Introduction
A budget refers to a list of planned expenditures and revenue. For a government, this is a summary of how the government plan to get revenues and how it will spend that money. In America, the federal budget is planned by the management and budgeting office and then taken to the congress for deliberations. Congress will make any desired changes on the budget; all states in America are supposed to have a budget that is balanced. However, the federal government is permitted to have deficits.
The budgeting cycle
We are going to examine the budget cycle and analysis that is normally taken when planning a budget. For the purpose of this paper, we are going to examine the budget cycle and analysis of a public district school. The budgeting cycle involves various aspects, which include; development of a budget, budget monitoring, strategic planning, results in communication, and then final assessment. Schools are required to make budgets for the sake of sound financial planning and accountability, as Hartman observers. Education budgets are a good working instrument for the success of local district schools and also the states. And provide an important chance for planning the school mission, improving school operations, and achieving the schools’ education objectives.
Factors considered before budgeting
The district school budget for the next financial year is normally based on a different factor. One an analysis of existing and also proposed programs of education, and also any new permitted by the Michigan laws or by the district school board. Two; an analysis of the district financial records and also audits got from the current preceding financial year accounts to be able to determine the district fiscal strength. Thirdly, before the budget is developed, the school has to the analysis of current and impending employees’ union consultation. Lastly, the budget reflects on projected income for the subsequent financial year. Various districts will put different degrees of highlight on the above four discussed factors.
Use of the budget
The budget gives a level of satisfaction of financial planning information to the state, the local authorities, and also the federal government. It also gives useful information to the taxing authorities. And it is used by the school to show how accountable the school is. Budgeting also provides an opportunity for parents to analyze the school source of funds especially the number of federal funds.
Budget development
The school districts have a lot to do because they must track their internal expenses and also track other many complex fiscal and budgeting. However, other districts have no written description about the way their budget procedures. District heads know these procedures of the head and draw the budgets without written laws. In developing the budget, the school makes an estimate it will need to spend for the financial year and how it will get the revenues to spend, as Bruce and Sheree state. Budget development can be done in two ways either vertical budget, which lists all different revenue and expenditure in that particular year, while the school can use a horizontal budgeting plan that will base its revenue and expenditure on comparison of the current the previous financial year.
Federal requirements for school district budgeting
The department of education in America states that developing school budget is a process that requires five steps to be followed by the schools.
Step one
The first step in many public schools started by the top management, normally a superintendent, who, together with district workers assigned to develop the school budget, spend most of the part of the year collecting data from the available sources. After this, they make recommendations. Then they will come up with a final product which they submit to the board of the school. The board will make amendments on the part they feel necessary, and after that, the board will endorse the final budget. After the board coming up with the final budget, the budget will be taken to the district level. Here the district board may give an assumption announcement, which will lead to major assumptions and formulas that will be employed in developing the budget. Secondly, most district schools issue calendar of main processes in their budget. If the calendar is not available, then a superintendent in charge of the budget can provide the timetable of the budget. It is important to note that at this moment, it is necessary for the people monitoring the budgeting process to familiarize themselves with the board members.
Step two
In this step, the proposed budget or its summary is presented to the board of the school; this is usually done a few days before the budget is officially made public. The board members at this stage can discuss about the budget proposals.
Step three
In this step, the budget is made public for the citizen to view and review. After this, the budget can then be published. It should be noted that this occurs in the late stage of the budgeting process, and the public is usually given little time to read the budget, ask the board questions, and propose any changes.
Step four
At this stage, a public hearing is done; this is usually organized by the board of the school. These public hearings can be more than one. At this point, the school is seeking public views on the budget. However, at this point, it is hard for the public to make any changes.
Final stage
At this point, the budget is then adopted, and the funding is approved. The board usually adopts the budget after the public hearing.
Michigan requirements
The Michigan laws put certain requirements that need to be followed by the education board in formulating a budget. This stipulation states that; the budget has to be made in a tentative form first, which will include income and expenditures that the school anticipates during the financial year. It should also show the expected cash in hand at the beginning and at the end of the next financial year. The secretary of the board issues a notice of the place, when, and at what time the proposed budget will be displayed for the public review. The secretary will also issue a notice of where and when they will be a public hearing of the budget. In Michigan, the secretary is supposed to ensure that the proposed budget is ready for public review 30 days before the proposed budget public hearing. Before the budget is adopted, the board of the school should hold two or more budget hearings. During the public hearing, the proposed budget details are explained, and the public is free to ask any questions and make any contributions to the budget.
The schools are provided with “school district budget forms,” which a standard form is meant to meet all the budget requirements.
The significance of clear and reliable information about budgetary cannot be underestimated; once the school budget is adopted, this budget will be used for the whole year. The yearly budgets are approved by all public district schools, and this includes all finances. This budget sets plans for achieving the financial targets of the local education board. Schools budgets are required to contain a previous annual statement detailing how they got their revenues and how it spends. The forms provided to the school give specific details on how they can do this. The board can then vote on the proposed budget and adopted it or reject it; this is done in public after the budget public hearing. It is necessary for the budget to be adopted by the school district before the beginning of the second quarter of the financial year.
Posting the budget on the web
According to the Michigan school code, under stature 17-1.2, it then requires that for those school districts which have websites; they should place the current budget details on the school website. After posting the information, the school authorities should notify parents and or guardians, informing then that they have posted their budget on the website. In case of any budget amendments done on the budget, the school is advised to post these amendments on their website. Though this is not a must for the school it is important and necessary.
Line item transfer
In case of any transfer of items fund, the board of education can hold a board resolution and make transfers of different items in any given fund; the transfers should not go beyond an average of 10% of the total amount of the money set for that specific item.
Any budget amendments can be done; this will be done through the board by following the same steps that were followed by the board when making the budget.
Key factors in school budgets
Every year, the local board of education adopts a number of budgets, which specifies the amount of revenue required to meet the expected expenses. All schools are supposed to maintain the budgets, and no deficits are expected. Many factors are considered, but the most important are mention below, which includes Funds;
School district accountant records the budget and also financial reports and organize them depending on the fund basis. A fund for specific activities is established. This fund is run according to the laws, restrictions, and regulations. Each established fund is an independent and separate accounting entity that has its individual assets and liabilities together with the fund’s balance. The school districts will determine how many funds are created. The fund does not depend on the size but the operations of the school district. The major funds that can be created include; education, transportation, operations and maintenance, bonds, and interest, municipal retirements, rent, working cash, and lastly, fire prevention and safety.
Analyzing the budget
This includes examining the different funds allocated to know how much will be spent on particular items/ funds and how it will be spent. In analyzing the budget, the board will examine the various fund discussed before. The education fund is normally highly varied and with the biggest volume of contracts. This is because the education fund includes other transactions that aren’t contained in other funds. Other expenses that are contained in this fund are expenditure of health, instructional costs, lunch costs, and other administrations costs. Other related costs that are charged on this fund are insurance costs, education tax, textbook rentals, and tuition. Janitors’ salaries and other workers’ salaries are also contained in this fund. The board of the school may decide to make any alterations to the operations and maintenance fund. All expenses of maintaining, repairing, and also improving the school infrastructure and property are under operations and maintenance fund. The analysis of all other funds is done to ensure that the budget has addressed all the issues required. The analysis also tries to pin point areas that the budget need to emphasize.
Time table of budgeting
In Michigan the budgeting process normally begins in the early autumn just before the financial year begins as explained by Oslon. The graph below will give a summary of activities of budgeting. The graphic chart below shows the flow of the steps of budgeting in district schools of Michigan.
Conclusion
Budgeting is a complex process that requires a lot of planning and accounting. For a successful budget the income and expenditure must relate to each other. A budget should be able to underline all the items that the school intends to spend and how it will spend. In creating a budget, public district school are faced with federal and also Michigan laws on how they should plan their budget. Budget development involves various steps ensures that the budgets created are according to the requirements of the schools. As Barry and Harold observes, the board of the school and the public has an important role in budgeting process. Analyzing the process is also important, as it presents a chance for correction.
References
- Oslon, S.R. The budgeting process: (2007) Web.
- William, H. T. (1999): School District Budgeting. Reston, VA: Association of School Business Officials International.
- Barry M. M.and Harold S.I (1982): Managing Public Resources. New York: Peat Marwick International.
- Thompson, D. C., and Wood, C R. (2001): Money and Schools. Larchmont, NY: Eye on Education, Inc.
- National Advisory Council on State and Local Budgeting, (1995): A Framework for Improved State and Local Budgeting and Recommended Budgeting Practices. Chicago: Government Finance Officers Association.
- Bruce, C. S.and Sheree, S T. (2001): Advanced Budget Technology in Education: The Future Is Now.” School Business Affairs 67 (2):27 – 32.
- Walter, H. et al. (1994): School Business Administration: A Planning Approach. Boston: Allyn and Bacon