“How do I get my principals and budget owners to manage their budgets effectively?”
Beyond providing training and reporting tools, many school districts often struggle to understand how to increase the competency and efficacy of their budget managers. Have you stopped to ask yourself, “What processes and systems have I established to enable my budget managers to be effective?” While many budget managers receive basic training and support from central office, there are often fundamental barriers within the district’s processes that keep budget managers from developing a strong understanding of their budgets. While adequate and ongoing training are paramount, it’s important that districts assess the culture and readiness of their budget managers. The importance of budget ownership needs to be woven into the fabric of the district, starting with district leadership. Additionally, districts need to establish the proper foundational financial systems for truly effective budget management.
Start with the foundation
When considering the basic requirements necessary for effective budget management, the financial systems and processes present in the school district are critical components. Every district has an enterprise resource planning (ERP) or school accounting system to house the financial transactions that occur in the district. While the manner in which a district sets up and uses their school accounting system will vary depending on their needs, its orientation can have a direct bearing on the efficacy of budget managers within the district. Budget managers can be successful when the district’s financial components are functioning properly with clearly defined processes. Consider the following recommendations.
Track budget and actual transactions at the school and department level.
Many districts either budget and spend funds out of central office accounts or budget centrally but spend out a location or department level account. While this may give the finance department more flexibility to move funds around without formally initiating budget transfers, it can prevent the district from understanding what portion of district funds are being spent at specific locations.
Budgeting and spending from central office accounts keeps budget managers from ascertaining what portion of the total dollars are earmarked for their schools and departments. Furthermore, with the new Every Student Succeeds Act (ESSA) financial transparency requirement, tracking and reporting school-level spending is now mandated. While districts can use specific allocation methodologies to figure out a school’s share of total spending, site-level budgeting and spending habits will make this reporting easier and less cumbersome on the financial office.
Give budget managers access to the full budget that supports their schools and departments.
Budget managers are often only granted access to a small portion of their total budget which typically includes non-personnel discretionary funds, such as supplies. Limited budget access leaves budget managers uninformed and makes it difficult for them to discern the total amount of resources allocated to support their operations. When budget managers understand the true cost of operations they can make data-driven decisions that take into account how much things actually cost.
In one district, when principals were shown the full compensation (salary and benefits) of their staff, one principal was shocked to learn that one of the school’s most underperforming teachers cost the school over $100,000. Access to this level of data helps principals and district administrators decide how to better allocate funding and resources to benefit the needs of the students.
Do your priorities match your budget?
It’s important that districts ensure that the budget is aligned to the strategic plan. For many school districts, the strategic plan is created in conjunction with the Superintendent, the school board, and other stakeholders and communicates the district’s high-level priorities over several years. However, a strategic plan is only half of the plan; districts need to establish a corresponding financial plan that assigns resources to the goals outlined in the strategic plan. When a district embeds the strategic plan within the chart of accounts, spending can be tracked against the district’s goals and the district can ensure intentional and equitable spending. For districts that do not have the ability to embed their goals into their chart of accounts, there may be other ways to tag dollars to strategic plan groupings that will allow for reporting. These districts should discuss their options with their school accounting system provider and district leadership.
How to do it: During your budgeting process as you budget items, specify which goals the budgeted dollars support.
Establishing goals and connecting it to spending creates a common vision for change. It gives the district focus and budget managers can better build and align their own local plans with the district’s. This ensures that resources are being spent on initiatives that are a part of a broader, strategic plan and if spending occurs outside of the plan, districts can quickly identify and assess to determine the appropriate next steps. Without a strategic plan connecting to the budget, budget management becomes a guessing game. If a budget manager realizes during the middle of the school year that there are several accounts where no spending has occurred, without a plan, how will they know what those funds were intended for?
Districts with strong financial system infrastructure and a systematic way to tie spending to strategic goals are better able to understand the overall efficacy of the district’s spending. Equipped with detailed spending information at specific locations or cost centers and a chart of accounts that tracks spending to goals and initiatives, budget managers are able to perform ROI analysis and program evaluations with greater frequency to further maximize opportunities for students.
Make finance a part of every conversation
Many site-level budget managers lack a traditional finance background so it is important for the district administration to create an environment that allows managers with non-finance backgrounds to feel comfortable accessing, analyzing, and understanding their budget information. Creating monthly education finance sessions that discuss broad strokes topics such as district operations or breaking down a chart of accounts in addition to being available in one-on-one settings will help build the confidence and competency of district budget managers.
Principals and other budget managers have many priorities and while financial management may not be at the top of the list, it’s important to embed finance in as many routine conversations as possible. Budget owners are most successful managing allocated funds when finance is a point of conversation at every check-in with district leaders.
How often a district decides to check in with budget managers will depend on the needs and capacity of the district but the next page contains four suggested intervals with corresponding activities that districts can utilize to ensure budget managers keep track of funds throughout the school year. These activities are not meant to be exhaustive and districts should encourage budget managers to review their financial data monthly.
For budget managers to be effective, districts need to establish a strong financial foundation (including budgeting practices that track spending at the school level), connect the district’s strategic plan to the financial plan, and make finance a part of every conversation.
Take an honest look at your district’s core financial systems and processes.
- Have you set them up in a way that fosters or hinders effective budget management? Evaluate how you expect budget managers to use the data.
- Do your site-level budget managers understand how to assess the data and glean actionable insights?
- Is the budget tied to your district’s strategic plan?
While the suggestions outlined are largely from a systems and process perspective, enacting these strategic changes will help build effective site-level budget managers that can help the district reach their defined goals and vision.
Sample Budget Review Timeline & Checklist
1. Beginning of the year
Ensure that budget managers understand how their budgets were derived and confirm that the amounts are correct.
Budget managers should review their budget plans to understand what purchases need to be initiated to be ready for the beginning of the school year.
Focus on transactions; are all purchases intended?
Review remaining budgeted items; are there planned expenses that are no longer necessary? Should funds be transferred?
Pay close attention to what percentage of your overall funds are being spent each month. Accounts at risk for overspending should be noted and discussed with district administration.
Take a holistic look at all accounts. With 50% of the year passed, how many accounts have less than 50% available?
Are there accounts where no spending has occurred at all? Ensure that you are on track to expend all funds.
4. End of the year
Assess overall account statuses. Ensure that all funds have been expended.