Schools Become the Focal Point of Finance

Abstract

In the world of business and finance, the old phrase cooking the books implies that manipulating financial ledgers will produce an illicit advantage for someone. Maybe this practice is used more often in movie and TV scripts than in real life, but what happens when the need for financial data outpaces the ability to provide answers? The recent controversy started by a federally appointed commission that suggested the Consumer Price Index has been miscalculated for several decades may be more than just an interesting example. Could there be a parallel in education? Are the traditional regulatory reporting mechanisms using district-level data built around average per-pupil expenditures, average daily attendance, or full-time equivalents flawed? Is there a better way to account for expenditures in education? Can tracing the flow of dollars to building- and program-level decision points create a better financial management tool? Recent reform efforts that have put the emphasis on buildings that use site-based management and other decentralized models have created a need for data that traditional school district accounting departments cannot meet. When building principals, teachers, and parent councils don't know how much money they have to spend or cannot gain control of the funds flowing to their buildings, then real reform is not possible. Out of sheer frustration, a Denver teacher involved in site-based management took her own personal computer and built an understandable version of the school district budget. Tracing the Flow of Dollars A few years back, Bruce Cooper of Fordham University took a new tack when he helped a student, Robert Sarrel, with a dissertation that attempted to answer the question of how much of the total state and local per-pupil allocation actually reaches the classroom in a New York City school building. Someone not familiar with the traditional school finance practices would probably assume that this would be an easy question to answer. But in the traditional green eyeshade back room of school accounting, the data were nowhere to be found. In fact, making new assumptions, asking for new data on personnel, seeking better descriptions of functions, and so on can lead one back up the accounting trail even to the offices of green eyeshade back room state-level accounting. With no solid answer in sight, the efforts of Cooper and Sarrel nevertheless caught the attention of some national education groups. Their early reports that perhaps as little as 30% to 35% of funds could be traced to the classroom fueled interest in the original study. Those who were sure that all the remaining funds went to something called administrative bloat also saw this as a topic worthy of more study. The U.S. Chamber of Commerce became interested, and the Lilly Endowment put up some money to help perfect the questions and the process. The Chamber found eight school districts that were willing to participate in a study tracking the flow of dollars down to the buildings, and the work proceeded with little fanfare. Accepting the idea that funds should be tracked in this way was not always easy, even when a superintendent and board had agreed to work on the new accounting model. The risk that new data could shine a spotlight on district decisions was real. Taxpayers, unions, principals, and parents would have data that could translate very quickly into a public clamor. For the most part, the information gathered from the eight districts did not cause any major problems. Administrative bloat was not as evident as some critics had expected, and usually the new data led not to corruption but to more questions pointing up the need for better information. In one district, for example, two middle schools with nearly the same enrollment had quite different spending patterns - even when faculty age and placement on the salary schedule were set aside. There were no cooked books, but it was evident that a new budget management tool was needed. …