yeah. Thank you so much for having me. This has been so much fun. I always love our times together. Thank you.
Speaker 2:And thanks to everyone for listening to this episode of MBOA's Net Assets Podcast. Join us each month as we continue our conversation with business leaders and key voices who are shaping independent school business, finance, and operations. Be sure to subscribe to our podcast on Apple, Spotify, or wherever you listen to your favorite podcasts. For more information on MBOA, visit us online at mboa.org. I'm Jeff Shields, MBOA President and CEO and your Net Assets Podcast host.
Speaker 2:Tune in next time.