"The public is looking for a return on its investment, and it rightly should."
Lowell Milken, president and co-founder of the Milken Family Foundation, commenting on the $5 billion annual public expenditure on K-12 education technology
Installing and managing technology in schools involves allocating (and reallocating) resources. Educational decision making almost always leads to decisions about resource allocation. In the planning process, budgets can inform the allocation of resources (budgeting as a part of technology planning is covered in Chapter 1). Knowing what has been expended supports future planning by comparing prior inputs to expenditures and allows decisions to be made about relative priorities. What to include in expenditures for technology, and how to organize the information, is what this chapter is about.
Awareness of the financial obligations associated with technology implementation and maintenance can go a long way toward ensuring two important management goals. First, budgets must be adequate to reliably support the technology system as designed. Second, a financial plan must include the necessary funding to replace technology components as they become obsolete. The lack of either of these key ingredients in the budgeting process will ultimately result in a technology system that does not function as an effective tool and can actually become a political liability to a school system. School districts would then be forced to deal with a significant decision-making issue in explaining to the community the rationale for the original technology expenditures.
This chapter provides suggestions and resources to assess expenditures for technology. Answering the key questions for this chapter amounts to estimating the annual share of a school or district's Total Cost of Ownership (TCO) for technology. TCO is a concept from the business world that is applied to the lifecycle costs of computing, usually standardized as a ratio of costs per equipment unit, such as a desktop computer (see sidebar "Understanding Total Cost of Ownership" that begins on the facing page for a discussion of its application in schools). The TCO concept can assist educational leaders to understand more clearly the costs required to successfully implement educational technology. A number of TCO support instruments and discussions can be found online: the Consortium for School Networking (CoSN) offers "Taking TCO to the Classroom" (http://www.classroomtco.org); other resources can be found at http://www.iteg.com/tco.htm.
Another important concept is return on investment (ROI). More important in administrative than in instructional applications, ROI analyses usually focus on the amounts of money saved by implementing technological advances or innovations. An example of such analyses can be found in a report to the San Diego City Schools Board recommending adoption of an electronic form (see http://www.sdcs.k12.ca.us/board/reports/2001/br.011127/e1a.pdf).
There are two aspects to the financing of technology (or any entity, for that matter): expenditures and revenues. Revenues would be fairly straightforward to discuss, but are less germane to financial analyses for technology than expenditures. For the present, this chapter restricts its consideration of technology finances to expenditures.
School financial systems are not particularly well configured to identify and present the costs associated with deploying, maintaining, and upgrading technology in schools. Categories used for budgeting in connection with technology planning overlap poorly with the major categories used in school accounting. The end result of these two different approaches is ongoing difficulty in reconciling technology expenditures with school financial reports.
Local and state requirements affect financial reporting practices, arguably more than they do any other area of data collection. The data elements available for analysis, and the way they are treated to produce reports, can vary widely within the bounds of generally accepted accounting principles (GAAP). This applies with particular force to the following aspects of cost accounting: the general allocation of functions to programs; the allocation of costs for equipment purchases and support services; the definition of indirect costs; and the definition of bases for the allocation of indirect costs. Cost assignment and depreciation schedules for equipment are particular issues.
TERM DEFINITIONS AND CATEGORIES
Account classification structure: For the purpose of defining data elements in the financial area, there are two sorts of financial transactions or activities: revenues and other sources of funds; and expenditures and other uses of funds. Both revenues and expenditures have a number of aspects or dimensions:
Fund: A fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources. It also contains all related liabilities and residual equities or balances. Funds are established to carry on specific activities or attain certain objectives of a local education agency (LEA) according to special legislation, regulations, or other restrictions. Seven fund types are recommended in Financial Accounting for Local and State School Systems, 1990 (NCES 97-096R):
Revenue source: Primary classification differentiates local, intermediate, state, and federal revenue sources. Revenues from restricted sources would be further classified using project/reporting codes. For some revenue source categories of possible interest to technology in schools, see pp. 81-82 of Financial Accounting.
Note: The Finance Task Force of the Forum is working to revise Financial Accounting; it is expected that some of the categories will be expanded, and definitions will change, as the task force's work progresses.
The key questions and indicators for this chapter relate to annual expenditures for items covered in other handbook chapters. Technology planners and administrators may want to refer to the relevant chapter for the development of further budgetary indicators. The time period of a year which the key questions imply is arbitrary; a different time period may be chosen, such as 5 years or less.
The important point of the indicators is that measurement units are ratios, such as expenditures as a percentage of amount budgeted, or amount spent per student, per teacher, or per building. Raw numbers are not interpretable without context, and creating uniform indicators such as those below allow data to be compared.
Classifying expenditure indicators as capital or consumable is complicated by the fact that coding thresholds differ widely from one state to another, and sometimes even within states. (See the sidebar to the right on differing thresholds.)
The first thought that occurs to technology planners and administrators when facing the costs of technology programs is whether or not their expenditures are comparable to those of other schools and districts. There are a variety of indicators that can be used for making comparisons; alternatives are detailed in the indicators below. Schools can also compare their expenditures to those of other schools in their district, regardless of school size, or they can choose comparable schools in other districts in their state.
|Expenditure comparisons for technology equipment||Expenditures for administrative equipment as a percentage of total technology expenditures.|
|Expenditures for instructional equipment as a percentage of total technology expenditures.|
|Average expenditures for instructional equipment per student, per teacher, per building.|
|Average expenditures for administrative equipment per building.|
|Expenditure comparisons for technology applications||Expenditures for administrative software as a percentage of total technology expenditures.|
|Expenditures for instructional software as a percentage of total technology expenditures.|
|Average expenditures for instructional software per student, per teacher, per building.|
|Average expenditures for administrative software per building.|
|Expenditure comparisons for maintenance and support||Expenditures for maintenance and support as a percentage of total technology expenditures.|
|Average expenditures for maintenance per student, per computer, per building.|
|Average expenditures for support personnel per student, per computer, per building.|
|Expenditure comparisons for professional development||Expenditures for administrative professional development as a percentage of total technology expenditures.|
|Expenditures for instruction-related professional development as a percentage of total technology expenditures.|
|Average expenditures for instructional professional development per student, per computer, per building.|
|Average expenditures for administrative professional development per administrative staff member, per building.|
|Expenditure comparisons for connectivity and infrastructure||Average expenditures for connectivity per student, per building.|
|Average expenditures for infrastructure upgrades per student, per building.|
Probably the most important aspect of tracking equipment costs is the replacement cycle that the indicators below cover. (Coding would most likely not differentiate between replacing obsolete equipment and purchasing new equipment.) It may be helpful for technology planners and finance professionals to keep in mind that the generally accepted life cycle of equipment is about five years in education versus two to three years in business, though different schools and programs may have shorter cycles (for instance, laptops will have shorter replacement cycles than desktop machines). Also, a replacement cycle may not apply to some indicators that this key question includes, such as leasing equipment and server space.
|Expenditures for instructional technology equipment||Expenditures as a percentage of the amount originally budgeted.|
|Average expenditures for instructional equipment per student, per teacher, per building.|
|Expenditures for administrative technology equipment||Expenditures as a percentage of the amount originally budgeted.|
|Average expenditures for administrative technology equipment per building.|
ndicators include software purchases, leases, and service subscriptions, including online content services. Software upgrades are most likely not distinguishable from new software purchases. The school's approach to software purchases, as well as the professional development and knowledge level of instructional staff, are likely to markedly affect these costs.
More detail on software purchasing patterns (for instance, separating expenditures for system-wide licenses from those for individual class or school subscriptions, and from expenditures for one-time purchases) and separation of general instructional technology costs from administrative or instructional software and systems expenditures might be clearly desirable. Separating out expenditures for classes of administrative software (by major business function) or instructional applications (by grade level or curriculum area) might also be desirable. However, it is unlikely that such information will be obtainable from currently available financial categories.
|Expenditures for instructional technology applications||Expenditures for instructional software as a percentage of total expenditures for instructional materials.|
|Average expenditures for instructional software per student, per teacher, per building.|
|Instructional software expenditures as a percentage of the amount originally budgeted.|
|Expenditures for administrative technology applications|
|Expenditures for specialized administrative technology applications as a percentage of amount originally budgeted.|
|Average expenditures for software per building.|
These indicators include overall maintenance, personnel, and support contracts. Maintenance and support expenditures may be difficult to precisely ascertain because teachers and even students may be doing maintenance on a volunteer basis, or as staff hired only to perform those duties. Loss of productivity is another aspect of maintenance and support that may or may not be able to be determined or even considered in expenses. The important factor to quantify for any school district in maintenance and support is the cost per student and ratio of support personnel to computers.
|Expenditures for maintenance and support||Expenditures for technology support personnel as a percentage of the amount originally budgeted.|
|Expenditures for maintenance agreements and contracts as a percentage of the amount originally budgeted.|
|Expenditures for replacement components as a percentage of the amount originally budgeted.|
expenditures for overall maintenance and support per student, per
The indicators below include contracts, personnel, and reimbursement. One difficulty of ascertaining the costs of professional development for technology is differentiating those costs from those for staff development in general. See Chapter 6 for further discussion of this topic, including the need to quantify training by context. Job-specific training is key to successful programs, and the need to present or perform certified technology skills in order to advance may help make some professional development programs more effective.
|Expenditures for instructional professional development||Expenditures for training materials such as videos and related publications as a percentage of total expenditures for instructional professional development.|
|Expenditures for external consultants as a percentage of total expenditures for instructional professional development.|
|Expenditures for presentations and workshops delivered in district, as a percentage of total expenditures for instructional professional development.|
|Average expenditures for professional development per teacher, per building.|
|Expenditures for administrative professional development||Expenditures for training materials such as videos and related publications as a percentage of total expenditures for administrative professional development.|
|Expenditures for external consultants as a percentage of total expenditures for administrative professional development.|
|Expenditures for presentations and workshops delivered in district, as a percentage of total expenditures for administrative professional development.|
|Average expenditures for professional development per administrative staff member, per building.|
This indicator covers line charges, subscriptions for system software, and contracts with Internet service providers (ISPs). However, some connectivity and infrastructure costs can relate to specific technology facilities' requirements, such as HVAC, security and electrical capacity expansion, and even lead and asbestos abatement. See Chapter 1, Technology Planning and Policies, for an explanation of planning for these costs.
It is particularly important for this key question to separate capital investment costs-that is, non-recurring expenditures such as wiring or rewiring, the purchase and installation of wireless components and communications servers-from annual, recurring expenditures such as Internet access provision.
|Expenditures for connectivity and infrastructure||Expenditures for telecommunications and Internet access as a percentage of amount budgeted, as a percentage of total expenditures for connectivity and infrastructure.|
|Expenditures for networking maintenance agreements and contracts as a percentage of original amount budgeted, as a percentage of total expenditures for connectivity and infrastructure.|
|Expenditures system or network monitoring software as a percentage of amount budgeted, as a percentage of total expenditures for connectivity and infrastructure.|
|Average expenditures for connectivity per student, per teacher, per building.|
The unit records below reflect the many levels at which finances are typically analyzed, based on the category of expenditure and record time period. These are units of measurement that would be determined by technology planners and/or administrators according to their own school or district's needs.
EXAMPLE OF UNIT RECORD STRUCTURE: SAMPLE UNIT RECORD FOR ANNUAL TECHNOLOGY EXPENDITURES
Direct technology expenditures:
Professional development expenditures:
Excerpted from "Technology's Real Costs," by Sara Fitzgerald
TCO can vary among companies, and different consultants use different formulas to calculate it. In most cases, though, TCO combines the "hard costs" of operating a network-including, for instance, the costs of training employees, maintaining a help desk and support staff, and repairing computers-with some calculation of "soft costs," namely the loss in productivity when users have to stop and fix their own computers or the network is down because of poor maintenance.
School districts, of course, are different from businesses and make their budgeting decisions based on very different factors. Nevertheless, even if a school district is not in a position to analyze its Total Cost of Owner-ship in a formal way, school leaders still need to understand all of the costs involved with operating computers if they are going to use them to their full advantage-and cost-effectively.
In 1997, International Data Corporation surveyed some 400 schools and calculated that the Total Cost of Ownership for a school with approximately seventy-five computers was $2,251 per computer annually. This result compared very favorably with a business of the same approximate size that indicated an annual TCO of $4,517 per computer.
Reprinted with permission from the September 1999 issue of Electronic School, Copyright © 1999. All Rights Reserved. An updated version of this paper can be found at http://www.electronic-school.com/199909/0999sbot.html.
John Techno has left Dr. Neussup a copy of the most recent technology plan implementation report, containing financial data for the previous school year. Impressed with John's efforts, Dr. Neussup calls to ask him to prepare an update presentation for the School Board on the status of the district technology plan and the expenditures per student to date to meet the goals of the plan. "Why don't you include a comparison to the technology expenditures of some other districts in the state that look like Freshlook County?" she suggests.
Knowing that the next School Board meeting is only two weeks away, John sighs. Now, how can he get data on other counties, and what would make them comparable?
Lost in thought, he forgets to tell Dr. Neussup that he has an appointment to meet with the Science Department head at Freshlook High School, to answer the other question she's put to him.
[To be continued...]
Under some state threshold coding rules, computers are considered a consumable supply and therefore have a simple purchase process, while under other rules they are a capital expenditure and need districtlevel authorization, etc.
Note: All numbers refer to the year 2000 or earlier
Alabama: $500 capital threshold statewide.
Alaska: Criteria for distinguishing capital equipment from supply items: cost exceeds $500; must be an independent unit rather than a part incorporated into another unit; is cheaper to repair than replace; and the cost of tagging and inventory is a "small percent"...
California: Specific dollar level is left to discretion of LEAs. State guidelines for classification as capital vs. supply include the following: does item lose original shape and appearance with use; does it have a normal service life of less than two years; is it easily broken, damaged...
Colorado: Dollar thresholds for capital are left to LEAs to establish, provided item does not exceed $5,000. District's fixed assets policy establishes criteria for when equipment must be capitalized and included in district's property inventory records.
Connecticut: Minimum threshold of $1,000. Technology is not treated any differently.
Florida: $750 threshold.
Georgia: Use expectancy of less than 2 years and costs of less than $2,000.
Hawaii: N/A, since all funding is from state and federal sources.
Fitzgerald, S. (1999). "Technology's Real Costs," Electronic School. See http://www.electronic-school.com/199909/0999sbot.html
Levinson, E., and Surratt, J. (2000). "Four Figures to Know When Calculating TCO," abstracted from "Buying Technology Using Good Horse Sense," eSchool News. See http://www.eschoolnews.com/news/showStory.cfm?ArticleID=1495
U.S. Department of Education, National Center for Education Statistics. (1990). Financial Accounting for Local and State School Systems, 1990 (NCES 97-096R). Washington, D.C.: U.S. Government Printing Office. See http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=97096r
U.S. Department of Education, Office of Educational Research and Improvement. (1998). An Educator's Guide to Evaluating the Use of Technology in Schools and Classrooms (ORAD 1999-1200). Washington, D.C.: U.S. Government Printing Office. See http://www.ed.gov/pubs/EdTechGuide/
U.S. Department of Education, National Center for Education Statistics. (1999). Best Practices for Data Collectors and Data Providers (NCES 1999-191). Report of the Working Group on Better Coordination of Postsecondary Education Data Collection and Exchange, National Postsecondary Education Cooperative. Washington, D.C.: U.S. Government Printing Office. See http://nces.ed.gov/pubs99/1999191.pdf
Technology and Facilities Modification Investment Worksheet, Integrated Technology Education Group, LLC, for the National Center for Supercomputing Applications. See http://www.ncsa.uiuc.edu/IDT
Taking TCO to the Classroom, Consortium for School Networking. See http://www.cosn.org/initiatives/
Understanding the Total Cost and Value of Integrating Technology in Schools. An IDC White Paper Sponsored by Apple Computer, Inc. (1997). See http://www.apple.com/education/k12/leadership/LSWTF/IDC.html