Common Methods of Accounting

Because budgeting is related to policy decisions, the manner in which it occurs is particularly important in schools and school districts.  Following is a brief discussion of three common options for developing a budget and recommendations for the ideal budget process.

A method commonly used is the traditional “line-item” approach to budgeting.  In this method, there exists a history of budgets divided by department and item.  It is commonly used for its ease of development, as most significant items are already laid out and can be adjusted based on changes or altered needs that develop from year-to-year.  This allows for easy comparison over a series of years.  Without performance information on each department, though, this budget approach can become a “rubber stamping” activity, failing to take into account inefficiency and waste.

Zero-based budgeting is an approach in which program units are defined for each division, which are then rank-ordered to determine the impact of each unit on outcomes for the department.  The focus is on concentration of resources where they are most effective.  Annual reviews that come with ZBB require significant staff time, planning and attention, which may create an inability to focus as rigorously on ongoing tasks.

A final budget option deserving mention is Site Based Budgeting, in which there is a focus on de-centralization, with local administrators or department heads at the center of the process.  In SBB, local control is promoted because the greatest level of understanding exists at that level.  In a school, the principal and staff members are charged with distributing resources to the necessary program components.  Committees may combine staff and community members to make decisions in this model.   Limitations of this model are that it may not be effective in an organization with scarce or limited resources.  The process may create conflict within a department or involve work outside the scope of ability of local staff. 

The ideal budgeting process would combine some aspects of the traditional “line item” approach, Zero Based Budgeting and Site Based Budgeting.  From the traditional approach, a budgeting staff can establish a baseline of historical needs and allocations.  While there may be some flux in what areas are more or less funded than in previous years, using this approach simply provides a logical starting point, since all employees and physical spaces available in a school or district office space must be accounted for.  As in Site Based Budgeting, the budget team should include staff whose “boots are on the ground” in the department that is being budgeted.  There is room for a host of inefficiency and shortages of funding if budget decisions are only made in a central office with little understanding of the day-to-day realities of a department or school.  And finally, while it is not an efficient approach alone, the concept of Zero Based Budgeting can be utilized to provide an occasional (perhaps every three to five year) bottom-to-top analysis of what resources have proven most necessary for successful operations.  The proponents of each budgeting strategy have persuasive arguments to make about the efficacy of their approaches, but in careful combination, the best approach can be crafted.