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The 5Ws of Year End Financial Reviews

What exactly should a K-12 year end review look like?  In this blog, we outline the 5Ws to explore best practices to review spending trends and behaviors.

It’s hard to believe another school year is coming to a close. This time of year, as districts across the country are planning graduation ceremonies and buttoning up classrooms for the summer, they often “just keep swimming” rather than taking the time to look back at the fiscal year and see how they performed. Financial review is key to this reflection and can inform planning for next year.

By taking the time to review finances at the end of the year, school districts prepare and start the new school year off on the right financial foot after a long and restful summer break. What exactly should a year end review look like? We’ll use the 5Ws method from our literary friends to explore this process.

Vendor Review: Who did you pay last year?

With a full year of transactions behind you, it’s important to conduct a vendor review. Since many purchases are being made independently throughout the year, aggregating transactions by vendor can quickly highlight areas where purchasing efficiencies and potentially cost savings could be realized. Through this review, one of our districts uncovered a vendor contract that was set to be cancelled, but payments had continued unintentionally. Now, that’s money in the bank!

In addition to reviewing vendors, it is also important to take time to review one-time payments (bonuses or stipends) that occur at the end of the year. With purchasing deadlines looming, we often see a spike in these payments at year end as a means to use up funds that won’t carry over. We need to review these transactions to ensure payments were intentional and paid fairly across employee groups.

Spending Inventory: What did you buy?

At the end of the year, it’s also important to take inventory of what you purchased.. Create a summary of your school or district’s transactions by cost categories (objects) to understand the types of purchases that were made. Generally, salaries and benefits make up about 90% of spending in a school district, but how do the other spending categories pan out?

The summary below breaks down per pupil spending by personnel and non-personnel transactions highlighting a significant disparity in non-personnel spending between schools. While there could be a very logical explanation for the variance in spending, it’s important to know if the variance exists to ensure intentionality in spending.

Image of variance in spending in Balance Manage

Take time to look at other cost categories as well to understand the percentage of total spend for each category.

When did you spend money?

For most school districts, there is a spike in spending at the beginning of the year as purchases are made in preparation for the school year. This trend is usually followed with steady spending throughout the remainder of the year. This type of pattern indicates spending against a plan.

Image of spending planning steps

Unfortunately, what is more often the case is a large bump in spending at the end of the year. When dollars are expended at year end there is little chance those funds have benefitted students in the current year and the spending is often aligned to a deadline or purchasing cutoff rather than a strategic plan.

Cost Center Review: Where were funds spent?

Create a summary of expenditures and remaining balances by location or cost center to understand where funds were spent across the district and how much is remaining at each cost center. Below is an example of this type of summary created in Balance.

Image of account summaries in Balance Manage

Review final ending balances to ensure there aren’t any cost centers that have overspent or have left dollars on the table. Take time to understand if this is a pattern for each of your cost centers and make a spending plan for the next year. If funds are historically underspent in a particular cost center, there could be an opportunity to reduce the budget and reallocate funds elsewhere.

Why was the money spent?

Budgets and spending should be the expression of a strategic plan. Take time during this end of year reflection to understand how funds were spent against particular strategies. Was there a new intervention program or technology initiative rolled out this year? Identify the underlying transactions related to these strategies.

Image of goals for spending in Balance Manage

Balance has the ability to make this task much easier using account and transactions tags. These tags gather transactions that have relationships outside traditional chart of account structures and can make it easy to search for and summarize all related costs for a particular program.

Allovue’s Balance Manage helps school districts to view available account balances and track spending at the transaction level. Budget managers can easily filter accounts and transactions by fund, program, location, or other account level details to view daily updates of their budgets and spending. Learn more about how Allovue can help you manage your finances. Contact us to learn more or to request a demo at: hello@allovue.com.

About the Author

Image of Kate Kotaska 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.