Fair enough, but consider this: http://www.capenet.org/facts.html (scroll to tuition table). Private non-sectarian elementary schools average $16k/year. The $13k RYNJ is charging seems pretty reasonable in light of that. I understand that their may still be affordability issues, but the school appears to be offering a product for about what it costs to deliver it.

The way accrual accounting works, when a parent signs a tuition contract, $13k is entered on the Revenue side as an Account Receivable, even though no cash has changed hands - the obligation to pay triggers recording the accounting event. Then, some reserve has to be established against non-payment, which is the bad-debt reserve. This is a paper entry, it does not reflect an account at the bank with actual dollars in it. The reason you make this entry is for planning purposes: you want a better guesstimate of how much money you will actually receive when the obligations to pay come due.

In other words, when somebody takes on the obligation to pay the school, the school records revenue. If, at the end of the fiscal year, there is still outstanding money to be paid, adjustments need to be made to the bad debt reserve, which is on the expense side. You don't reduce the revenue side, you simply adjust the expense side up.

The way that a bad debt reserve SHOULD be entered is based on the school's experience with non-payment, which allows it to come up with a reasonable estimate. Amounts in the 1/4 to 1/2 of a percent are relatively common numbers in other settings, but I have no special knowledge of whether they are appropriate in this setting. Note however that scholarships offered after-the-fact or abatements can be treated in different ways from an accounting perspective, and in general are not considered 'bad debt'.

This may seem like hair-splitting, but in practice there is a difference between saying 'you owe me money but I understand that you'll never pay it so I'm writing it off' and 'I agree that your payment of a smaller amount than our original agreement will be considered payment in full.' I believe that in for-profit accounting this makes a big difference, b/c you can write off bad debt as a business expense, but you can't write off a discount or abatement offered after-the-fact - but I'm not 100% on that.

Note, I'm not a CPA, and none of this is gospel. My knowledge is from being a COO and ED in non-profit orgs.

This appears to be a healthy school, financially speaking - and may be why schools dont' think there is a tuition crisis the way that parents do.

Re #2, you're totally misunderstanding what's going on. Bad debt has nothing to do with scholarship, it has to do with credit - ie parents paying tuition on installments. The school noted that last year they changed to an accrual-based system, which means that they record financial events when the obligation happens, not when the cash goes out the door. Practically, what this means is that last year they had to take a bad-debt charge against all the credit they've extended, whether to parents or anyone else, all at once. It's not a real number - they didn't actually spend $300k, or actually experience $300k in losses from bad debt. They just had to establish on their balance sheet that their receivables could well be worth $300k less after allowing for bad debt. The actual amount of bad debt should be lower than the allowance. You can see that this year, they're only reserving $30k of bad debt against about 12 million of revenue obligations. Looks like they're using 0.3% as their rule of thumb, which is reasonable.

This seems like a generally healthy school that has set tuition prices at roughly total expenses/# of students. They don't actually collect all that, but there's almost no tuition dollars by one family that are supporting another family - almost all of those dollars are coming out of fundraising. Also, as a healthy school, they have been able to spend down their mortgage some this past year.

If schools generally look like this, do we still have a tuition crisis?