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    The 5Ws of Year End Financial Reviews

    What exactly should a year end review look like? We’ll use the 5Ws method from our literary friends to explore this process.

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    It’s hard to believe another school year is coming to a close. This time of year, as districts across the country are planning graduation ceremonies and buttoning up classrooms for the summer, they often “just keep swimming” rather than taking the time to look back at the fiscal year and see how they performed. Financial review is key to this reflection and can inform planning for next year.

     

    By taking the time to review finances at the end of the year, school districts prepare and start the new school year off on the right financial foot after a long and restful summer break. What exactly should a year end review look like? We’ll use the 5Ws method from our literary friends to explore this process.

     

    Vendor Review: Who did you pay last year?

     

    With a full year of transactions behind you, it’s important to conduct a vendor review. Since many purchases are being made independently throughout the year, aggregating transactions by vendor can quickly highlight areas where purchasing efficiencies and potentially cost savings could be realized. Through this review, one of our districts uncovered a vendor contract that was set to be cancelled, but payments had continued unintentionally. Now, that’s money in the bank!

     

    In addition to reviewing vendors, it is also important to take time to review one-time payments (bonuses or stipends) that occur at the end of the year. With purchasing deadlines looming, we often see a spike in these payments at year end as a means to use up funds that won’t carry over. We need to review these transactions to ensure payments were intentional and paid fairly across employee groups.

     

    Spending Inventory: What did you buy?

     

    At the end of the year, it’s also important to take inventory of what you purchased. Create a summary of your school or district’s transactions by cost categories (objects) to understand the types of purchases that were made. Generally, salaries and benefits make up about 90% of spending in a school district, but how do the other spending categories pan out? Take time to look at other cost categories as well to understand the percentage of total spend for each category.

     

    When did you spend money?

     

    For most school districts, there is a spike in spending at the beginning of the year as purchases are made in preparation for the school year. This trend is usually followed with steady spending throughout the remainder of the year. This type of pattern indicates spending against a plan.

     

    Unfortunately, what is more often the case is a large bump in spending at the end of the year. When dollars are expended at year end there is little chance those funds have benefitted students in the current year and the spending is often aligned to a deadline or purchasing cutoff rather than a strategic plan.

     

    Cost Center Review: Where were funds spent?

     

    Create a summary of expenditures and remaining balances by location or cost center to understand where funds were spent across the district and how much is remaining at each cost center. 

     

    Review final ending balances to ensure there aren’t any cost centers that have overspent or have left dollars on the table. Take time to understand if this is a pattern for each of your cost centers and make a spending plan for the next year. If funds are historically underspent in a particular cost center, there could be an opportunity to reduce the budget and reallocate funds elsewhere.

     

    Why was the money spent?

     

    Budgets and spending should be the expression of a strategic plan. Take time during this end of year reflection to understand how funds were spent against particular strategies. Was there a new intervention program or technology initiative rolled out this year? Identify the underlying transactions related to these strategies.

     

    Allovue has the ability to make this task much easier using account and transactions tags. These tags gather transactions that have relationships outside traditional chart of account structures and can make it easy to search for and summarize all related costs for a particular program.
    Allovue
    ABOUT THE AUTHOR

    Allovue works with districts and state departments of education across the country to allocate, budget, and manage spending. Allovue's software suite integrates seamlessly with existing accounting systems to make sure every dollar works for every student. Allovue also provides additional services such as chart of accounts and funding formula revisions.

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