Budgeting and Financial Planning - What's the Difference?

The Superintendent of a small Massachusetts School District, East Long Meadow, prepared a clear, concise document describing his perspective of differences between budgeting and financial planning ( East Long Meadow MA Financial Planning Overview Document). He described fiscal responsibility of the school district:

"School Committee members, superintendents, and business managers have two levels of fiscal responsibility. The first level is compliance with state and federal law. Compliance ensures that the budget meets state standards and that state funds are directed to legislated accounts and programs. Compliance does not ensure that funds are being used efficiently or effectively, however. The second, higher order of responsibility is that of fiscal stewardship, which goes well beyond compliance and ensures that funds are spent on programs that make a difference and move the district toward its vision. Fiscal stewardship avoids deficit spending and the need for drastic cuts that undermine education. It requires that policy and process are in place to ensure that funds are used effectively and wisely and that deficits are avoided.

How does a School Committee achieve effective fiscal stewardship? The answer is financial planning. You would never build a new house only to tear down part of it because you didn't budget enough to finish the entire building. Unfortunately, that's how some districts often handle funds. Some build a district vision for student success one year at a time and often end up spending so much on small projects that they don't have enough for the programs that would really make a difference. But building a successful district requires a strategic plan, improvement goals, and a financial plan to support the vision--plus the fiscal stewardship to make sure tax dollars are being directed to the most effective programs and departments."

As MMSD takes its first small, positive public steps developing a multi-year budget, there is valuable information in this budget that can provide guidance for questions to ask about multi-year financial planning and not simply the same budget with inflated expenses.

I sent a copy of this memo to Carol Carstensen earlier this month. I have been asking for a long term financial picture, as has Ruth Robarts and others in the community. I am encouraged to see that the District Administration has taken the first step in that direction on February 14th.

Posted by at February 19, 2005 1:15 PM
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