This chapter defines the need for and advantages
of a fiscal data system that is appropriately aligned with a comprehensive
education information system. In addition, it describes useful applications
of education information, in particular, information that can influence
education management and policy decisionmaking. Finally, the chapter
identifies frequent users of education information who can benefit
from the kinds of data envisioned by this handbook.
Successful management of any large organization
requires extensive and effective use of information. Information
about education ranges from staff and student information to extensive
financial information, which may also encompass school facility
and program-level information. A comprehensive education information
system can provide many benefits for education management:
The benefits of an extensive data system are
especially apparent in the relationship between programs and costs.
For appropriate, cost-effective, and timely decisions about students
and schools and programs to be made, accurate and complete information
must be widely available to the many users of education data, such
as the research community, school administrators, school boards, policymakers,
school improvement teams, creditors and potential creditors, and the
general public. The advantage of a comprehensive education information
system to school finance is that it allows a complete, accurate, and
timely display of the distribution and use of resources, with direct
educational program implications. At a time when significant questions
are being raised about spending on schools, a more comprehensive data
system has real value in its potential to uncover the answers to these
questions. Because education finance has such an important impact
on society, it is a central focus of policy debate and decisionmaking
at all levels of government-processes that are greatly hampered without
a uniform data system.
- Using data to influence decisionmaking.
Good decisions are based on inquiry and analysis. Information
technologies are available to make good decisionmaking possible
for school-based administrators, as well as for external users
of education information, such as legislators and patrons.
- Using data to target specific areas for
improvement. Timely and accurate data can help decisionmakers
at all levels focus on improvement strategies.
- Using disaggregated data to examine wide-ranging
goals. Disaggregating data for analysis helps identify
programmatic and fiscal inequities and determine what the baselines
for improvement should be.
- Using data in rapid program evaluation.
To have an impact, program evaluation must be timely as well
as complete. When program and other data are compiled and linked
in an accurate and well-designed retrieval system, the goals of
schooling can be more effectively and efficiently met.
- Using data for budgetary control.
Greater control and more informed decisionmaking are possible
when all costs of school operations are available.
- Using data to examine relationships between
cost and effectiveness. Information technologies allow
graphic representations of these data.
- Using data to improve administrative
time management and mandated reporting. When core databases
are built around the NCES Common Core of Data Elements, improvements
in administrative efficiency and time management can be significant.
The value of a
comprehensive data system is further evident in examining the distribution
of resources (fiscal equity) and the use of those resources (productivity)-two
of the major foci of school financial accounting information. Since
1971 (Serrano v. Priest 487 P.2d 1241 ), legal
challenges to state school finance systems have required states
to revise funding formulas to better ensure equitable funding among
school districts, and those same challenges have forced states to
attempt to define what constitutes an adequate education. The assumption
that a more equal distribution of resources will lead to increased
equity in the uses of finite resources continues to be debated-in
the courts, in the media, and among the general public.1
School financial accounting systems are an important
source of information for measuring the costs of an equitable and
adequate education in each school district. Recently, the emphasis
on accountability has turned the spotlight on achievement in schools,
with adequacy and equity (expressed only in terms of resource inputs)
no longer sufficient to satisfy legislators, taxpayers, parents,
or members of the general public. The focus of much school financial
information today is how much it costs to achieve a minimum acceptable
level of educational performance for all students. The clear
trend is to understand fiscal and programmatic data in terms of
the particular need of specific groups, such as students with disabilities
or limited proficiency in English or those who come from economically
disadvantaged families (Reschovsky and Imazeki 1997, 144).
Although conceptually it is convenient to maintain
a separate financial system with well-defined elements, most of
the operational and policy questions that need to be answered in
the modern era rely heavily on data that cross into other areas
as well. To be useful, definitions of school financial data must
align with other aspects of the education information system. An
aligned and comprehensive education information system should provide
the data necessary to answer questions about key areas of school
The ability to answer these questions demands
a system of education information that comprises much more than just
the finance component; in essence, an education information system
should also include at least the student records system, the staff
records system, the property system, the curriculum or program component,
and the community services component. Instructional management systems
can be (and frequently are) linked to student records systems to provide
policymakers with greater analytical capability so that they can make
the appropriate, cost-effective, and timely decisions expected in
today's complex and competitive policy arena.
- How much is spent on education?
- Who pays for education?
- How are funds allocated?
- How are educational resources linked to student
The data system needed to support these complex conditions argues
for the need to benchmark data across time and argues for "best
practices.These strenuous conditions place a premium on the standardization
of information systems. Standardization is critical if the operations
of one school district or state department of education are to be
compared over time or with those of another, or if data from the
operations of many school districts or state departments of education
are to be consolidated for comparison.
One emerging policy issue that poses a major
challenge for education information is the escalating debate on
how to increase school productivity. Inadequate data have made it
difficult to assess and evaluate educational productivity. Detailed
financial information is necessary before an understanding of educational
productivity can begin. But financial data that are not presented
in the context of other important information will paint a very
incomplete picture. An education information system with school
finance data linked to student outcome indicators is essential to
an understanding of how resources are being used and how they can
be used more effectively.
At the federal level, for example, the National
Center for Education Statistics (NCES) collects public education
finance data through the National Public
Education Financial Survey (NPEFS) and the School District Financial
Survey (F-33). The NCES is the primary federal entity for collecting,
analyzing, and reporting data related to education in the United
States and other nations. The NCES is a branch of the Institute
of Education Sciences in the U.S. Department of Education and is
authorized to collect data by Congress through the Education Sciences
Reform Act of 2002 (P.L. 107-279), 20 U.S.C. 9543.
The Common Core of Data (CCD)
Survey started collecting data beginning with the school year 1981-82
survey collection. The NPEFS survey is part of the CCD. The F-33
survey is a U.S. Bureau of the Census survey, part of the Annual
Survey of Local Governments. The NCES supports this collection effort
to ensure that all districts are included in each year's collection.
The data items on both surveys are based on the account codes presented
in this handbook, and each item on the survey forms is defined through
reference to the account codes presented here in chapter 6.2
The data collected from the NPEFS collection
are used in the formula for allocating Title I and other federal
grants to school districts, as specified under the authority of
section 153(a)(1)(I) of the Education Sciences Reform Act of 2002
(P.L. 107-279), 20 U.S.C. 9543, which authorizes the NCES to gather
data on the financing of education. The NCES collects data annually
from state education agencies through NPEFS. In addition to finance
data, the NPEFS survey also collects average daily attendance data.
Average daily attendance is the denominator in the average state
per pupil expenditure figures required by the Title I legislation.
Because these data are used in the allocation formula, established
deadlines, definitions, and editing procedures are rigidly enforced.
Survey deadlines are announced in the Federal Register, and
the definitions are based on the account codes and definitions presented
in this handbook.
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The potential value of both extensive and useful
data about education is enormous due to the magnitude of expenditures
for education at the state and local levels. As measured in total
funding or in number of people employed, education is the largest
policy arena for state and local governments with growing interest
at the federal level.
The demand of policymakers at the local, state
and federal levels for quality and useful data and outcome measures
to evaluate fiscal and programmatic policy changes drives the need
for data systems to become more and more comprehensive. Data are
constantly used to make decisions with immediate impacts and long-term
implications. For example, financial reports of state and local
education agencies are used to compare actual financial results
with legally adopted budgets; assess financial conditions and results
of operations; assist in determining compliance with finance-related
laws, rules, and regulations; assist in evaluating efficiency and
effectiveness of processes; and plan for the future. The GASB defines
financial reporting as the means of communicating financial information
to users (GASB Concepts Statement 1, Objectives of Financial Reporting,
paragraph 32). For this communication to be effective, financial
information must have the following basic characteristics (Governmental
Accounting Standards Concepts Statement 1, Objectives of Financial
Reporting, paragraphs 63 through 68):
These standards imply wide uses of data and
require carefully designed policies to help guide decisions about
who uses a system of information (and how, why, and when they do so).
Some policies are codified in law or regulations; others are official
statements, executive orders, or agency directives. Government information
policies are guided by two complementary, but sometimes conflicting,
purposes: stewardship and usefulness. Stewardship encourages policies
that regard government information as a public good, such as personal
privacy and records management, whereas usefulness promotes policies
that encourage the dissemination of information to improve the quality
and lower the cost of government services, such as public access and
interagency information sharing. Stewardship policies address confidentiality,
information security, data quality and integrity, and long-term preservation
of information. Usefulness policies address interagency and intergovernmental
sharing, public access, public-private information partnerships, and
reuse of information.
- Understandability. Information
should be simple but not oversimplified. Explanations and interpretations
should be included where necessary.
- Reliability. Information should
be verifiable and free from bias. It should be comprehensive;
nothing should be omitted that is necessary to represent events
and conditions, nor should anything be included that would cause
the information to be misleading.
- Relevance. There must be a close
logical relationship between the information provided and the
purpose for which it is needed.
- Timeliness. Information should
be available soon enough after the reported events to affect decisions.
- Consistency. Once a principle
or a method is adopted, it should be used for all similar events
and conditions. If a principle or a method has changed, the nature
and reason for the change as well as the effect of the change
should be explained.
- Comparability. Procedures and
practices should remain the same across time and reports. If differences
occur, they should be due to substantive differences in the events
and conditions reported rather than arbitrarily implemented practices
or procedures for data collection.
These issues are
made more complex by the rapid technological advancements that further
challenge traditional policies and generate new questions. The Internet,
in particular, has fueled policy debates that were unimagined a
decade ago, raising questions of appropriateness, privacy, and ethics.
Local, state, and federal laws require that certain types of information
(e.g., individual student and staff records) be protected from unauthorized
release. Education information systems continually struggle to achieve
balance so that under the best circumstances, the struggle results
in higher quality data that are more useful for the general public
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For data collection to be purposeful and
useful, it must fit the needs of its users. Users of school finance
information may be divided into three major groups: those to whom
the school districts and state departments of education are primarily
accountable (the general public); those who directly represent the
general public (legislative and oversight bodies); and those who
lend or participate in the lending process (investors and creditors)
(GASB Statement #1, paragraphs 35 through 37). These groups have
different needs for these data, although all are concerned with
the design and implementation of an entire educational system that
is both programmatically and fiscally effective and efficient.
The General Public
One of government's primary goals is to promote
the general welfare of all its citizens. Public education, although
not mandated by the U.S. Constitution, is a response to the need
for an educated public to participate in a representative democracy.
One objective of the general public is therefore to purchase the
maximum amount of service with a minimum amount of taxes. Therefore,
to help fulfill a government's duty to be accountable, school financial
reporting should help the general public determine whether its objective
is being met.
As noted previously, defining and measuring school
productivity and student achievement are exceedingly difficult.
Mathematics and reading scores have long borne the burden of determining
"productivity,but the reauthorization of the Elementary and Secondary
Education Act of 2002 reflected a much broader range of concerns,
including school readiness, graduation rates, and increased participation
in higher education by minorities, as well as a host of social concerns,
such as the cessation of drug use and violence. Although these aims
cannot be perfectly quantified, a comprehensive education information
system can help respond to the need of the general public to know
what is actually going on in schools and how their tax dollars are
Although few in the general public will reflect
at great length beyond the superficial aspects of the relationship
between dollars spent and results produced, one subset of the general
public consists of individuals whose scope and depth of interest
in education data go far beyond that of the typical citizen. Education
researchers (whether in government, universities, or schools) are
at the "high demandend of the information-use spectrum. Their collective
need for data is great and accordingly must be weighed against the
cost of providing the data. At the same time, it is difficult to
know ahead of time where the real payoffs will emerge. Fortunately,
a well-designed and comprehensive information system that is populated
by data that are valid, reliable, and timely and that provides reasonable
access in a format that researchers can use will serve the specialized
constituency and the broader public as research is translated into
Legislative and Oversight Bodies
At the local level, school administrators rely
on financial information to evaluate past performance, to aid in
day-to-day decisionmaking, and to inform the general public of the
schools' resourcefulness and stewardship. Employees, particularly
program coordinators but also classroom teachers and noninstructional
employees, use financial information to plan budgets and to request
additional funding or to redirect existing funds. Additionally,
financial information embedded in a comprehensive education information
system allows administrators to assess the areas of greatest need
and plan how best to allocate education resources in the future.
In addition, school boards and other local governing
units have both a responsibility for and an intense interest in
the operation of the school system. The local school board is responsible
for establishing policies and for overseeing and appraising the
administrator as he or she carries out these policies. The school
board thus needs timely warning of situations that may need corrective
action. The board also needs information as a basis for judging
both the efficiency of the administration and its effectiveness
in complying with policies and restrictions. Some of this information
can be provided by general purpose financial reports, but comparable
information about other school districts is needed as a basis for
Other units of government also rely on information
for policy directions. On average the U.S. Congress and state legislatures
provide about half of the resources for the operation of school
districts in the nation today, with the percentage even higher in
some states. Accordingly, they need information on the schools'
operation as a basis for deciding whether to commit additional resources,
and how much. Additionally, governance units need cumulative information
(in comparable format) about the operations of groups of school
districts in order to formulate funding policies. To this end, legislators
are interested in such data-based matters as
From this overview, it is clear that the defining
characteristics of a useful accounting and data reporting system of
interest to state and federal legislators are comparability of data,
ability to achieve a variety of classifications, and timeliness in
- the ways in which local, state, and federal
programs interact within specific operational areas;
- profiles of school finance structures as they
relate to tax resources; and
- the impact (and cost) of programs resulting
from specific legislative initiatives.
Investors and Creditors
Finally, in governmental accounting, investors
and creditors are considered to include bondholders and prospective
bondholders, commercial banks, vendors, and others who have extended
credit, or who are considering extending credit, to the school district.
Typically, these data users are interested in the financial position
of the school organization, its operating performance, and its likely
sources and uses of funds as indications of the probability that
the bonds or loans will be repaid in full and on time.
Investors and creditors need information about
available and possible future financial resources, actual and contingent
liabilities, and the overall debt position of an institution to
evaluate the institution's ability to continue to provide resources
for long-term debt service. They review operating results and cash
flow data (both currently and over time) to look for trends that
may indicate strengths and weaknesses in the ability of the government
to repay debt. Trend analysis helps investors and creditors project
future revenues and predict possible allocation of those revenues.
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All three user summary groups are interested in
comparing original or modified budgets with actual results. For
example, to assess accountability, citizens and legislative and
oversight bodies want to ensure that resources were used in accordance
with appropriations. Spending in excess of budgeted amounts may
indicate poor financial management, weak budgetary practices, or
uncontrollable and unforeseen circumstances. Underspending may indicate
effective financial management by providing the necessary quality
and quantity of services within the available appropriations. Situations
in which actual expenditures are less than budgeted may also represent
a decision by management to accumulate a surplus of resources for
future use. A comprehensive education information system gives a
broad view of budgetary concerns, rather than simply a "bottom line.
As a result, this revision of the Financial Accounting for State
and Local School Systems Handbook is intended to assist
in the creation and improvement of a comprehensive data system that
results in better academic and fiscal performance in America's schools.
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an overview of court cases regarding education reforms, see"Overview
and Inventory of State Education Reforms: 1990 to 2000"
2 Additional information
regarding these surveys including instructions for completing them
can be found on the Internet sites listed in appendix B.