Is Your District Ready for Financial Transparency?
By Christopher Rinkus
For the average parent, it's difficult to know with any certainty how much is being spent at your child's school. The Every Student Succeeds Act (ESSA) serves to remedy that through a new requirement: school districts must begin annually publishing actual per-student expenditures by school on the district website.
This will increase transparency and help educate the public on how resources are being used. For most districts, complying with these new requirements will mean current financial data practices must change.
Given current practices, it's nearly impossible for most districts to produce an accurate account of spending activity by school. Large purchases, like technology and curricular materials, are often counted as part of the district's central office spending, although the goods themselves are destined for schools. For positions like social workers or maintenance workers, districts may bill the cost to a central office department, although the services are taking place in schools. The result is that a significant percentage of the goods and services that a school receives are not part of the school budget and must be found elsewhere.
Harder still, some districts simply do not include school location (or "building code") as part of their chart of accounts, and their systems cannot track spending to that level of specificity. These districts are missing the necessary infrastructure to accurately report school-level spending data.
The Necessary Improvements
First, districts will want to reexamine their accounting. If the costs for goods and services in schools are being counted as part of the central office, it is impossible to accurately report how much is actually being spent at each school. Instead, districts will need to create a formula for apportioning those costs to schools in order to make an accurate statement about how much is actually being spent at each school. For more complex costs, such as student transportation, it will likely require time and research in order to unpack and apportion the correct share of the cost to each school.
Next, some districts may find that their chart of accounts is missing a school location level. Districts cannot continue to rely on big pots called "schools" or "instruction" to represent school spending, which is often the case for districts missing location in their data. Instead, these districts will need to reconfigure their chart of accounts in order to append a location code to every account and expenditure. In most places, the fix must be done simultaneous with the annual budget file upload, so that money is slotted in the appropriate location.
Lastly, districts should consider an investment in a modern data analytics platform. A modern tool will allow users to analyze financial data in new and innovative ways, such as comparing spending by school to student performance scores. When financial data analysis is made both easier and more accurate, actual school-level spending can become a frequent reference point, rather than an annual chore.
What's one thing districts can do right now? Engage an an outside partner. An experienced partner can help districts work through some of the strategic decisions that are necessary to make financial data more transparent and accessible. For example, an outside partner can assist a district in deciding how certain costs that have traditionally been managed centrally can be apportioned to schools. An experienced partner can also point districts to technology solutions that will conduct the analysis and produce the necessary reporting.
Perhaps the best advice anyone can give district leaders is to embrace the new era of financial transparency and accountability that's been ushered in by ESSA. Part of the reason the law passed with broad bipartisan support was its unambiguous end goal: to ensure that every school district is offering the most support it can to students. That's something we can all get behind.
Christopher Rinkus is a Senior District Partner with Allovue, an education finance technology company that empowers educators to strategically and equitably allocate resources to best support the needs of students. Allovue's ESSA Ready website, software and professional services help support financial preparation and analysis needed to comply with ESSA.