There is often a significant amount of confusion regarding how strategic plans, policy goals, short-term objectives, tactical plans and budgets interact. And when the wrong terminology is used, the conversation and debate becomes confused. So let’s walk through it step by step.
- A strategic plan sets out the broad policy goals and objectives for the next three to five years.
- The strategic plan establishes the broad parameters under which the district will operate during that period.
- It is extremely difficult and unproductive to try to tie specific spending in any given year to the strategic plan – this should only happen at the budget level. [Added] However, the specific annual objectives should be a clear and unambiguous subset of the strategic plan objectives.
- The administration is charged with developing a one year plan that identifies specific policies, measurable objectives and specific spending to attain those objectives. All of this represents a subset of the longer term strategic plan.
- The specific policies, measurable objectives and spending are quantified in an annual budget.
- The budget represents a one year tactical plan that presents how much the administration will spend to reach the specific and measurable objectives for the next twelve months.
In summary – a strategic plan is broad and long-term while a budget is a short-term tactical plan that implements policy and spending to meet short-term objectives.
In other words, the strategic plan is the ending point and the budget is but one stop along the way.-
And now to why the differentiation is important. The budget process represents the time frame when both the administration and the Board can weigh in the objectives for the coming year and how spending will be directed to meet those objectives. It also is a statement of overall policy that presents what the administration wants to accomplish in the upcoming year. Given how important the process is, it is critical that the Board have a strong level of comfort that the budget presented is an honest assessment of the priorities of the administration and that the administration will carry out the spending in the manner presented.
Given the importance of the process, let’s look back in history a bit to see what the administration did once the budget was passed. This is a relatively simple process that can be accomplished by simply comparing the actual spending to the approved budget. The chart below (click to enlarge) compares the FY13 Approved Budget to FY13 Actual spending. As you will note, there are some very significant differences that were not discussed during the preparation of the budget, were not fully discussed with the Board during FY13 and were not approved by the Board in an amended budget.
Once the FY13 budget was passed, the administration changed priorities, directed spending to other areas and never received Board approval for doing so.
Note – if you want to skip the gory details, just scroll down to the conclusions and recommendations at the end of the post.
As you can see in the chart above, there was a $22.5 million transfer from other departments to Direct Instruction. This represents a 17.1% increase over the level authorized in the FY13 Approved budget. My estimate is that the administration added approximately 300 teachers over that were not included in the original budget. While I am not complaining about adding teachers, I do believe it is a problem that the administration was unable to determine its actual requirement for teachers during the budget process and thereby make a clear and unambiguous statement to the Board on its intention for the upcoming year. Every year the number of teachers is a major concern for the Board – why didn’t they get the straight story up front?
Now that $22.5 million had to come from somewhere other than the General Fund reserves. Let’s look more closely at this and see what it says about how the administrations priorities changed during the year. Approximately $2.2 million came from reducing the Exceptional Children’s Program. It appears as if staffing for the program was reduced by 8.3% – but there was never any discussion regarding this staffing change at the Board level. Did an apparent administration policy to increase the spending on the program fall by the wayside? It appears so, but the change in priorities and objectives was never brought to light.
If we continue to look, we see that the Early Intervention Program came in at approximately $5.5 million less than budgeted. An estimate is that there were approximately 35 fewer teachers that initially presented. Again, there is no discussion on this at the Board level that I could find. The Early Intervention Program is a critical one that the Board relies on to address improving elementary school at risk kids. So what happened? Why did the administrations spending priorities on this program change? Unfortunately, it is unlikely we will ever find out – and the priority set by the Board was changed without their knowledge or approval.
And another interesting fact – the spending on School Administration and Central Office School Administration was $1.6 million higher than budgeted. Now this would have been an interesting conversation at the Board level – if they had been told this was the case. Apparently they were not and, the debate on the bloated administrative spending was never fully engaged. Was this simply a coincidence? Or was it simply the administration doing what it wanted to do without Board input. You decide.
Now there is another red flag that is consistent from year to year. The cost of Operations (facilities, transportation, security, etc.) was $2.6 million under budget, with the cost of Utilities over $2 million under budget. However, the Operations budget is off by a lot on nearly every line item – as was the case in the prior year as well. And for FY15 they are asking for a $3 million increase. Why should the Board trust the validity of the current request when the Operations group’s track record of poor budgeting is so readily apparent? While I am not sure that this speaks to any specific educational outcome policy, it does speak to potential budget games being played.
In addition, there are two General Administration function that were under-budgeted – Finance and Information Technologies – with a total spending of $10.3 less than budgeted. Of this amount, $5.8 is explained by the fact that this amount was budgeted in the departments, but was subsequently transferred to Capital Projects. This was discussed at the time the budget was passed. However, what about the additional $4.5 million under-budgeted amounts? One of the major items is the budget for certain district wide benefits – which I believe is for Workmen’s Compensation self-insurance came in $2.6 million less than budgeted. When asked about the $6.0 million budgeted for the current year, the response was that “we will look into it”. So far – “crickets chirping”.
And based on the information we have, it is difficult to assess where the under-budget was for IT. But suffice it to say that the numbers presented in the approved budget are not consistent with what was actually spent. This also may be indicative of why the FY15 IT budget is requesting a $5.5 million or 28.1% increase for infrastructure items over FY14. This may, in a sense be a catch-up request for prior years underfunding.
Again, the budget is a tactical plan that aligns spending with the objectives of the organization and the priorities of the duly elected Board. Based on the comparison of FY13 Actual to FY13 Budget, it is reasonably clear that the administration says one thing during a budget process to get the budget passed and then, without clear direction or even discussion with the Board, does whatever it wants and spends funds in a manner that is not consistent with the policy and direction inherent in the budget approved by the Board.
The actual expenditures are available in late August or September – however, the administration did not release this information in detail until this current budget process – which is way too late.
As such, I will reiterate my call for bringing more accountability to the budget process and recommend the following three items to make the administration more accountable to the Board on spending issues.
- In February, in advance of starting the next year’s budget process, the Budget Committee should review a full year forecast as compared to the Approved Budget and Amended Budget.
- In August or no later than September, the Budget Committee should review a detailed actual to budget comparison – for the approved budget, the amended budget and for the forecast noted above. The presentation must be in the same format as the original budget was approved.
- In both instances above, the administration should present actual results or forecasted results as quantified in the Balanced Scorecard. It is time to start tying spending to results.
Just doing these three things will give the Committee and the Board a significant amount of information regarding the administrations true directions on spending – and provide the Board the information necessary to establish that their policy directions are being carried out by the administration.
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