In a preview of his presentation at the May 30 PICPA Pennsylvania School District Conference, Dr. Timothy Shrom discusses the benefits of benchmarking for school district business officials, value-added strategies that exist to help school districts improve the process, and steps to take to ensure benchmarking efforts net useful results.

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By: Bill Hayes, Pennsylvania CPA Journal Managing Editor

Podcast Transcript

Benchmarking is an often-discussed and invaluable tool for school business officials, but what areas should be looked at when benchmarking in school district financing. And what are some fruitful sources that exist when school business officials go looking for suitable data? These answers and more will be provided at the May 30th PICPA Pennsylvania School District Conference by Doctors Timothy Shrom and Andrew Armagost of the Pennsylvania Association of School Business Officials. Today, we are lucky enough to have Dr. Shrom with us to provide a preview of their presentation.

What would you say are some of the steps a school district has to take to ensure their benchmarking efforts are appropriate and will net useful results?

[Shrom] I think you have to start with the whole concept of are you doing something that's very formal or you doing something that's informal. I always like to tell people, you just need agreement on what you're doing. What are you going to be measuring? It's really a what, why, and then gets to the who question. It's sort of like an agreed-upon process. You start tracking things, you start trending things, you know what you want to do, but it moves on down the list in terms of then, what are you actually trying to get into? Are you trying to do something for an internal operations piece or are you going to do it for strategic purposes that was maybe board-level-driven or is it something internal-driven, just within your office?

When you look at those first steps, it really comes back to that, that what and why. And sometimes, you know what? It's just a fishing trip and it is like, I need to collect this data to see where we're at because we don't have it collected. It really comes down to that first step of getting agreement on what are you going to collect and why, what's the actual intent, how formal do you want to be? But it's amazing how some of those first steps actually start to lead you down other paths. That's the beauty of actually putting some processes together for collecting the data.

What would you say are a couple of the more common areas looked at when benchmarking in this area that we're talking about, which is, of course, school district financing.

[Shrom] Particularly within school district finance, everybody wants to look at the major revenues and the major expenses. They always just jump right out. I always remind students and or people when I'm talking to them about school finance, that school districts have two budgets. People tend to forget that. They say, “What's your debt?” And someone says 60 million, 100 million, whatever. But they really have two budgets. So you have the revenue budget and the expenditure budget and they both have to balance as I like to say E equals R every time. I think that's where a lot of people start. I see a lot of people get really involved in per student revenues, per student expenditures. There's some good things with that and some bad things with that.

We're going to be talking about that at the conference a little bit as well. The major functions within school finance, those who are doing the accounting work within schools, understand what I mean by the functional areas. I like to work in the object areas a lot. Then I think in terms of, again, more common areas the percent shares. I work in a lot of different consulting areas with percent shares. What is driving your budget? Here's a good example. Good example would be, and maybe people don't really think about it, but within the object codes of salaries, there are some school districts that are just dominated by salaries because they actually like to do everything in house. And then there were many districts who aren't so dominated in salaries because they have prequel dominated and some contracted service areas because they like to contract stuff out.

There's many reasons for both, but you don't necessarily have to reach the target in the same manner. So again, when people are looking at collecting data and then trying to compare, which is what a lot of people try to do, you really have to be aware of what you're comparing because you might be collecting the same type of data from two different school districts, but if they're reaching the target meeting and instructional outcomes for students that are reaching that target, coming at it from a couple of different approaches of either in house or contracting it out, you have to be very careful about comparing your data.

We're not going to be able to get into all the information that people are going to get at the presentation, but what are one or two of the more valuable sources that exist for school districts when they're searching for this data?

[Shrom] Well, first of all, it's their own data. To me, that's important. If you don't know yourself, you should know yourself better than anyone else. So that's the first place and you just have to have good internal records. The second one is really PDE – Pennsylvania Department of Education – data sources. There's a lot of stuff there that you can just go and download, bring in, drop into spreadsheets. The AFR files – annual financial report files – budgets, lots of metric files, particularly within the new basic formulas. Lots of metrics, that's in there. Maybe not so well known, but maybe a couple of hundred of our school districts and LEA across the state work with a Forecast 5, which we refer to as “the five data.” Then we also have about 200 plus, maybe approaching 300, school districts working through the Novo product, which is a healthcare tracking data process. So there's some really wide data sources and then there's some more narrow in scope in a sense of our user access. But, again, I always will go back to what do you have in-house and you need to start there because you need to know you.

Are there value-added strategies that exist to help school districts to improve the benchmarking process? If there are, what are one or two of the tips?

[Shrom] I think in terms of value-added, maybe as a result of doing the work. One of the ways that I know I've worked with some, I would call them classmates at that time, but the idea is to improve the benchmarking process. I like to build in an ongoing process with an annual report or something that comes to the board. What do we do every September or what do we do every October? We do this report or after the end of the audit, what do we generally report to the board and then build in a validation process that kind of trends things for you over time. If you don't have that, if you don't have that kind of, well, this is when we bring this report to the board or this is when we look at this report at our annual summer retreat with our business office or with our admin team. Those things get lost. Somebody can do a lot of work for four or five or six years and if there isn't a way to make sure you bring that piece back and update, it gets lost.

I see that in school district after school district as the business manager changes and the staff changes and the superintendent changes. So trying to build into a process of this is what we do and look at, I think that's huge.

What do you think are the biggest benefits of benchmarking for school districts? What are they getting out of it ultimately?

[Shrom] I think in terms of just getting to this, I'm going to go back to the why. Is it part of a mission or commission? Is it part of a charge? Is it to improve, to actually improve, or is it actually, again, the fishing trip, is it just to understand and know? Is it part of an action or follow-up? I think if you know why you're doing it, that's the huge, biggest benefit that you set up a process where you can come back and revisit it. What was the objective and goals? One of the things that drives me nuts is major decisions are made and inflection points are turned from and implemented. Then three years from now, two years from now, six months from that point, no one brings that back to the decision-making team who made that thing.

In other words, the board made this decision, what are you tracking? What were the measure points? Did it actually work? Did you tweak it as you go? But I think when you get to that benefit of getting yourself aligned with how you do this, it doesn't take a lot of time and sometimes it's not expensive at all. I think it builds confidence in the person in your team. It builds kind of a learning mode. I think it provides insights for your own operations to local comparables, to wider comparables, particularly like a Forecast 5 where we can and the PD data where you can compare across the state. And even nationally, if you would like. But the idea is I just think that there's so many benefits to doing it and some can just be so local and others can be much wider and strategic for your organization.