School Finance

1. School Finance Presentation Four

2. Introduction to the Budgeting Process Complex • involves numerous people through out district & the community • a single budget cycle covers a period of almost 2 years from start to finish and requires a multitude of activities • requires numerous special interest groups inside and outside the school district organization bring pressure to meet the particular interest • budgeted revenue & expenditure amounts are both subject to change and the budget process must incorporate updated information regularity to modify previously established figures

3. Organization of Budget • Alternative approaches to budgeting refers to the general methodology and format used in developing the budget estimates and preparing the budget documents. • Principal approaches to budgeting used by School Districts are: 1. Line-Item Budgeting 2. Functional/Object Budgeting 3. Program, Planning, and Budgeting System 4. Zero-Based Budgeting

4. Activity • In four small groups prepare a presentation to the Board of Education on: • Group One – Line-Item (Object) Budgeting • Group Two – Function/Object Budgeting • Group Three – Program, Planning, and Budgeting System • Group Four – Zero Based Budgeting

5. Line – Item Budgeting • technique in which line items, or objects of expenditure-personnel, supplies, contractual services and capital outlays-are focus of analysis, authorization, and control • most common approach through 1960s • also known as “tradition” budgeting • emphasis is on identifiable items which provides a budget that was easily understood and controlled • attention is on items purchased rather than the purpose of expenditures

6. strict adherence to the line item approach results in a format that is not compatible for planning or managing the more diverse and complex school districts • problem is that line items for different operations are aggregated to yield a single total amount • there is no provision for identifying or planning separate expenditures for different schools, types of students or grade levels • does provide useful and essential information • good to use in combination with other approaches to budgeting • is a basic element in organizing and developing data in other budgeting methods

7. Function/Object Budgeting • Most commonly used approach for school district budgeting • Organizes the budget around the major functions of the district • Primarily instruction and supporting Services • Functions further divided into more specific sub functions and within each function or sub function, the expenditures required to carry out the necessary activities are estimated and reported once line-item basis • Provides budget information in 2 important dimensions • The purposes of the expenditures (function/sub function) • The specific items purchased (object) • The function dimension identifies the “why” of educational expenditures, while the item-line approach specifies the “what” to be purchased.

8. Design of Function/Object Budgeting • The program structure closely matches the way in which responsibilities are assigned. • The program functions and sub functions correspond to the organization structure used by most school districts. • The results are an effective and efficient budgeting structure with clear lines of authority and accountability. • Each budget category is assigned a single individual for both organizational and fiscal responsibilities. • Most used budgeting approach by most states and school districts for education and recommended by the book.

9. Program, Planning, and Budgeting Systems (PPBAS) • Budget organized around a program structure based on district educational objectives • Expenditures grouped by corresponding objectives, rather than be the district’s organizational structure or standard accounting categories as in function/object approach. • Expenditures in a single budget category can cut across organizational boundaries and require additional steps in the accounting system to redistribute the cost to the appropriate objectives • Approach sometimes called PPBES, where E stands for evaluation

10. Principal Steps in implementing a PPBS approach are: • Specifying alternative approaches or programs for achieving outcomes objectives • Specifying alternative approaches or programs for achieving outcomes • Translating the alternative programs into fiscal and non-fiscal requirements • Analyzing each alternative approach to determine cost effectiveness • Selecting the best combination of programs and establishing the optimum course of action for the district, based on the analysis • Reviewing and assessing each program, and once implemented, determine to what degree desired outcomes were achieved • Feeding these evaluations back into the system at the beginning of a new cycle • Two problems with PPBS • Mismatch between the organizational structures responsible for operating Complexity and difficulty of establishing a program structure with useful objectives for managing educational operations • Mismatch between the organizational structures responsible for operating the program and budget categories • PPBS is not frequently used approach in school district budgeting.

11. Zero-Based Budgeting (ZBB) • Decision packages are prepared to describe the funding of existing and new programs at alternative service levels - both lower and higher than the current level. Funds are allocated to programs based on rankings of these alternatives. • Basic concept is to build and justify the entire budge each budget cycle. • Attempts to avoid incremental budgeting and is focused only on the new amounts or additions to be added. • Considers the entire budget each year and requires comparisons among all budget areas • Time consuming if followed completely • Forces comparisons of and choices among programs and activities that are often difficult to adequately compare. • Because many educational programs continue from year to year it is not necessary to justify them annually. • Not widely adopted by school districts; but has useful concepts that can be incorporated into a district’s budget process, particularly when cutbacks are required.

12. Conclusion • The budgeting method of a district may be dictated by the state’s accounting manual and associated regulations may dictate the format for reporting a district’s final budget. • Some flexibility, however, left to district administrators to build budget (influenced by economic and political conditions facing district).

13. Budget Calendar • Listing of all activities required during the budget process, arranged chronological by month. • Several Important Purposes • Schedule all budget-related activities at the time they should be properly done and sets deadlines for their completion. • Allows districts to plan and carry out the budgeting process efficiently. • Functions as a management tool to monitor critical activities of the budget process to make sure they are completed on time. • Serves as a communication devise with the district.

14. Contents of the Budget Calendar • Planning and Preliminary Steps • Activities that are concerned with organizing and planning the budget development process. • Budget Development • Activities related to developing the expenditure and revenue estimates and other components of the budget document. • Review and Approval • Activities or actions that involve the school board, other public bodies and the voting public. • Beginning a New Budget Year • After the budget is approved, there are still logistical steps that are necessary to start the new year properly and accurately.

15. Developing the Budget Calendar • Step 1: Determine the level of detail • depends on who will use the calendar and for what purposes • board calendar • business manager • building principals • Step 2: Identifying Activities (2 methods) • series of related activities oriented and then arranging them by date • time-oriented method focuses on a time period, month, and activities in that month • combination of two (2) methods useful • Step 3: Specify Dates (2 types of dates) • Date an activity should begin • Date an activity should be completed • Some activities may have dates that are mandated by the statue or regulations • Some flexibility in timing certain activities

16. Developing the Budget Calendar cont. • Step 4: Identify responsible personnel • Important to identify the person or position responsible for carrying out each activity • District level administrators • School level administrators • Step 5: Steps in Constructing the Calendar • Put fixed dates on the calendar. • Place the date of the last event (board adoption of budget) on the calendar. • Select and place activities that must be finished immediately prior to the final event and work backwards to place them in the calendar. • Developing the budget calendar is an interactive process

17. Conclusion • Budgeting calendars are useful tools • Improves the efficiency and effectiveness of a school district’s operation • Ensures deadlines are not being missed and selection of activities are helpful and interrelated activities are adequately coordinated

18. Questions • What are the four organizational approaches to budgeting? • What are the four purposes of a budget calendar?