POLICY BRIEF

Best FFiscal
iscal Management
Management
Practices for Rural Schools

By Jerry Johnson and Greg Malhoit

November 2004

RURAL TRUST POLICY BRIEF SERIES ON RURAL EDUCATION

Copyright © 2004 by the Rural School and Community Trust. All rights reserved.
Printed in the United States of America.

The authors wish to thank William J. Mathis for his counsel and advice in the publication of this policy brief.

Editor: Alison Yaunches

Except as permitted under the United States Copyright Act of 1976, no part of this publication may be
reproduced or distributed in any form or by any means, or stored in a database or retrieval system without
prior written permission of the publisher.

Rural School and Community Trust

1530 Wilson Blvd., Suite 240
Arlington, VA 22209
Telephone: (703) 243-1487
Fax: (703) 243-6035
www.ruraledu.org
E-mail: [email protected]

The Rural School and Community Trust (Rural Trust) is the premier national nonprofit organization
addressing the crucial relationship between good schools and thriving rural communities. Working in
some of the poorest, most challenging rural places, the Rural Trust involves young people in learning
linked to their communities, improves the quality of teaching and school leadership, advocates for appro-
priate state educational policies, and addresses the critical issue of funding for rural schools.
 BEST FISCAL MANAGEMENT PRACTICES FOR RURAL SCHOOLS 3

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Table of Contents
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I. Introduction ................................................................................................. 5
Guiding Principles of Sound Fiscal Management Systems........................... 8
The School District Budget Process ............................................................. 9

II. Best Fiscal Practices: Responsibilities and Roles ........................ 10

Planning the Budget .................................................................................... 10
Formal Review and Approval of the Budget .............................................. 13
Implementing the Budget ........................................................................... 14
Monitoring and Evaluating Expenditure of Funds ...................................... 15
Communicating How Funds are Used ....................................................... 17

III. Rural-Specific Concerns and Strategies in the Budget Pr

Budget ocess .... 19
Process

IV
IV.. State PPolicy
olicy Options to Ensur
Ensuree Sound FFiscal
iscal Management ..... 22
Management

V. Conclusion ............................................................................................... 25

End Notes and References ..................................................... 26

Appendices
Appendix A - Budgeting Models ................................................................ 27
Appendix B - Glossary ............................................................................... 28
Appendix C - Resources ............................................................................. 30
 BEST FISCAL MANAGEMENT PRACTICES FOR RURAL SCHOOLS 5

I: INTRODUCTION
INTRODUCTION

T
he operation of public schools and efforts to improve them
often revolve around three central questions about funding.
First, do schools and districts have sufficient or “adequate”
funding to offer all children a quality education? Second, are state
and local financial resources distributed fairly or “equitably” among
school districts and schools? And, finally
finally,, ar
aree funds for education
effectively and efficiently manag
effectively ed?
managed?

At the core of these three questions are two gen- of their community, state, and nation. In short,
erally agreed upon principles: 1) a high quality edu- schools can—and are expected to—prepare children
cation is vital to every child and to the well-being of to participate in a competitive and ever-changing
American society as a whole, and 2) financial and economy, and to assume the responsibilities of citi-
material resources are crucial to providing that high- zenship in a democratic society.
quality education. This paper recognizes the
existence of inadequacy and inequity in school Substantial resources are required for providing
funding, particularly for rural schools and districts. the kind of high quality education that can meet
While supporting and encouraging efforts to reverse these expectations. At present, about $480 billion
this trend and provide adequate and equitable fund- per year in public funds is expended for educa-
ing for schools, we also recognize the practical tion. Local communities, state governments and the
realities of operating within the contexts of today’s public at large have a responsibility to make avail-
schools. It is with that in mind that we offer sugges- able the financial and material resources required
tions here for maximizing the effectiveness and to provide all children with access to a quality edu-
efficiency of existing resource levels. cation. In return, educators and citizens have an
equally important responsibility for using all of
A high quality public education system is vital to those resources efficiently and effectively.
children, and to the well-being of the nation’s citi-
zens and society as a whole. Research1 has consis- But, providing adequate resources for education
tently demonstrated the benefits of education as can be a challenge, particularly for communities with
measured by traditional social outcomes like in- low property and/or income wealth. The level of
creased personal income levels, decreased likeli- resources available to these low wealth schools is
hood of criminal activity, and decreased reliance often a problem, and inequities among schools
on public assistance. Moreover, schools play a criti- competing for high quality teachers and other
cal role in the ongoing work of democracy by pre- personnel often aggravate the situation. Moreover,
paring students to participate fully in the civic life ineffective or inefficient fiscal management can
6 RURAL SCHOOL AND COMMUNITY TRUST

sometimes mean that even adequate and equitable Some rural districts have voluntarily addressed
funding fails to provide students with the educa- fiscal management issues through such innovative
tion they require and deserve. Rural schools, in strategies as combining school superintendents or
particular, need to make the most of every dollar jointly hiring finance administrators to be shared
available to teach their children. Anything less than by multiple districts. Under these administrative ar-
the most efficient and effective use of resources is a rangements, questions arise about when it is cost
disservice to children that adds to educational effective to offer specialized budgetary and finan-
achievement barriers they may already face. cial management services, what are the standards
for budget services, and what kinds of skills and
In rural areas, fiscal management is often pro- training should be required for serving in a fiscal
vided at very small units of administration, because management position. Allowing school districts to
both schools and districts are small. Fiscal person- voluntarily engage in combining services and
nel in such districts are rarely specialized and fre- resources (in addition to other approaches and strat-
quently have inadequate training for the work. But egies) is not the only option available to states. In-
today’s environment of budgetary constraints and deed, states have a menu of options available to
an increasing focus on high stakes test results, means increase collaborative efforts, ranging from creat-
that state and local policymakers are demanding ing incentives for districts to combine services to
greater financial and educational accountability on mandating shared administrative functions through
the part of all school leaders, including those from educational cooperatives or supervisory unions com-
rural schools. Evolving from this accountability prised of multiple districts.
movement, parents and community members now
have expanded opportunities to participate in This policy brief is intended to highlight some
schooling and to hold school leaders accountable. of the leading policy issues faced by states, local
Sound fiscal management of limited education school districts,
resources is therefore essential to building and policymakers, educa-
maintaining confidence in the public school sys- tion leaders, and Sound fiscal manag ement
management
tem among those whose children are its intended concerned citizens. of limited education
beneficiaries. State and local poli- resources is therefore
cies vary apprecia- essential to building and
Along with concerns from policymakers and bly, and we ac-
community members, courts are increasingly rais- knowledge that a
maintaining confidence
ing questions about fiscal management practices definitive statement in the public school
in school finance litigation. For example, in the on how school fi- system among those
pending school finance case in North Carolina (the nances can and whose children are its
Leandro case), the trial court held that state and should be managed intended beneficiaries.
local schools are responsible for implementing in every setting is
demonstrably sound fiscal management systems and beyond the scope
practices.2 In school finance cases across the na- of this paper. Rather, the goal is to present general
tion, the defense almost always contends that there recommendations about best fiscal practices that can
is enough funding available, but the schools and be tailored to meet the needs and circumstances of
districts just use it inefficiently. In light of this trend, individual states and school districts.
overcoming the barriers to effective and efficient
fiscal management and developing policy environ- The document is organized into five sections.
ments that can ensure the sustained use of best prac- Following a list of “guiding principles of sound fis-
tices is important for rural schools if they are to pre- cal management systems,” Section II outlines re-
vail in the courts and state legislatures. sponsibilities and roles in the fiscal management
 BEST FISCAL MANAGEMENT PRACTICES FOR RURAL SCHOOLS 7

process. This section is organized according to the • Elected/appointed governance bodies,

five major steps in the budgeting process, and em- and
phasizes opportunities for engagement by various • State departments of education.
constituencies at each step in the process. An inte-
gral part of both responsive schooling practices and The involvement of these multiple groups in the
a sound fiscal management system is active partici- process of fiscal management broadens the perspec-
pation by teachers, parents, students, and commu- tives and knowledge base that go into setting priori-
nity members. The roles of school officials, elected ties and making decisions. It also provides for a sys-
or appointed governance bodies, and state depart- tem of checks and balances that can ensure that
ments of education are crucial as well: school officials public funds are managed effectively, efficiently, and
can and should encourage that active participation in accord with priorities developed by the school
and be responsive to it; governance bodies can and and community.
should actively seek the insights and concerns of
their constituencies; and state departments of edu- Section III considers rural-specific concerns and
cation can and should create policy contexts that strategies, and Section IV examines the options
facilitate this kind of participatory process. available to state policymakers in ensuring sound
fiscal management practices at the school and dis-
With that in mind, we consider the roles and trict level. Following the fifth and final section, the
responsibilities for each of these groups: conclusion, are appendices offering specific infor-
• Teachers/parents/students/community mation on budgeting models, a glossary of school
members, finance terms, and resources for obtaining addi-
• School officials, tional information.
8 RURAL SCHOOL AND COMMUNITY TRUST

Guiding Principles of Sound FFiscal

iscal Management Systems
Management

S
chool districts spend and account for millions of dollars (about $480 billion per year nationally) in
public funds for education. As such, their practices should be guided by principles ensuring that
systems, policies, and processes are designed, coordinated, and directed toward student learning and
the wise investment of public dollars for education. Sound fiscal management practices are characterized
by the following eight guiding principles.
1. Integrity
rity.. Fiscal management practices must be implemented in ways that promote and sustain the
Integrity
integrity of the school district and the community: school institutions earn the trust of citizens, and
citizens practice civic responsibility. Avoiding conflicts of interest, or even the appearance of such
conflicts is vital.

2. Efficiency
Efficiency.. A school district’s fiscal management system must use available resources in ways that
most directly and effectively meet the educational needs of students. Resource allocations and
expenditures should be justifiable in terms of their expected impact on teaching and learning.

3. Educational Excellence for All Children. Fiscal management practices must support the provision
of high quality learning environments, opportunities, and experiences that recognize the needs of
individual students, and work toward the attainment of high levels of achievement for all students.

4. Funding Adequacy and Equity

Equity.. Fiscal management practices must ensure that all schools and
programs are provided with sufficient resources to provide a quality education to all students.
Policies and practices must also ensure the fair distribution of resources to students, taking into
account their individual needs and the diverse and unique circumstances of schools and school
districts. Significantly, funding equity is both an inter-district and intra-district concern—i.e., the
distribution of state funds to districts should reflect fairness in meeting the needs of individual
districts; likewise, the distribution of those funds by the district should reflect fairness in meeting
the needs of individual schools.

5. Public Involvement. Parents and community members have a major stake in how schools and
districts use public resources to educate their children and support their communities. Accord-
ingly, fiscal management systems must offer and encourage opportunities for significant and broad
public involvement in the process of creating, implementing, and monitoring budgets.

6. Transpar ency
ency.. Transparency in this context refers to the need for openness by school officials to
ransparency
share information about school finance matters with everyone. Schools and districts must develop
and implement a fiscal management system that provides parents and community members with
clear and easy-to-understand financial and accountability system information.

7. Accountability
Accountability.. Fiscal management systems must guarantee that the processes involved in the
administration of public funds are conducted openly, and that those involved are held account-
able to the highest standards of professional ethics and competence. External and unbiased profes-
sional audits should be an integral part of any fiscal accountability system.

8 . Competence/Professionalism. The individuals who are responsible for handling and spending
public dollars for education must demonstrate a professional level of competence in fiscal man-
agement. Local and/or state organizations should require and provide training that will enable
individuals to reach a high professional level of competence.
 BEST FISCAL MANAGEMENT PRACTICES FOR RURAL SCHOOLS 9

The School District Budget Pr

Budget ocess
Process

T
his diagram tracks primary sources of funding and major categories of expenditures. The school
district budget, in the center, is the link between financial resources that flow into the district from
various sources and the expenditures that support teaching and learning. The school budget, then,
reflects the outcome of the active and thoughtful consideration of: (1) what kinds of resources—instruc-
tional staff, instructional materials, technology, transportation, etc.—are needed to provide all students with
high quality learning opportunities, and (2) what sources and levels of available funds can be most effec-
tively used to provide those needed resources.❖

❖
All figures are based on national averages. Actual distributions vary considerably among states and school districts.
10 RURAL SCHOOL AND COMMUNITY TRUST

II. BEST FISCAL PRACTICES: RESPONSIBILITIES AND ROLES

PRACTICES:
• Par

A
school district budget is, first and foremost, ents, T
Parents, eachers, Students, and Comm
Teachers, unity
Community
an instrument of educational planning—it is Members. Their involvement brings diverse and
the primary means by which school leaders objective voices not directly represented by
and communities express their beliefs about the school officials and governance bodies to the deci-
educational needs, goals, and plans for their chil- sion-making process, and their positions as non-
dren. While a school budget is largely composed school employees/non-elected officials provide a
of figures (anticipated revenues, proposed expen- useful set of checks and balances.
ditures, etc.), those numbers can and should rep-
resent the culmination of considerable and thoughtful • School Officials. They bring knowledge and
deliberation and planning by a diverse group of skills in aligning both educational needs with pro-
people: parents, students, the community, board grams and practices and also those programs and
of education, administrators, and staff. That delib- practices with available resources. They can trans-
eration should be centered on how to effectively late the needs, goals, and approaches derived from
and efficiently provide all students with a high quality broad-based decision-making into concrete educa-
education. tional and financial terms.

A budget should answer these questions: • School Governing Bodies. They play an im-
• What needs to be done to educate students? portant role by holding school officials accountable
• How should it be done? for responding to the expressed needs of the com-
• Who will do it? munity. Acting on behalf of their constituents, they
• How much will it cost? approve and monitor fiscal plans and their imple-
• Where will the funds come from to sup- mentation. They serve (and should represent) the
port the budget? interests of not just their constituency, but the entire
community, and they can provide a useful and im-
The budget can serve as an instrument of both portant communications channel between the
fiscal guidance and control. Implemented effec- school and the community.
tively, the budget
can serve as a • State Departments of Education. They can
The ultimate goal in hold both school officials and governing bodies
guide for school
planning the bbudg udg
udget et is to budget leaders to accountable for effective, efficient, and responsive
align available funding determine leadership. They have the joint responsibility of en-
suring that schools and districts use resources wisely
and resources with the whether proposed
expenditures are to meet the needs of their students and also of pro-
needs of students and viding the training and resources that will enable
aligned with the
schools. them to do so.
overall vision or
mission of the
school or district. In this role, the budget can also Following is a brief review of fiscal management
be used to hold education leaders accountable for practices along with recommendations for the par-
spending public dollars according to a school ticipation of the four above groups in five major
district’s priorities and plans. areas: (1) planning, (2) review and approval, (3)
implementation, (4) monitoring and evaluation, and
Primary participants in the kind of effective fis- (5) communication.
cal management system we are advocating include:
 BEST FISCAL MANAGEMENT PRACTICES FOR RURAL SCHOOLS 11

A. Planning the Budget

Budget emergencies is important during budget planning.
The ultimate goal in planning the budget is to Otherwise, the district may have to cut essential
align available funding and resources with the needs services in order to address emergencies and un-
of students and schools. Many school districts start anticipated needs.
the process by estimating the funding they expect
The planning When sufficient funding
to receive, then allocating those limited resources
to meet student needs. Ideally, however, the pro- stage of the budget- is not available for
cess should actually work in reverse. The budget ing process is the providing pre-identified
planning process should begin by determining stu- most open, allow- needed programs and
dent and school needs, and then exploring ideas, ing for the greatest
services, schools and
concepts, and strategies to plan the most practical public input. At this
stage, the budget communities must
and most appropriate ways to meet those needs.
Only after these processes, then, should the bud- will normally reflect commit themselves to
geting process turn to financial resources and attempt the organizational pursuing additional and
to match funding and resources with identified pro- structure of the alternative revenue sources.
grams, projects, and services. school district by
breaking down the
The following example illustrates how the pro- elements of the district’s operations into individual
cess might work in the case of a new program to pieces or categories and considering how those
help struggling students. If a school district wants to pieces can be coordinated to create and maintain
start an after-school program, it will identify that quality learning opportunities for all students. Most
program as a budget priority. After reviewing possi- districts will break the budget down by categories:
bilities to determine the most appropriate after- teacher and staff pay; teacher and staff fringe ben-
school program for use with their students and in efits; transportation, building maintenance; and in-
their community, the district determines the cost structional supplies. Many districts will also break
of developing and implementing the program. The down parts of the budget that are not centralized
next step then involves considering possible sources functions (e.g., instructional supplies) by individual
of funding from anticipated revenues—local, state, schools, showing a total budget for each school in
federal, other. the district.

When sufficient funding is not available for pro- No two school district budgets are alike. In most
viding pre-identified needed programs and services, budgets the largest category of expenses is teacher
schools and communities must commit themselves pay and fringe benefits, often representing nearly
to pursuing additional and alternative revenue 80% of a school district’s expenses. The school
sources: increasing local revenues (in states where budget is a complex document, made up of vari-
boards have taxing authority), lobbying munici- ous elements that involve a variety of schools, pro-
pal, county, and/or state government for additional grams, departments, and categories—some that directly
funds, or grant writing. Based upon resource levels support education (e.g., teachers) and some that
available, the after-school program is made a part provide support (e.g., transportation). Balancing
of the working budget, or may be scaled back or these various elements and categories to fit into
eliminated if sufficient resources do not exist after the overall budget is crucial.
higher priority items are funded.
A number of theoretical approaches (see Appen-
That example also underlines the often over- dix A for some representative models, pg. 27) to
looked aspect of contingency planning for the bud- budgeting have been developed in response to calls
get. Ensuring that funds are available for unforeseen for greater educational efficiency, cost effectiveness,
12 RURAL SCHOOL AND COMMUNITY TRUST

and involvement by principals and teachers. While • Offer comments on or propose changes
these approaches can offer creative and viable mod- to the budget;
els for structuring the mechanical processes of bud- • If the school district is not cooperative or
geting, approaches and models are of secondary open during the budget planning process,
importance to the fundamental issues of under- bring your story to people who can help
standing the budget and of its role in charting the get the message out, such as state educa-
direction of the school district. tion leaders, lawyers, and the media.

Budget Planning Roles and Responsibilities:

Budget School Officials (Superintendent, Principal,
Parent/Teacher/Student/Community Member: Finance Administrator, etc.)::
• Know your local school board represen- • Develop and share with community
tatives and school officials and how to members and the public a budget plan-
contact them to ask for information or ning process and timeline that allows for
share concerns/ideas; public sharing and input;
• Know and understand what opportunities • Make certain that all communications
for public involvement exist (e.g., many regarding the budget are prepared in an
states require that final budget approval easy-to-understand format, using non-
take place in a public meeting). If public technical language as much as possible;
input is allowed, speak out about ques- • Ensure that members of governing bodies
tions, concerns or proposals; (school councils, school boards, committees)
• Contact the school district office or your have sufficient training to be able to
school board representative to find out understand the budget and contribute to
what opportunities for budget input exist its development.
and take advantage of them;
• Obtain copies of all budget documents Governing Bodies (Board of Education, Site-
and request an appointment with school
Based Decision-Making Council)::
officials to have the documents explained
• Understand the mission of the school
in non-technical language if needed;
district, and use it as a guide in setting
• Identify the level of the budget. Is the
priorities
budget for the district as a whole? Are
• Most school districts have a long-range,
there building level (i.e. by individual
multi-year plan for improving the school
school) budgets? Do building-based
system going by various names such as
budgets only cover teaching supplies or
“strategic plans,” “action plans,” etc. The
do they also include maintenance,
“priorities” of the strategic plan should be
teacher salaries, benefits and the like? Do
the first options considered after essential
local school citizen counsels or adminis-
services are funded;
trators have authority to make a budget?
• Take steps to obtain additional or alterna-
What is the nature of that authority?
tive funds when needed, including
• Find out what revenue or funds the
generating additional local funds through
school district expects to receive;
the (1) exercise of local taxing authority
• Attend board meetings: ask questions
where it exists or (2) lobbying state and
and learn as much as possible about both
local government for additional financial
the budget and the process followed by
support. Each district should have at least
the school district for creating that budget;
one person responsible for maximizing
• Make specific suggestions about programs
grants, since federal and other grants
or things you would like to see the school
often have some flexibility to be used to
district do next year;
target district goals;
 BEST FISCAL MANAGEMENT PRACTICES FOR RURAL SCHOOLS 13

• Participate in any available training or B. Formal Review and Approval of the

workshops offered by groups such as the Budg et
Budget
state school boards association or school
Reviewing and approving the budget—the docu-
business managers organization that will
ment that will become the educational blueprint for
increase knowledge of budget planning
the coming school year—represents the transition from
and/or school finance in general;
the general and open-ended planning processes to
• Ask school district staff to explain budget
a more formal and internal implementation processes.
documents in understandable terms and
ask tough ques-
This stage of the process is more mechanical and
tions of those
While the approved internal than the first—district finance staff and offi-
who produce the
budg et is not carv
udget ed
carved cials work to create a formal financial document
budget;
in stone, and amend- that reflects the priorities identified in the plan-
• In all deliberations
ning process. This formal budget also must com-
ments can be made in and decision-
ply with state and federal laws and state department
the implementation making about the
of education regulations. While the approved bud-
budget, think
phase, a significant get is not carved in stone, and amendments can be
holistically—
amount of time and made in the implementation phase, a significant
consider the “big
energy must be amount of time and energy must be devoted to
picture” and
reviewing the budget for completeness and for
devoted to reviewing remember that
accuracy before it is submitted for approval. Again,
the bbudg
udg et for com-
udget the budget reflects
maintaining a contingency fund is crucial.
in numbers what
pleteness and for
the school district
accuracy before it is Requirements for approving district budgets are
as a whole values
submitted for approval. normally spelled out in state law, and vary from
and wants to
state to state. In all cases, however, local school board
accomplish;
approval of the budget is the first step. Whether
• Insure that the public and all stakehold-
the board has final authority varies by state. Some-
ers are invited to fully participate in the
times boards can approve a budget up to a certain
budget planning process.
capped percentage increase or tax limit. Boards can
go to a public vote to override the cap in some
State Department of Education::
states. Others require a public vote on the budget
• Mandate and sponsor training for school
each year. Still others grant boards the authority to
finance administrators, school board
develop a budget which they then present to mu-
members, and site-based decision-making
nicipal authorities (councils, commissioners, etc.).
councils where they exist—the emphasis
The National Center for Education Statistics pro-
for these training workshops should be
vides descriptions of individual state’s school fi-
on developing budgeting and school
nance systems, including some information on
finance knowledge and skills, and estab-
statutory requirements for budget review and approval,
lishing a common terminology.
at http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2001309.
• Set guidelines for district budget planning
processes that both encourage the setting
of school and district goals through Budget Review and Appr
Budget ov
Approval Roles and
oval
community and public involvement, and Responsibilities
allow for flexibility in how those goals are Parent/Teacher/Student/Community Member::
to be achieved. • Carefully review draft budget documents
made available to the public;
14 RURAL SCHOOL AND COMMUNITY TRUST

• Look for evidence that priorities set out sions about proposed changes;
in planning stages have remained; • Be prepared to answer the question “how
• Meet with, call, or e-mail school officials does this expenditure promote student
to get answers to questions or explana- learning?” for each budget item;
tions of confusing parts of the budget. • Ensure broad citizen involvement;
• Make sure the budget is written and
School Officials (Superintendent, Principal, presented in an easy-to-understand format.
Finance Administrator, etc.)::
• Revisit the mission/beliefs of the district State Department of Education::
and the priorities identified in the • Mandate, at the very minimum, that
strategic plan and use them as the lens for review and final approval of the district
examining and proposing/considering budget take place in an open meeting,
changes to draft budgets—use the lan- and that the proposed budget be made
guage of the district mission/belief available to the public in advance of the
statements to discuss budget items; meeting;
• Know and adhere to all state require- • Set guidelines for district budget review
ments with regard to budgetary review and approval that emphasize community
and approval; and public involvement.
• Create additional opportunities for all
citizens and constituencies (e.g., advisory C. Implementing the Budget
Budget
boards, budget committees, etc.) to be Planning, reviewing, and approving a budget are
involved in reviewing draft budgets; essential parts of sound fiscal management practices.
• Provide public (readable, non-technical) But, even a well-constructed budget can only be
budget documents; in the case of ap- effective when it is actually followed and used as
proval processes that include a public the primary guide for expenditures. Implemented
meeting, make the proposed budget in this way, the budget serves as an ongoing roadmap
available to interested parties early for school district leaders to ensure a school envi-
enough to allow for review, questions, ronment that both reflects the needs of children
and clarifications prior to the meeting; and respects the ideas and suggestions of school
• Develop and broadly distribute to the and commu-
community a simple document that nity members.
explains the budget in layperson language. The bbudgudg et serv
udget es as an
serves
If the budget is
not used in this ongoing roadmap for
Governing Bodies (Board of Education, Site- way, there is an school district leaders to
Based Decision-Making Council):: increased pos- ensure a school environ-
• Revisit the mission/beliefs of the district sibility that ment that both re flects the
reflects
and the priorities identified in planning children’s edu-
stages, and continually return to them as needs of children and
cational needs
draft budgets are reviewed and changes may not be met respects the ideas and
are proposed—use the language of the effectively, the sugg estions of school and
suggestions
district mission/belief statements to distribution of community members.
discuss budget items; resources may
• Participate fully in the review approval not be aligned
process by reading and understanding the with identified and approved priorities, and the
entire budget document, asking questions funding process moves away from democratic prac-
as necessary, and participating in discus- tices and toward autocratic decision-making.
 BEST FISCAL MANAGEMENT PRACTICES FOR RURAL SCHOOLS 15

Implementing the budget, then, is about first the budget (e.g., a large jump related to
managing and expending education dollars accord- beginning year salary encumbrance) in a
ing to that plan, and then taking the priorities straightforward, educational manner;
articulated and approved by the district and com- • Be prepared to answer the question “how
munity and putting them into action. Once staff does this expenditure relate to the mission/
and vendor contracts are signed, there is not much beliefs and/or promote student learning?”
flexibility to change the budget. The day-to-day work for any out-of-budget expenditures;
is done internally by school and district employ- • Make certain that board members under-
ees, using the budget as a plan and guide for ensur- stand budget documents and expenditure
ing that expenditures serve the needs of children reports.
in the most efficient and effective ways possible.
Officials can maintain transparency in this stage by Governing Bodies (Board of Education, Site-
reporting expenditures and allowing and encour- Based Decision-Making Council)::
aging parents, students, and community members
• Participate in any available training or
to follow the implementation of the budget and to
workshops that will increase personal
ask clarifying questions about expenditures.
knowledge of budget implementation
and/or school finance in general;
Budget Implementation Roles and
Budget • Carefully review all financial statements,
Responsibilities reports, and documents provided, looking
Parent/Teacher/Student/Community Member:: carefully to see if budget expenditures are
• Attend school board and other public consistent with priorities and the approved
meetings where the budget or school budget;
finances are likely to be discussed, • Ask questions of the superintendent and/
review available documents, and ask or finance administrator as necessary;
questions to make sure the budget is • When reviewing budget expenditures, be
understood; able to answer the questions: How does a
• Meet with school officials and/or contact particular expenditure relate to the
board members to get an explanation of mission/beliefs of the school district?
budget items that are hard to understand, How does it promote student learning? Is
and to discuss questions, raise concerns, it targeted toward the needs of students
and make suggestions. who may need extra help?

State Department of Education::

School Officials (Superintendent, Principal, • Mandate and provide professional
Finance Administrator, etc.):: development/training for school finance
• Use a uniform chart of accounts (i.e., a
administrators and school board members;
standardized list of accounts with a
• Set reasonable guidelines for methods of
specific title and number assigned to each
accounting (e.g., accrual accounting) and
account);
using a standardized chart of accounts.
• Prepare and make available to the public
monthly budget updates by general
categories (e.g., transportation, technol- D. Monitoring and Evaluating the
ogy, professional development. Updates Expenditure of Funds
should be no longer than one page, front The school district budget, like any other plan-
and back); ning and leadership document, should be assessed
• Proactively explain perceived oddities in for its effectiveness in meeting the primary goals
16 RURAL SCHOOL AND COMMUNITY TRUST

for which it was developed. For a school budget, Budg et Monitoring and Ev
Budget aluation
Evaluation
the primary goal is providing funding so all children Roles and Responsibilities
can receive an education that enables them to reach
Teacher/Parent/Student/Community Member::
their fullest potential. Assessment should be ongo-
• Attend the board meeting that reports on
ing—monitoring expenditures, comparing current
the annual audit results, and review
expenditures with planned expenditures, investi-
available materials and ask questions as
gating instances of over- or under-spending, and
necessary;
making adjustments as necessary. Assessment should
• Participate—and encourage others to
also be evaluative, with an annual outside profes-
participate—in any school surveys that are
sional audit to determine whether funds were expended
intended to assess program effectiveness, etc.;
in accordance • Meet with school officials to ask ques-
For a school bbudg udg et, the
udget, with applicable tions or share concerns;
policies, regula- • Use monthly budget performance sum-
primary goal is providing tions, and stat-
funding so all children can maries as an evaluative tool.
utes. In the case
receive an education that of both ongoing School Officials (Superintendent, Principal,
enables them to reach their and evaluative
Finance Administrator, etc.)::
assessments,
fullest potential. The • Develop and implement a process for
open commu-
evaluation of how funds are ongoing monitoring and evaluation of
nication with
spent should reflect this goal. funds expenditures on at least a monthly
parents and
basis;
community
• Have standing orders that staff are to
members is crucial—and should include distribut- immediately report any perceived irregu-
ing a management letter reporting on the audit’s im- larities in the budget;
portant findings. • Ensure that documents providing public
information on evaluations (e.g., CPA
Both internal and external participants monitor audit) contain an easy-to-understand
the expenditure of funds. Internally, school offi- executive summary/management letter;
cials—and, in some cases, board members—will re- • Use the mission statement/district beliefs
view individual expenditures with an eye toward as a guide for monitoring and evaluating the
the working budget. Externally, parents, community effectiveness and efficiency of expenditures;
members, and others in the public will review • Include program evaluations as a key way
monthly budget updates (shorter documents that to assess overall expenditures
highlight spending by category) with an eye toward • Use the audit as a management tool—e.g.,
broad priorities. as a significant piece of evidence in the
evaluation of programs, services and
Evaluating how funds are spent has both finan- personnel.
cial and educational implications. Annual audits
evaluate whether district funds have been handled Governing Bodies (Board of Education, Site-
competently and ethically. Program evaluations help Based Decision-Making Council)::
to determine the effectiveness of specific programs, • Include “fiscal management practices” as
shedding light on returns—or lack thereof—from an important criterion in superintendent
specific investments in teaching and learning. Both performance evaluations (and for the
forms of evaluation provide useful information for district’s chief financial officer, if applicable);
planning the next year’s budget. • Know the purposes of evaluation/audit-
ing, and use their results as a learning
 BEST FISCAL MANAGEMENT PRACTICES FOR RURAL SCHOOLS 17

tool for enhancing future program and information that is accessible, meaningful, and un-
finance decisions. The annual audit derstandable by all. This can mean preparing an
provides a check and balance for boards executive summary of a lengthy report or prepar-
to know if there is either incompetence, ing a narrative to accompany data representations
fraud or mishandling of funds, or just or graphic depictions of data and/or narrative infor-
plain bookkeeping mistakes; mation. One useful strategy for monitoring the ef-
• Participate in any avail1shops that will fectiveness of communications is by soliciting feed-
increase knowledge of financial evalua- back from parents, using a survey, for instance. An-
tion and/or school finance in general; other strategy would be to form a parent advisory
• When reviewing the results of a financial council to provide the same kind of feedback
audit or program evaluations, continually through ongoing dialogue.
revisit the mission/beliefs of the district
and consider findings in light of priorities Teacher/Parent/Student/Community Member::
and student needs; • Read and understand communications
• Require and review brief expenditure from the school or school district;
summary reports on a monthly basis; • Ask questions about issues/communica-
• Review and approve the annual audit/ tions that are unclear;
management letter in an open meeting. • Request additional information as
needed;
State Department of Education:: • Meet with school officials to present any
• Set guidelines regarding processes for questions and comments you might have;
annual evaluation of fund expenditures • Attend school board meetings and ask
that emphasize transparency and account- active informed questions, but be sure to
ability, but that also allow some flexibility strike a balance between being too quiet
in how goals are to be achieved (e.g., and being a gadfly who is easily dismissed.
alternatives to CPA audits);
School Officials (Superintendent, Principal
E. Communicating How Funds are Used Finance Administrator, etc.)::
Continuous communication with the public is • Actively seek opportunities to inform the
an integral part of fiscal management. It is not public about schooling and school
enough for finance issues;
schools and • Present information in a style and format
In all communications, the school districts that is accessible, meaningful, and under-
school or school district to comply with standable by all (included here is the
should strive to provide open records issue of document length and the need to
information that is laws only when prepare summary/synthesis documents);
accessible, meaningful, and pressed. Rather, • Broadly distribute a year-end report that
schools and dis- informs stakeholders about the source of
understandable by all. tricts should: funds, how funds were expended, what
be proactive programs and services were supported by
in involving the broader community in setting goals; the budget, and how the budget impacted
keep them apprised of the ongoing work; and re- students and the district. Include clear
port to them annually or semi-annually on goal statements about surpluses or deficits and
achievement and the effectiveness of different pro- why either occurred.
grams/expenditures. In all communications, the
school or school district should strive to provide
18 RURAL SCHOOL AND COMMUNITY TRUST

Governing Bodies (Board of Education, Site-

Based Decision-Making Council)::
• Actively solicit from parents and commu-
nity members their insights, comments,
and suggestions about what and how the
district can best meet the needs of
students, and encourage them to attend
and participate in board meetings,
committee work, etc.;
• Provide a check (e.g., via a parent advisory
group that pre-screens communications)
for determining the accessibility, mean-
ingfulness, or understandability of
documents prepared by the district office;
• Boards of education may choose to
establish board finance committees that
review all expenditures and have an
ongoing dialogue with the district admin-
istration. These committees must meet in
public.

State Department of Education::

• Develop and provide school leaders with
sample models for communicating
budgetary and other school information
to parents;
• Provide support for the development of
school and district websites and other
resources for communicating with the
public;
• Require and enforce uniform data
reporting methods to ensure data integ-
rity, state reporting, and comparisons
within and across school districts.
 BEST FISCAL MANAGEMENT PRACTICES FOR RURAL SCHOOLS 19

III. RURAL-SPECIFIC CONCERNS AND STRATEGIES IN THE BUDGET PR

STRATEGIES OCESS
PROCESS
Nationally, rural students represent about a quar- teacher salaries than those in urban and suburban
ter of all students attending public school, and nearly areas leads to difficulties in recruiting and retaining
a third of all schools are located in rural places. teachers, and lack of technology funds, along with
These rural schools and students have a number of often limited technological or communications in-
unique characteristics and needs. For instance, the frastructures, makes it more difficult for small rural
smaller size of many rural schools and districts can schools to
sometimes lead to per pupil expenditures that are make use of in-
higher than those of larger urban and suburban novative dis- A number of states have
schools. Higher costs—in some cases, merely the tance learning no provisions in their
perception of higher costs—are also caused by dis- opportunities. funding systems to
tance or isolation, high rates of poverty, lack of a School em- account for increased per
social service infrastructure, and higher utility costs. ployees, par-
Complicating the issue, small rural school districts ents, students,
pupil costs in small rural
frequently have a low or declining tax base. As a and commu- schools. The under -funding
under-funding
result, they often must operate with limited amounts nity members of rural schools has
of local funding for education. can organize implications for teaching
and work to- and learning in a number
In a number of states, policymakers have used ward making
“economies of scale” principles to argue that small changes in state
of areas.
rural schools with higher per pupil costs should be school finance
consolidated into larger schools that can educate systems that will provide fair and adequate distri-
students at a lower cost. More detailed analyses3 of bution of funds. At the same time, schools and dis-
educational costs (e.g., ones that take into account tricts who strive to maintain democratic school gov-
relevant influences such as the multiple roles played ernance and provide high quality services and learn-
by administrators in smaller schools and districts, ing opportunities for all children must find ways of
or the increased levels of donated time and materi- working within constraints they currently face, and
als in smaller schools and districts) have begun to be creative in maximizing the efficiency of avail-
call into question the logic of economies of scale. able resources.
And policymakers and the public are finally begin-
ning to understand that the costs of consolidating Grouped by category, the following recommen-
small rural schools and districts far outweigh any dations offer strategies that rural school districts can
predicted financial savings. In fact, predicted fi- use to meet the challenges posed by their small
nancial savings are often offset by hidden financial size and diminished fiscal capacity:
costs (e.g., increased transportation costs), dimin-
ished academic performance by students, increased A. Shared administrative staffing patterns.
discipline problems, reduced parental involvement, Economies of scale and the small size of rural
and limited participation in school activities.4 school districts can mean that the costs of traditional
administrative staffing practices (e.g., one principal
A number of states have no provisions in their per school) are impractical. In these instances, dis-
funding systems to account for increased per pupil tricts can assign one principal to provide administra-
costs in small rural schools. Even in those states tive support for more than one school. In all instances,
that do, the provisions are often insufficient to com- however, a designated instructional leader (e.g., a
pletely level the playing field. This under-funding lead teacher) should be physically located at each
of rural schools has implications for teaching and school site.
learning in a number of areas. For instance, lower
20 RURAL SCHOOL AND COMMUNITY TRUST

B. Multi-grade instructional staffing patterns. districts means they have less money available for
Traditional approaches to instructional staffing (e.g., capital construction and school facility renovation
separate classrooms for each individual grade) may projects. In addition, state policies that favor the
also be impractical in rural school districts. In such construction of large schools in centralized locations
cases, split-level grades and multi-grade classrooms serving large
can be an effective approach to working with smaller geographic ar-
enrollments. Significantly, this is a practice that has eas—and dis- Schools and communities
positive financial and pedagogical outcomes—i.e., courage or should w ork to
work toggether to
multi-age grouping is acknowledged as an effective even disallow be ag ents for chang
agents changee
innovative instructional practice, without regard to investment of in state policy and
financial concerns. resources in
improving
advocates for equity
C. Shared fiscal functions/other specialized smaller schools and adequacy in school
services and functions. As suggested throughout located in ru- funding.
this document, best fiscal management practices re- ral communi-
quire competency and professionalism on the part ties—are dam-
of district staff responsible for managing fiscal affairs. aging to both rural schools and their communities.
Geographic isolation and other factors can make it Research suggests that rural communities with lo-
difficult for districts to recruit and retain qualified cal schools are more able to retain their population
financial managers. Districts faced with this chal- and tend to have much healthier local economies.5
lenge can partner with other districts and share the
services of one individual who provides specialized Other research suggests that smaller schools are
financial services. Likewise, districts can and should more effective at producing higher achievement for
seek opportunities to “share” other specialized staff all children, particularly children from low income
(e.g., school psychologists, speech therapists, teach- families and children of color (thus closing “achieve-
ers for the hearing impaired, etc.). ment gaps”).6 For these reasons, rural school dis-
tricts must do everything within their power to pre-
D. Sharing staff. The ability of schools and serve and maintain their existing physical school
districts to offer a wide range of curricular programs structures. This means that upkeep and maintenance
can be made more difficult by their smaller enroll- expenditures must be emphasized and protected
ments and staff numbers. Programs like early child- at all costs in the district budget. It also means that
hood education can be offered effectively through state governments must play a greater role in fund-
inter-district partnership agreements. In a similar ing the repair and maintenance of existing school
vein, districts can collaborate to provide co-curricu- facilities—and must ensure policy contexts that are
lar programs like vocal and instrumental music, by conducive to doing so (i.e., policies that do not
sharing staff and sharing or jointly purchasing ma- mandate a minimum size for receiving state aid),
terials (e.g., musical instruments, uniforms). especially for resource-starved rural schools.

E. Distance learning. Distance learning tech- Advocacy for Equity and Adequacy
nologies make specialized curricula, innovative pro- Regardless of creative steps taken by local dis-
grams, and cooperative/collaborative projects viable. tricts to economize and cut costs, many rural schools
They also offer enhanced learning opportunities for are significantly disadvantaged by state school fund-
students and staff alike in instructional technology. ing systems. The severe and persistent under-fund-
ing of rural schools has led rural districts in a num-
F. Capital projects. A declining local tax base
projects. ber of states to file lawsuits challenging the consti-
and the diminished fiscal capacity of rural school tutionality of existing state education funding sys-
 BEST FISCAL MANAGEMENT PRACTICES FOR RURAL SCHOOLS 21

tems. To date, legal challenges have been filed in nities should work together to be agents for change
46 states, many with a rural focus (e.g., Kentucky, in state policy and advocates for equity and adequacy
Tennessee, Arkansas). In many of these cases, courts in school funding. Avenues for participation in this
have found in favor of the school districts ordering kind of advocacy include being informed about state
state lawmakers to significantly increase funding for policy, legislative and legal contexts, joining exist-
education. Moreover, in this era of higher standards ing coalitions (or where none exists, starting one),
and NCLB, most states are grappling with methods learning about funding opportunities and writing
to improve student achievement. grant proposals for additional funds or funds for
Under these circumstances, schools and commu- special programs to enhance the education program.
22 RURAL SCHOOL AND COMMUNITY TRUST

IV
IV.. STATE POLICY OPTIONS T
STA O ENSURE SOUND FISCAL MANA
TO GEMENT
MANAGEMENT
Balancing local control with state responsibility specified in law, represent the highest
can be a delicate proposition. However, since states standards of accounting and should be
are constitutionally responsible for education, and employed by any external accountant.
since more than 50% of all funding now comes from
state sources, states have a compelling duty to assume • School finance training for school
an active role in officials and governing bodies. To lead
educating chil- effectively and to fulfill their roles and
State policy should dren, including responsibilities to their schools and
directing the communities, district personnel must
mandate school finance management possess knowledge and skills in the area
training for school and use of re- of school finance. State policy should
officials and governing sources. mandate school finance training for
bodies; support the school officials and governing bodies;
provision of high quality Because support the provision of high quality
school districts training; and review and approve any
training; and review and and schools vary alternate training offered by other groups.
approve any alternate so greatly in
training offered by other terms of both • Effectiv
Effectivee bbudg
udgeting pr
udgeting ocesses. Effective
processes.
groups. their strengths and efficient fiscal management practices
and their needs, require that budgeting is an ongoing
approaches to process of assessing needs, monitoring
maximizing the effectiveness and efficiency of avail- the effectiveness of current resource
able resources must vary as well. Flexibility is the expenditures, and seeking input from a
crucial component in meeting district and school variety of perspectives within the district
variations. That flexibility must, however, be bal- and the community. State policy should
anced by a policy context that ensures that govern- set guidelines for budgeting processes
ment funds are used appropriately and in the ser- that include a timeline for budget devel-
vice of achieving the state’s educational objectives. opment and enforce compliance with
open meetings laws.
Recommended policy options:
• Categorical pr
Categorical ograms accountability
pro accountability..
• External professional audits. All sound
Categorical funds are resources targeted
fiscal systems, from the largest to the
for specific student populations and/or
smallest, need an effective system of
specific programs for assisting students.
checks and balances. This protects the
Budgeting and implementation should
public’s interest and the integrity of the
ensure that these funds are used for their
school board, while providing manage-
intended purposes. Expenditures should
ment tools for school administrators.
be monitored and reported in a format
States should require annual external
that allows governing bodies and the
audits of school district finances (includ-
public to see how categorical funds are
ing special fund and enterprise accounts),
being expended, and to hold school
conducted by a qualified and state
officials accountable for using them in
licensed professional. The standards
appropriate and effective ways.
outlined in GAAP (Generally Accepted
Accounting Procedures), while not
 BEST FISCAL MANAGEMENT PRACTICES FOR RURAL SCHOOLS 23

• Chart of accounts written in lay language.

language. requires school districts to document
All too often, financial bookkeeping and fixed assets), and should make use of the
accounting uses specialized terms not process at the local level as a tool for
readily understood by a layperson. In managing inventory and fixed assets, and
addition to using a standardized chart of determining replacement schedules for
accounts with common codes, district capital items such as computers, expen-
leadership should ensure “transparency” sive lab and shop equipment, and school
by using account titles that clearly indicate buses. States must provide guidance and
the nature of the expenditure item or models for these accounting procedures.
category in non-technical terms.
• Monthly statements. Monthly state-
• Revenue sheets presented in non- ments should be prepared and distrib-
languagee and format. Revenue
technical languag uted in a fashion that allows for public
sheets, like charts of accounts, should involvement in monitoring the budget.
follow a common format. Districts must This means communicating current
assure that definitions and terms easily expenditures and commitments (or
enable lay persons to understand how encumbrances) by categories, providing
much money is received, from what the relevant budget figures that allow for
sources, and for what purposes. comparisons with planned/expected
expenditures, and offering information
• Enterprise or separate accounts for clarifying major over- or under-spending).
special purposes. Funds for activities
that fall outside the primary instructional, • The role of board and board finance
administrative, and support functions of committees. Separation must exist
schooling (e.g., funds for class reunions, between those who place the purchase
teacher retirement gifts, athletic clubs, the order, the person who approves the
transportation system, or construction, purchase, and the bookkeepers who keep
etc.) should be maintained in separate records of the transactions. State policy
and clearly identified accounts. As the should reflect this separation of roles. In
authorized agent for these funds could be rural districts with fewer people to review
an untrained lay person, these accounts purchases, these roles are often in the
sometimes become the subject of intense hands of only one or two people. This is
local controversy. Independent cost not acceptable practice. Consequently,
centers or separate accounts prevent the local policy should mandate purchase
intentional or unintentional diversion of authorization from the school board or a
these resources and makes it easier for all separate board finance committees.
involved to see and understand spending These finance committees (which may or
patterns. States should establish guide- may not include non-board members),
lines and procedures to account for should be held to the same open meet-
enterprise funds and local districts should ing regulations as regular board meetings,
make sure such accounts are established including notifying the public of meetings
and properly controlled. through local media.

• GASB 34 and fixed assets. Schools

fixed • School quality essentials. As the right to
should comply fully with all federal an adequate educational program
requirements regarding GASB 34 (which emerges in court case decisions and as
24 RURAL SCHOOL AND COMMUNITY TRUST

the primary way in which children are they are adequate for education in today’s
assured a true opportunity to learn, states world. Additionally, states must determine
are reviewing and establishing new ways whether components are responsive to the
of defining essential school quality needs of all schools and communities in
components. Recent adequacy research rural areas as well as in urban and subur-
in Kentucky and Arkansas shows, for ban areas. Defining Adequacy in a Rural
example, that pre-school programs, full- Context7 is a document that offers concrete
day kindergarten, small class sizes, recommendations for ensuring such respon-
adequate instructional materials, curricu- siveness.
lum development capacity, and the like
are necessary if truly no child is to be left Likewise, school districts must establish
behind. policies, practices, and support funds to
make sure these essential services are avail-
States must establish a definition of able. Parents and members of the public
“school quality essentials” or review their must review and advocate for these essen-
current definition to determine whether tial learning opportunities.
 BEST FISCAL MANAGEMENT PRACTICES FOR RURAL SCHOOLS 25

SECTION V
V:: CONCLUSION

I
t is vital that schools and communities understand the leading
issues of policy and practice in the area of school finance if they
ar
aree to ensur
ensuree the efficient and effectiv
effectivee management of rresour
management esources
esources
for teaching and learning. The emphasis throughout this process
should be on collective decision-making processes and the devel-
opment of policy contexts that set high standards while allowing
flexibility in meeting the needs and circumstances of individual
states and school districts.

The policies and practices of managing public quality learning opportunities, making
resources that support teaching and learning are of effective and efficient use of resources is
vital importance to us all, because: crucial to success.

• Education matters. A high quality • The courts matter

matter.. Courts are increas-
education is vitally important for productive ingly raising concerns about fiscal man-
citizenship, and it is a guaranteed right for agement practices in cases that challenge
all children in most state constitutions. the levels of funding provided to school
districts (e.g., North Carolina’s Leandro
• Money matters. A high quality education case).
requires an adequate level of resources—a
level not present in many places, and Sound fiscal management practices are not only
particularly not in low property wealth important to us all, they also demand the focus and
areas. efforts of us all. This document offers recommen-
dations for how individuals and organizations can
• Fiscal management matters. Given
management contribute to the goal of providing high quality edu-
limited levels of resources and the cation for all children. We encourage you to ac-
mission to provide all children with high cept the responsibility and participate.
26 RURAL SCHOOL AND COMMUNITY TRUST

REFERENCES

1
see, e.g., Ashenfelter, O., & Rouse, C. (1999). Schooling, intelligence, and income in America:
Cracks in the bell curve. National Bureau of Economic Research, Working Paper 6902, 3; Dryden
Witte, A., & Tauchen, H. (1994). Work and crime: An exploration using panel data. National Bureau
of Economic Research, Working Paper 4794; and Wolfe, B., and Zuvekas, S. (1995). Nonmarket
outcomes of schooling. Institute for Research on Poverty, Discussion Paper 1065-95, 3.

2
Hoke County v. North Carolina, Wake Co. Sup. Ct., Case No. 95 CVS 1158 (April 4, 2002), in
accordance with Leandro v. North Carolina, 346 N.C. 336 (1997).

3
See, e.g., Legislative Resolution 180 Staff. (2003). School Distriction Organization Background Infor-
mation. Lincoln, NE: Author.

4
See http://www.ruraledu.org/docs/consolidation/fiscal.pdf, http://www.ruraledu.org/docs/consolidation/
schoolsize.pdf, and http://www.ruraledu.org/docs/consolidation/cotton.pdf for reviews of the literature.

5
Lyson, T.A. (2002). What does a school mean to a community? Assessing the social and economic
benefits of schools to rural villages in New York. Journal of Research in Rural Education, 17(3), 131-
137.

Dreir, W.H. & Goudy, W. (1991). Is there life in town after the death of the high school? High schools
and the population of Midwest towns, 1994. Paper presented at the Annual Rural and Small Schools
Conference.

6
See http://www.ruraledu.org/rpm/rpm604d.htm for a summary of several studies in this line of inquiry.
7
Rural School and Community Trust (In Press). Defining adequacy in a rural context. To be available
at: http://www.ruraledu.org/
 BEST FISCAL MANAGEMENT PRACTICES FOR RURAL SCHOOLS 27

APPENDIX A: BUDGETING MODELS*

The following are two of the more common budgeting models or theories of planning expenditures
within an organization. These models can provide school and district leaders with a structured and system-
atic approach to technical aspects of the budgeting process.

No budgeting model or theory is a “magic bullet.” Budgeting often means making hard decisions among
competing priorities. The following procedures can be useful tools in making these decisions.

Planning, Programming, Budg

Pro eting,
Budgeting, Zero-Based Budg
Zero-Based eting (ZBB):
Budgeting
Evaluation System (PPBES): The use of a ZBB model requires a rigorous
The PPBES budgeting model involves multi-year evaluation of all programs and services. This model
analyses of data from five major categories: pupils, asks each program area to annually justify why it is a
programs, personnel, facilities, and finance. Using continuing priority—which means it theoretically
these data, the PPBES model seeks to sharpen in- starts from zero each year. It is viewed as effective
tuition, judgment, and the link between the most in both stemming the tide of rising budgets and
efficient way of achieving school goals within the increasing management and program effectiveness.
budget on the part of educational leaders through
adherence to a systematic approach to analysis. The ZBB process can be described in terms of
four basic steps:
The PPBES budgeting model is comprised of
five primary components: 1. Define the organization’s “decision units”
1. A systematic analysis of the organization’s (i.e., the lowest practical unit that is
objectives and review of existing approaches knowledgeable about the spending
to achieving those objectives; request and its impact);
2. A search for relevant alternatives— 2. Develop “decision packages” for all
different ways of achieving the activities (a decision package defines a
organization’s objectives; specific function or operation that can be
3. An estimation of the total cost for each evaluated and compared to other func-
alternative—including direct and indirect tions—e.g., goal/service, means of achiev-
costs, initial costs, costs requiring future ing goal/providing service, alternative
organizational commitment, and those means, cost/benefit of primary and
costs that cannot be measured in terms of alternative means, etc.);
dollar amounts; 3. Rank all decision packages in terms of
4. An estimate of the anticipated effective- priority with regard to fulfilling the
ness of each alternative, i.e., an estimate mission of the organization;
of how close each comes to meeting the 4. Approve and fund each activity or deci-
objective; sion package to the level of affordability.
5. A comparison and analysis of the alterna-
tives, seeking the combination of alterna-
tives that promises the greatest effective-
ness, with given resources, in achieving
the objectives.

*Adapted from Hack, Walter G., Candoli, I. Carl, and Ray, John R. School Business Administration: A Planning
Approach. Boston: Allyn and Bacon, 1995. ISBN 0-205-16366-1
28 RURAL SCHOOL AND COMMUNITY TRUST

APPENDIX B: GLOSSARYŠ
Account on a loan, generally for capital construction projects.
A descriptive heading under which similar finan- This is similar to the mortgage on your house and
cial transactions are recorded. the money is guaranteed by a bonding agent.

Accrual Accounting Capital Outlay

Basis of accounting in which revenues are recorded An expenditure that results in the acquisition of
as soon as they are anticipated (e.g., when taxes are fixed assets or additions to fixed assets that are pre-
assessed), and expenditures are recorded as soon sumed to have benefits for more than one year. It
as they are encumbered (e.g., when a purchase re- is generally an expenditure for land or buildings.
quest is approved). Thus, the money is considered
spent when the order is placed. Capital Project Fund
A fund to account for all the resources used for the
Adequacy Base acquisition of capital facilities including real prop-
Dollar figure that represents what the state believes erty. Usually, the building account is separate from
it costs to adequately educate one child with no the general or school operating fund.
special needs for one year.
Categorical Funds
Assessed Value
Value State and federal funds that are designated for spe-
The total dollar value assigned to all real property cific educational objectives or categories of children.
and personal property subject to taxation. Examples would be for special education, socially
and economically deprived children, or bilingual
Audit children.
An examination of financial records and accounts for
the purpose of determining: 1) whether all transac- Compensatory Education
tions are recorded properly; 2) whether all transac- Educational services above and beyond what is nor-
tions are legal and legitimate; and 3) whether financial mally due a student under a state’s education law.
statements drawn from accounts reflect an accurate Most frequently, these are state or federal Title I
picture of financial operations and financial status. monies earmarked for social and economically de-
prived children.
Averag
eragee Daily Attendance (ADA)
(ADA)
The average daily attendance of students in a school Debt Service Fund
district. This figure is often used to determine state Used to budget and account for receipts and ex-
aid. penditures necessary to meet the annual debt obli-
gations of the school district. You will most often
Averag
eragee Daily Membership (ADM) find a budget line for this purpose. It is the equiva-
The number of resident students in the school dis- lent of a home mortgage payment.
trict who are enrolled and attending school in the
school district. This figure is also used by states to Fair Market Value (FMV)
Value
determine state aid allocations. The amount that a willing seller could reasonably
expect to receive from a willing buyer in the sale of
Bonded Indebtedness property, or what you can get for your house on
Obligations of a school district to make payments today’s market.

Š
Adapted from “Glossary of Budget and Finance Terms” http://www.doe.state.in.us/finance/glossary.html. See also
http://www.mvsd.k12.ca.us/images/finance%20glossary.pdf and http://home.wi.rr.com/jthanrahan/html/glossary.html.
 BEST FISCAL MANAGEMENT PRACTICES FOR RURAL SCHOOLS 29

Foundation Program the loss of some other asset in the school district
A state aid program that provides a minimum level (selling of land or equipment).
of funding per student (called a foundation amount)
and requires a minimum basic property tax rate for Percentag
centagee Equalization
ercentag
schools. If the local tax base is not strong enough A state aid program where each district is assigned
to generate the foundation amount for each stu- an index of district wealth (based on calculations of
dent, then the state provides the rest. This is the property wealth, income wealth, or a combination)
most common type of state aid formula. The key is which ranges from zero to one. Per pupil spending
whether the state sets the number high or low. levels are then determined by the district, and the
state’s contribution to that amount is determined
Fund by the index. For example, a low wealth district
A grouping of financial transactions, both receipts may have an index of .8; in this case, the state pro-
and expenditures, of money for a specific purpose. vides 80% of the per pupil amount.

Guaranteed Tax YYield/Guaranteed

Tax ield/Guaranteed Tax Base
Tax Property T
Property ax Levy
Tax
A state aid program that guarantees school districts an The dollar figure produced by multiplying the tax
equal amount of tax base per pupil regardless of the rate and the assessed value.
wealth of the district. The higher (or lower) the dis-
trict chooses to spend, the higher (or lower)the state Property T
Property ax Rate
Tax
aid. Used by a few states, the system is quite equitable A statement in dollars and cents, expressed per each
but the state matching fund is prone to manipulation $100 of assessed value, which will yield a specific
based on state revenues and political factors. amount of money in property taxes. The yield is
also referred to as the levy (see “millage”).
General Fund
Used to budget and account for all receipts and Revenue Receipt
expenditures for the basic operation and the pro- Money received that adds to the monetary assets of
grams of the school district. Expenditures from this the school district without a corresponding addi-
fund may be made for items associated with the tion to the debt of the school district or a decrease
daily operation of a school district. This includes in another asset(s) of the school district. The two
expenses for salaries of teachers, administrators, sup- most common revenue receipts are property tax
port staff, fringe benefits, supplies, heat, lights, main- revenue and money from state support.
tenance, and other day-to-day operation expenses.
School Budget
Budget
Millag
illagee A financial plan considering both revenue and ex-
Factor applied to the assessed valuation of real or penditures necessary to meet the educational pro-
personal tangible property to produce tax revenue. gram of the school district.
It is a tax rate. A mill is defined as one-tenth of a
percent or one-tenth of a cent (0.1¢) on the taxed Weighting (or Additional Pupil Count)
value of the property. Some states use a 1.0 cent This is a method of providing additional state assis-
value per $100 of property value to determine tax tance on the basis of certain educational programs
rates (see “property tax rate”). costing more than a regular program. For example,
a compensatory education student may get an addi-
Non-Revenue Receipt tional student count in the formula of 0.25 or an
Money received that is balanced by increases in the extra 25% in aid (see “categorical programs”).
debt of the school district (borrowing money) or by
30 RURAL SCHOOL AND COMMUNITY TRUST

APPENDIX C: RESOURCES
1. Resources available from the National Center for Educational Statistics (NCES)
• Common Core of Data (CCD) – National • State Statistical Profiles Provides state level
school finance statistics in raw form. It is summaries as well as access to district and
available for download and on CD-ROM. school data (limited) and statistics. http://
The Build-a-Table application ( http:// nces.ed.gov/pubs2000/stateprofiles/
nces.ed.gov/ccd/bat) allows users to down-
load state-, district- and school-specific data • Public School Finance Programs of the
in Excel and other formats. United States and Canada Descriptions of
state finance systems. http://nces.ed.gov/
• Site map of NCES papers and reports by edfin/state_finance/StateFinancing.asp
topic http://nces.ed.gov/help/sitemap.asp
• “Characteristics of Small and Rural
• Finance-specific papers and reports Schools” Information on students, rev-
http://nces.ed.gov/edfin enues, expenditures, class size, etc.
http://nces.ed.gov/pubsearch/
• Encyclopedia of Educational Statistics pubsinfo.asp?pubid=97529
http://nces.ed.gov/edstats/
• “Digest of Educational Statistics: 2001” The
• Summary of Litigation involving state basic compendium of educational statistics
school finance systems http://nces.ed.gov/ across the nation. About 500 pages of sta-
edfin/Litigation/Contents.asp tistical tables addressing a myriad number
of issues. A core document with many com-
• Small and Rural School Districts Charac- parisons across states. http://nces.ed.gov/
teristics: NCES Statistical Analysis Report, programs/digest/d01/
May 1997 (NCES-97-529) http://nces.ed.gov/
pubs97/97529.html

2. Resources available from other sites

• State finance system descriptions and data- • National Center for Education Finance
bases http://www.wcer.wisc.edu/cpre/fi- Newly established office by the National
nance/state/ Conference of State Legislatures to track
national school finance issues and trends.
• Summaries of newspaper articles from www.ncsl.org/programs/edu.html
around the nation with hyperlinks
http://www.smartbrief.com/ascd • Center for Special Education Finance
http://csef.air.org
• Education Week Weekly newspaper of
education interests, with good searchable • State Websites Find your state’s govern-
archives http://www.edweek.org ment website by visiting
http://www.piperinfo.com/state/
 BEST FISCAL MANAGEMENT PRACTICES FOR RURAL SCHOOLS 31

3. School FFinance
inance Textbooks
Textbooks
There are many standard textbook treatments of
educational finance and fiscal management issues.
The following texts may prove useful in develop-
ing a quick background on a particular issue. The
listing does not imply a recommendation by the
Rural School and Community Trust.

• King, Richard A., Austin D. Swanson, and

Scott R. Sweetland. School Finance:
Achieving High Standards with Equity and
Efficiency, Third Edition. 2003. Allyn and
Bacon. ISBN 0-205-35498-X.

• Odden, Allan R. and Lawrence O. Picus.

School Finance: A Policy Perspective, Sec-
ond Edition . New York: McGraw-Hill.
2000. ISBN 0-07-047486-9