Summer Search
Organization
Summer Search’s mission is to unleash students’ potential through mentoring and transformative experiences. Founded in the San Francisco Bay Area in 1990, Summer Search has expanded to Boston, New York City, Seattle and Philadelphia, serving more than 3,500 students across the country in its high school and post-secondary programs. The organization has an annual budget of about $20 million and a staff of over 150 people. Summer Search supports its participants in achieving educational, career, and financial well-being outcomes that are on par with or exceed those of their peers. In 2018, Summer Search students achieved the following results nationally:
• 98% of Class of 2018 high school seniors graduated from high school.
• 97% were accepted into a 2 or 4 year college.
• 68% of prior years’ participants have earned a bachelor’s degree within six years of high school graduation.
Situation
Summer Search will soon launch a comprehensive capital campaign to raise $100 million over the next three years. One goal of the campaign is to increase the organization’s financial reserves that will be needed to sustain its operations as it grows and expands its programs. Summer Search currently maintains a cash reserve of about $3.5 million, representing two months of operations, and wants to develop a new financial reserves policy that answers three key questions to help determine its financial sustainability:
1. What level of reserves should be held organization-wide?
2. How can it reach and maintain its reserves target organization-wide?
3. What guidelines should govern reserve use within its five regions?
Project Objectives
Summer Search management asked the ACT team to assist in developing and securing national Board approval of an operating reserve policy and Board-directed fund. Specifications included recommended size as well as guidelines regarding the use and maintenance of the reserve.
Project Overview
The project consisted of two phases. Phase 1 comprised over a dozen interviews with stakeholders representing the national organization and each of the five regional offices. At the project’s midpoint, the ACT team presented key themes from the interviews and the proposed go-forward approach to the Summer Search board. Phase 2 consisted of follow-up interviews, historical financial analysis, a regional survey and development of the final recommendations, which were presented to Summer Search management, national Board chair, and national finance committee chair.
The project began in March’20 at the outset of the COVID-19 crisis in the U.S. and wound up in Sept’20. The impact of the pandemic on the organization was: 1. The $100 million capital campaign referenced above became far less likely in the near term, 2. Summer Search received a $2.4 million PPP loan from the SBA which they believed would be forgiven and would serve as a jump start to the reserve, and 3. One week before the project end, Summer Search decided to run a $2.2 million deficit for the coming fiscal year and use the PPP loan proceeds to fund it. The combined result of these dramatic changes caused the ACT team to look at the formation of a Reserve and developing a policy for its use and maintenance in a highly dynamic and uncertain set of circumstances.
Key Recommendations
The ACT team recommended the following:
• Summer Search should create a nationally administered Reserve to be deployed for unexpected budget shortfalls (“rainy day” events) and not for growth, innovation, infrastructure initiatives. The initial target should be $5 million and then be adjusted periodically as the organization’s budget evolves.
• Summer Search should “start fresh” and fund the Reserve with excess funds across the regions currently in marketable securities.
• Summer Search should also create a Growth fund in each region, proportionately allocated based on the current surpluses and budget sizes.
• Summer Search should create an accounting infrastructure and policy to keep funds distinct and provide clarity of ownership of funds across national and the regions.
Key Conclusions
Summer Search has a clear and admirable mission. Organizational dynamics spanning a national office and 5 independently managed regional offices, however, create confusion around authority and decision-making. For the ACT team’s recommendations to be successfully implemented, Summer Search should continue to reinforce a “One Summer Search” mindset based on communication, transparency, and decision-making clarity.
Final Report Outline
• Project Overview and Objectives
• Summary of Recommendations
• Reserve Size, Formation, and Maintenance
• Other Thoughts Outside Project Scope
• Appendix