Guidelines for Analysis of Procurement Expenditures within a School District Budget for the Purpose of Reducing Current and Future Expenditures without Cutting Employees


Analysis of procurement spending on materials, supplies and purchased services is a very important effort for school districts in this time of shrinking revenues.  Effective budget analysis requires appropriate and accurate resources: tools, data, perspective and timing.  If one or more of these is missing, effective analysis is diminished. 

Such effort is very helpful to a district, as reducing / eliminating non-personnel expenditures is much preferred to cutting staff.  Often districts conclude that 80% of expenditures are staff-related, thereby effectively eliminating a close analysis of a huge pool of potential reductions.  The elimination of non-staff expenditures has a distinct advantage in that it does not carry the politically charged impact of cutting positions. 

The following are the tools and data needed to analyze what procurement changes (reductions) are needed to eliminate significant expenditures without cutting employees.

1.  Operational budgets reflecting every department’s actual, encumbered and anticipated procurement expenses by month.  Merely dividing annual expenditures by twelve and projecting year-end totals is not adequate.  Funds are expended at different times during a fiscal year.  It is important to know from department level directors/managers how much is projected to be spent through the remaining months of the current fiscal year.

2.  Operational budgets reflecting anticipated monthly expenses by category:  All expenditures, both at the school sites and the central office should be reviewed.  Analysis of hidden departments such as facilities and food service is critical.

  • Supplies/Material – Whatever expendables are used by the department
  • Contracts/Purchased Services
  • Capital Purchases/Expenditures
  • Miscellaneous Expenses –Training, office supplies, travel, idiosyncratic items, etc
  • All projects, both at the sites and in the central office departments

3.  Operational budgets for the same items reflecting funding sources by category and amount.

4.  Data showing anticipated annual expenditures for purchased services / contracts by vendor, total authorized (only for remaining months within fiscal year, not for total contract) for vendor, together with YTD actuals (by vendor).

5.  Position summary for all funded district positions – filled and vacant with time frame for vacancies (how long they have been vacant).

6.  Knowledge of how the district projects year-end expenditures/budgets, especially for contracted services, materials and supplies.  Are predictions based on beginning year budget or on actual projected expenses?  For example, if the budget department originally projected physical plant operations expenses to be $7,000,000 for fiscal year 2008-2009 and departmental leadership now projects the expenditures to be no more than $6,000,000, which number is used in predicting year-end projections?  Department managers are often not consulted for year-end projections.  How then does budget determine end-of-year numbers?  A thorough understanding of district budget department assumptions as to how and where it projects the district will complete the year is critical.

7.  All manager and higher positions must be involved in projecting year-end expenditures, along with recommended cuts.  This cannot be done by the budget/finance department in isolation.  All idiosyncratic and non-repetitive expenditures need to be included in these projections.

8.  Documents must be prepared with verbiage included to clarify headers (both columns and rows), not just with account, location or object codes.  It is important that all stakeholders (especially the board) be able to read and understand the documents, without needing to know expenditure or funding codes.   Many ERP systems create reports with information that is identified only by numerical coding.  They often don’t sum sub-totals and totals in a useful manner.  Such reports are not suitable for use by lay stakeholders.  Budget personnel must adapt the reports to a usable and friendly format.

9.  In-house versus contracted expenditures – those that are contracted should be considered first.  Do not cut positions until contracted services have been cut by 10-15%.  Materials and supply purchases should be cut 5-7% prior to positions.

10.  Review of vacant positions – only fill those which are essential.  Eliminate all positions that have been vacant for more than two years.  Eliminate most that have been vacant a year or longer. 

11. Review all allowable exchanges/inter-usability of funding sources for expenses – how can expenditures be funded differently?  Which fund sources have available resources to spend?  Is the state allowing for flexibility within categoricals?

12. Revenue sources – Is there revenue (grants, income, etc) that can supplement or replace current general operating revenue dollars?  Besides ADA or FTE, what are the options for increasing district revenue?  For example, how can food service revenue be increased to pay for a greater share of allowable direct expenses to the program?

13.  Planned work/projects/purchases – What can be postponed?

14.  Metrics/best practices – Where is the district high or low?

15.  How can contracts or purchases be amended to lessen projected costs?  What contracted services or work can be brought in-house, performed by existing staff?

Remember:

1.  When expenses are cut, only project the portion of the expense remaining in the fiscal year.

2.  Various state and district timeframes create timing and notification restraints.

3.  Cutting purchased services/contracts is almost always preferable to cutting positions.

4.  A budget crisis is a good time to right-size an organization.  Try not to set artificial targets (10-15% across departments, for example).  Make the targets fit.

5.  Think of incremental cost savings – they often add up!

The following are vital to a successful process:

  • Whether the analysis is done in-house or with the assistance of consultants like the staff of The Portolan Group, district personnel must be committed to a thorough analysis of potential savings without preconceived restrictions.  This is hard work.
  • A knowledgeable employee from budget/finance needs to be assigned full-time to coordinating the identification and presentation of the data for analysis.
  • All manager level personnel must be made aware of the expectation that they will fully cooperate in this effort, especially in the analysis of their own projected expenditures.
  • School districts are often not adept at change, even in times of fiscal crisis.  They tend to be closed systems, preferring homeostasis to morphogenesis.   
  • District personnel must accept the challenge of thinking in new paradigms for saving expenditures.  Sacred cows must be rendered less holy.

The Portolan Group, Inc is the nation’s premier provider of school, district and higher education central office, business and support services consulting.  For more on this and other school, district or college management related needs, please feel free to contact us at info@portolangroup.com or 1-87-PORTOLAN.

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