Mid-year financial reviews are an important way to measure financial progress within the school year and ensure the budget accurately reflects the spending plan. Mid-year reviews are also an important jumping off point for budget planning for the next school year.
Ideally, mid year reviews are part of a more frequent financial review cycle either quarterly or monthly to ensure dollars are spent strategically and we’re not overspending or leaving any money on the table at the end of the year. The most common reason we see districts not conducting regular financial reviews is that they believe the process is too time consuming to carry out.
One way to complete a mid year review is through a Source and Pace analysis to gain a quick sense of financial performance for your schools and departments.
Source and Pace Analysis
The Source and Pace analysis looks at the pace of spending across selected funding sources to gauge whether a school or department is at risk of overspending or underspending at the end of the year.
Simply put, Pace is:
a comparison of the percentage of budget remaining versus the percentage of the fiscal year remaining, and
an assessment of whether the school or department is spending fast, slow or on track.
Setting the Pace
When you are setting the pace, the first step is to identify the funding sources to be reviewed and the budgeted and remaining funds associated with those funding sources.
Once the sources and cutoff dates are identified you’ll calculate the percentage of the year remaining for each source. We recognize that spending deadlines can vary for different funding sources, or that departments may have a different spending cutoff than schools who will be out for the summer months, so be sure to factor in these circumstances when calculating the percentage of the year remaining.
Adjusting the Pace
When calculating the pace or percentage remaining in the fiscal year, it’s also important to take a look back at historical spending trends to ensure spikes or lulls aren’t coming up in the second half of the year. In the chart for this sample district you can see a large spike in spending occurs in the spring months likely as budget owners make the mad dash to spend down funds before the end of the fiscal year.
For this district, 75% of the total spending actually occurs after December 31st. The pace should be calibrated to account for these types of trends.
Evaluating the Pace
Once the pace is calculated it’s time to see how school and department actual spending and remaining budget compares to the pace.
We generally use three broad categories * On track means a school’s remaining budget is within 5-10% of the percentage remaining in the fiscal year. These schools are at low risk for overspending or underspending the budget at year end.
A slow pace indicates that the school is has a larger percentage of budget remaining than the desired pace and could leave dollars on the table at year end.
And finally, a fast pace means that there is a lower percentage of budget remaining than the desired pace and the school could be in a position of overspend at the end of the year.
It’s important to remember that the source and pace analysis in NOT a forecast and conversations about the pace of spending are an important part of the mid year review process to fully understand spending plans in order to make any necessary adjustments.
This type of analysis can be done largely within our Balance Manage platform and we’ve seen many of our partner districts leveraging the tool for mid year financial reviews and also more regular quarterly reviews with just a couple clicks of the button.
About the Author
Kate Kotaska is a Senior District Partner for Allovue, Inc. Before joining Allovue, Kate spent the majority of her career in Denver Public Schools shaping the district’s resource allocation model and building a backbone of financial support known as the Financial Partner Network. As DPS’ Executive Director of Budget and Finance, Kate was responsible for streamlining the district’s budget process to maximize stakeholder engagement and transparency. Kate earned her undergraduate degree from Pace University in Pleasantville, NY.