SARC BITE 23 | APRIL 12 , 2004

Are You Including Financial Indicators of Your District's Health in Your SARCs?

When your public, your board, your staff, and your district's business partners review your annual reports, they expect to find a balanced composite of the factors that matter most. High on that list, especially in financially troubled times, is a measure of your districts fiscal health. Fueling this curiosity is page-one news about Vallejo's request for an emergency loan from the state. And in the Sunday, April 4, SAN FRANCISCO CHRONICLE was a page-one story whose headline read: "Schools send out distress signals: 22 Bay Area districts and 57 in state may not be able to pay their bills." Tom Henry, leader of the states Fiscal Crisis and Management Assistance Team (FCMAT), tells it like it is.

"We've never been busier," said Tom Henry, chief administrative officer for the fiscal team, the state's rescue squad created in 1992. "We literally get a telephone or e-mail every single day" from school districts asking for help managing their finances.

What will your citizens learn about your schools and districts finances when they read your SARCs? If you're doing what most accountability directors are doing, you're following the literal instructions in the data guidelines This includes reporting on two sets of financial factors. The first is a comparison of teachers' salary scales and your superintendent's salary to those of their peers in similar districts. The second is supposed to be a school-level expenditure per ADA, based on the prior fiscal year's actual expenses. (Most districts fail to do even this much, relying instead on a district-wide average of direct expenses per ADA.) Not once in five years of reviewing hundreds of SARCs have I ever seen more than this revealed. Nor have I seen principals take advantage of the opportunity to comment in their SARCs on the ways in which the years of cutbacks have affected their schools staff, programs, or students.

The financial section in your SARC also appears last. For those relying on the state's technical data delivery vehicle, now known as the SARC template, it Is the last of 14 pages. A reader would conclude that your district puts it last because you believe money matters least. Students' physical fitness, something schools are largely not responsible for, appears in the middle of many districts SARCs, right next to test scores. Placement conveys your priorities.

AN ALTERNATIVE APPROACH TO REPORTING ON YOUR DISTRICT'S FINANCIAL HEALTH

The state of your fiscal health is a function of your district, not your school sites. The problem is that few districts in California publish district-level annual reports. So there is no home, in effect, for this financial report. The only traces citizens will find are in your school board meeting agendas and in articles in your local newspaper. With the crisis so obvious, and with so many districts turning to their voters for parcel tax and bond measure approval, and to their students' parents for voluntary fees for sports and busing, you'd think that district leaders would be making their case in the traditional form of an annual report to the community.

Certainly districts are getting pushed in this direction already by federal law. NCLB called for this district annual report explicitly when it was signed into law in January 2001. The U.S. Department of Education issued guidelines in September 2003, further clarifying what this district-level report should look like and how it should be disseminated. The CDE's Coordinated Compliance Review manual named the district accountability report as one of the must-have documents their teams should look for.

Whatever you think of NCLB, it's to your advantage to tell your own story. A district annual report is an effective, emphatic, and earnest way to do that. You'd be joining a tradition that is not just embraced by publicly traded businesses. Many public sector organizations and almost all nonprofits issue annual reports.

MEASURE BY COMPARING

Simply including your J-200 filing is not sufficient. For the reader -- anyone from a site council parent to the leader of your teachers union, from a member of your Chamber of Commerce to the human resource director of your community's largest employer -- the issues differ. What they seek is clarity, candor, and meaning. And this can only emerge if you discuss a limited number of key factors using two comparative benchmarks: (1) how your district's spending and revenue compares on a per-ADA basis to that of other districts in the county and state; and (2) how your district's spending and revenue has changed over time.

The comparative benchmarks enable a lay reader, a humble citizen lacking accounting knowledge, to make sense of the numbers. The two views -- one comparing your district to others, the other comparing your district to itself over time -- provide a meaningful metric easily grasped by anyone who can read USA TODAY.

The factors are well presented already on the Ed-Data Partnerships Web site (FCMAT is a part of the Ed-Data Partnership.) They offer both a summary and fully detailed view of ten years of J-200 filings. They index each line item, viewed on a per-ADA basis, against the average district in the state. Line items well above or below the average jump off the page. Also included are teachers salary and benefit scales for four years, including year-to-year pay raises.

The factors that matter for all districts include salaries, benefits, number of teachers employed (FTE), and enrollment trends. For other districts, debt service and deferred maintenance matter, too. Some factors are harder to flush out from the J-200: special education costs, legal fees, litigation settlements. As Tom Henry explained, rising enrollment can bring in enough funds to mask underlying stress points. Other factors, like the value of buildings and land, or the degree of utilization of plant and equipment, are not to be found in the J-200.

More difficult is identifying the future cost of commitments already made. If your district has agreed to future raises for teachers or has granted lifetime medical benefits (as West Contra Costa USD did almost ten years ago), that would at least warrant comment in your annual report.

SUMMARY RECOMMENDATIONS

Reach beyond compliance. You need not be a prisoner of the accountability reporting laws. Go beyond what the laws require to do what's best for your district.

Write for your reader. A financial disclosure that is formally correct but which leaves your reader scratching her head is not effective. Aim for what your teachers aim for: the "aha" moment when the light bulb goes on

Publish a district annual report. This is both a requirement under NCLB, and good business. Get the funding for this out of the vulnerable general publications budget and into a protected line item. It is a strategic communication that will return handsomely on whatever you invest in it.

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