Driven by Data

So you want to begin departmental budgeting…

Considerations for successful departmental budgeting

Most charter schools start out with one overall budget managed by the Executive Director and COO; however, as your schools grow, you will likely want to empower a larger group of staff members with insight into your spending plans and activities. Through departmental budgeting, department heads will have more authority and autonomy in budget allocation, but it will also require a higher level of coordination across your team. Below are the four key phases to successfully transitioning your staff to departmental budgeting.

1. Planning
Ensure that you have accurate information to start the year, considering both historical financial data and planned spending. A senior LEA staff member (e.g., CEO, COO) should lead the coordination of identified department heads so that budgeting is correct and reflective of school needs.

2. Developing
Adopting departmental budgets is typically a multi-year process. The “Beginner” model is used in the first year to get everyone comfortable with thinking about the spending that happens in their departments but doesn’t delegate much budget control. The goal is to move to the “Advanced” model in subsequent years.

Beginner (Methodology-based):

  • School leadership decides how much each budget-holder receives and the amounts within each category.
  • Budget-holder is primarily tracking against pre-approved spending.
  • Only certain accounts are allocated to budget-holders. Typically those are the more discretionary categories, e.g, student and office supplies.

Advanced (Need-based):

  • Budget holders develop their own budgets annually and make a case for the allocation of certain funds. Those requests are then “rolled-up” into the larger LEA budget.
  • A senior LEA staff member (e.g., CEO, COO) manages future iterations of the LEA budget and individual budget-holders prior to a fully approved budget.
  • Almost every dollar in the LEA is accountable/budgeted to a department.

3. Implementing
In order to accurately track spending against budgets throughout the year, you’ll likely need to increase the number and types of staff involved in expense coding. Both an LEA-level employee (e.g., Business Manager) and the departmental budget holders should be first in the approval/coding route of incoming bills – the LEA-level employee to direct the bill to the correct budget holder and the budget holder to code to the correct account. This added workflow is vital to making accurate conclusions in the following phase of Monitoring.

BEST PRACTICE: Don’t “massage” account coding just because you have funds available in a certain account. Assign the expense to the appropriate account code so that you can learn how much spending actually is in each account to assist with future years’ budgeting.

4. Monitoring
For budget holders to truly be held accountable to their spending they need to have accurate and timely information. Monthly actuals versus budget numbers should be provided to all budget holders, along with transaction-level detail. All budget holders should be trained on how to interpret these documents and how to use them for decision-making.  For example, budget holders need to understand that this reporting is accrual-based (not cash-based), which means that there is likely a lag between when an expense will show up in the report and when it was ordered.

Insights learned from the Monitoring process are then used to inform adjustments in spending throughout the year and the next cycle’s Planning/Development phases.