SchoolsRetooled TM

Why School Financial Statements Need an Overhaul

May 9, 2012 at 9:28 AM Leave a comment

Wasting resources intended for our children or our retired public servants would seem to be reprehensible. Ironically, the government accounting systems that were created to protect these beneficiaries from fraudulent use of funds have become culprits. Regulatory accounting impedes analysis of the linkage between funding and mission. Further, its details are inadequate for building the robust models needed to evaluate the effectiveness of the delivery system.

Just a few of the problems with financial statements for public education…

• There is no direct link between the sources of funds and the students served.
• District accounting reflects compliance with regulations instead of education priorities. There is no standard for distribution of funds across content areas, cohorts of students, or programs (e.g., STEM).
• School-based accounting shows only a partial list of accounts. It does not capture full measure of resources invested in the educational effort or allow assessment of return on investment.
• School financial management guidelines are preoccupied with petty cash – vending machine and event cash receipts – not big picture funding of the school’s mission.
• Governmental Accounting Standards Board (GASB) guidelines for pensions do not require accurate assessment of plan solvency.
• Lack of transparency renders fiscal oversight dependent upon translation by insiders.

Incumbents in school district finance or building leadership are specially trained in the esoteric demands of the existing regulatory model. Many have never worked outside of the industry. The echo chamber cannot be expected to identify the problems and agitate for change. Indeed, inexperience, lack of knowledge, or comfort with the status quo may conspire to obstruct progress toward a fiscal model that informs decisions without loss of integrity to regulatory intent. Nevertheless, we need change now.

Entry filed under: Financial data.