School+Finance+-+Week+4

Part 1 FIRST is the state accountability system for a district’s business and financial operations. Ideally, the system will ensure that districts follow sound financial practices and manage their financial resources effectively for the benefit of all district stakeholders. Based on my interview with our business manager, Jennie Battise, I believe that the FIRST report contains many important components. I believe that the three most important indicators are number 1, 5, and 7.

Indicator 1 asks “was the total fund balance less reserved fund balance greater than zero in the general fund?” Maintaining a healthy fund balance is crucial in most districts. In emergency situations, it is important that the district have funds set aside. Although we try very hard to never touch the fund balance, it is often necessary to use this money when unexpected expenses occur. For example, this past school year, we were forced to deal with a legal situation that required us to exceed the amount we had budgeted for legal fees. Using a budget amendment, we were able to move enough money from our fund balance to pay all the extra legal bills without using funds designated for other purposes. Looking at the fund balance in a district is a good way to judge the general financial state.

A second important component is Indicator 5 which asks, “Was there an Unqualified Opinion in the annual financial report?” An Unqualified Opinion is given by an auditor when the “financial statements presented are free from material misstatements and are represented fairly.” (Auditor’s Report, Wikipedia) A school district should receive an Unqualified Opinion in each year’s external audit. This indicates that the district is following Generally Accepted Accounting Principles (GAAP) in its financial operations. In the FIRST Report, a school district wants to answer Yes to this question.

A third very important component is Indicator 7 which asks, “Did the District’s Academic Rating Exceed Academically Unacceptable?” This is a very critical component because it ties together the two accountability systems. A district that is failing to meet academic standards needs to consider how resources are being used and if the funds are being used effectively to impact student learning. An Acceptable or better rating demonstrates a least a nominal connection between the use of financial resources and student achievement.

Part 2
 * || District 1 || District 2 ||
 * Total Revenue per pupil || $10,529 || $10,316 ||
 * Total Operational Expenditures per pupil || $8,611 || $8,908 ||
 * Average Teacher Salary || $39,771 || $50,307 ||

In comparing these two districts, it is obvious that the “economy of scale” concept may apply to these school districts. In the smaller District 1, total revenue per pupil is $10,529 and total operating expenditures per pupil are $8,611. These amounts are very similar to the larger District 2 which has a total revenue per pupil of $10,316 and a total operating expenditure per pupil of $8,908. Even though these per pupil amounts are very close, the huge difference in total students allows District 2 (32,326 students) to generate much more total revenue than District 1 (830 students). This is evident in the disparity in teacher salaries. District 1 has an average teacher salary of $39,771 compared to District 2 with an average teacher salary of $50,307.

Another huge disparity exists in the taxable value per pupil which is significantly higher in District 2 (567,521 compared to 162,892 in District 1). This results in District 1 having to rely much more heavily on state revenues (61%) than District 2 (27%). Again, this allows the larger district more funds to pay a higher teacher salary. Looking at the teachers at both districts is revealing. Although the average years of experience are similar and the turnover rate comparable, the percentage of teachers with advanced degrees is much higher in District 2. In District 1, only 12.7% of teachers have advanced degrees. In District 2, 24.6% of teachers have advanced degrees.

Does the “economy of scale” concept apply? There are certainly some advantages to be found in District 2. Teacher salaries are obviously better, total revenues are higher, and the fund balance is much higher, but the bottom line is that the students in District 1 are just as successful as those in District 2. Overall, I think that District 2 has been able to provide more money for academic programs and less for infrastructure, as evidenced by the higher teacher salaries. District 1, on the other hand, has managed to be successful despite not having these advantages.

Part 3 In LISD, differentiated staffing is an almost impossible challenge. Because of the small number of overall staff, it is difficult to specialize. At our high school, it would be beneficial to have teachers with fewer classes and fewer preparations, but that is not possible at this time. Most of our high school teachers, have six to seven different subjects to teach each day with very few repeated sections. The campus goals for academic progress are affected by our teachers having no opportunities to specialize, but rather a constant need to generalize.

For example, the math teacher who teaches six classes of Algebra 1 has the opportunity to perfect his methods and materials and concentrate on being the best Algebra 1 teacher he can be. At our school, the math teacher must teach everything from seventh grade math to PreCal and be successful at each level. He cannot specialize because the district cannot afford multiple math teachers. I believe that differentiated staffing would have a positive impact on my campus, but due to our small size and the current budget situation, we are unable to do much specializing.

 Part 4 Based on the LISD 2010-2011 Budget, salaries make up approximately 72% of the total budget. Payroll, including salaries and benefits, accounts for $1,502,416 of the budget. The total proposed budget is $1,998,897. Looking at other districts in our area, I believe we are fairly comparable. In most of these districts, the percentage of the total budget that is devoted to salaries is roughly 70-80%. I think that this makes sense, because I do believe that people are our most important resource. Without the right people, programs and supplies will not produce learning. Although most school personnel would welcome a 5% salary increase, there would be both positive and negative impacts from such an action. On the positive side, an increase in salary would raise teacher morale and give them a much needed feeling of support from the district. The district would be able to attract quality teachers and retain the teachers already hired. A salary increase would likely create more loyalty and goodwill within the district. On the other hand, a 5% salary increase could result in budget cuts in other areas. Teachers or instructional aides could be released to allow for the higher salaries for remaining staff. Supplies and other resources might be cut to increase the funds needed to increase salaries. Cuts in these areas could hurt district morale. In considering an increase in salaries, the district must consider both positive and negative consequences that may result. Part 5 <span style="color: black; font-family: 'Times New Roman','serif'; font-size: 11pt; line-height: 115%;">After interviewing the business manager, I believe I have a much clearer understanding of the purposes and the process of completing the Annual External Audit. Having an outside auditor examine the district’s financial operations is a very important yearly necessity. An outside person can often see things that may be overlooked by district personnel who are too closely involved in the day to day finances of the district. The process is fairly straightforward. The district selects an external auditor following a request for proposals (bids) by the district. The school board evaluates the proposals and selects a firm to complete the audit. (Usually, we receive proposals from 2-3 firms.) Once selected, the auditor will notify the district to schedule an onsite visit and send a list of any documents that he may need in advance or that the district must have available when he arrives. The onsite visit takes 1-2 days in our district and the auditor will occasionally call with follow-up questions or requests for additional materials. The conclusions of the auditor will hopefully be an unqualified opinion which indicates that the district’s operations and procedures are in order. Regardless of the financial situation in the district, this is an important conclusion of the audit. Finally, the auditor prepares a written report to be presented to the school board. The audit report is presented in a public meeting before the board, published in the local newspaper, and sent to TEA.