August 10, 2021

Is Your Business Office a Thermometer or a Thermostat?

Gary L. Jones, EH&A Senior Associate

When school leaders talk about districts and charters that establish patterns of excessive spending, they use terms like fiscal distress, fiscal crisis, and financial mismanagement.

Complaints are voiced about substandard accounting practices, poor budgeting, and bad cash management. This leads to calls for greater and better fiscal oversight by county offices of education or intervention on the part of the Fiscal Crisis & Management Assistance Team (FCMAT).

We hear about the need for struggling districts and charters to create finance committees and establish fiscal stability plans.

Notice the use of the terms like fiscal, financial, budget, accounting, business, cash, and finance. These are school business words. One could falsely conclude that a school system with a financial problem has a poor or faulty business office, Chief Business Official (CBO) or Chief Financial Officer (CFO). That thinking could lead to comments like, “If that staff, if those people, just did a better job the district or charter would not be in such a mess” or “We need a different CBO (or CFO); the next business leader can fix this.”

What if it is not about the business office, its leaders and staff? The fact is they spend very little money, a miniscule percent of the budget, compared to the rest of a school system. Over the course of my career, I am not aware of one business office being responsible for deficit spending in a district or charter.

Let’s rethink and realign our focus. School operations (programs, facilities, meals, technology, etc.) need far more attention than a business office. School systems that have structural deficits did not get there through bad accounting practices.

When a district or charter comes to the point where it needs a Fiscal Recovery Plan or a Fiscal Stability Plan, we all know they need to stop spending beyond their means. If we were more honest and accurate with our language, what they really need is an Operational Stability Plan. Calling it such, puts the emphasis back where it belongs, on the way school leaders are operating their district or charter.

No matter the name, these plans need to be multi-year plans, established in annual budgets. Just as important, someone must have the authority to ensure the plan is followed. That is the purpose and primary responsibility of the business office and its leaders.

School systems that get themselves into financial trouble tend to treat their school business office like a thermometer, simply monitoring and measuring the “temperature” of the district or charter.

However, the best school leaders see the business office and its leaders as a thermostat, not a thermometer. When spending is well below the budget, the CBO or CFO should notify program leaders of the availability of funds to meet the needs of students. Conversely, when spending exceeds or is projected to exceed the budget, the CBO or CFO should meet with program leaders to rein in excessive spending and prevent unbudgeted spending.

When you look at your district or charter, ask yourself if it is experiencing operational stability. If the answer is yes, do what you can to ensure your business office does not become a simple thermometer. If your school system is struggling financially, both a multi-year plan and business-office thermostat to monitor, measure, and control spending are essential.