An analysis of business procedures of small elementary school districts

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A Project Presented to the Faculty of the School of Education The University of Southern California

In Partial Fulfillment . financing the school p l a n t ..........



PAGE Maintenance of p l a n t s ..........


Management and accounting of school p r o p e r t y ................................


Property r e c o r d s ............


R e c o m m e n d a t i o n s ......................... Administrative channels


Administrative organization


73 73 73

The "budget..............................


Accounting for r e v e n u e .................


Accounting for district expenditure


. .

Supplies, material and l a b o r ..........


Personal s e r v i c e s .....................


Payroll procedure

. . . . .







PAGE Average Assessed Valuations



School Districts of Los Angeles County Since 1 9 4 0 ........................ II. III.

Norms for PerCent

of CurrentExpense

Balance S h e e t ........................

11 . . . . 56



PAGE Administrative flow of Authority

. . . . . .


CHAPTER I THE PROBLEM Due to the rapid increase in the birth rate the elementary school of today is desperately struggling to maintain high standards of education.

The obligations

imposed upon the elementary school to maintain an adequate system of financial accounting is of paramount importance. Business practices and procedures are lacking or are wholly inadequate in areas that have expanded beyond their pre­ war confines. Statement of the problem.

The purpose of this

study was (1 ) to discover the elements of business pro­ cedures for the elementary school and to construct an instrument by which these elements could be checked against a school accounting program;

(2 ) to check the

business procedure of small elementary schools in Cali­ fornia;

(3 ) to evaluate business procedures as a means of

making recommendations for improving business procedures in elementary schools;

(4) to construct a list of business

practices that are essential in the elementary school. Justification of the problem.

Proper business

procedures efficiently carried out will furnish the admin­ istrative unit of the elementary school valuable assistance.

2 Business procedures properly executed tell the financial story of the past and govern future trends of such prac­ tices.

Revenue needs may be secured from well kept busi­

ness procedures, helping to insure proper expenditure of funds apportioned to the business office. Conclusions of the effectiveness of business prac­ tices can be well observed in the various surveys made by learned members of business administration at the University of Southern California.

Maintenance of a business office

by the elementary school has proved to be highly efficient. The smaller unit which does not have a business officer depend upon the principal or the district superintendent-primarily educators— to carry on the functions and pro­ cedure of the business office.

Therefore, the elementary

schools are greatly in need of properly executed business procedures. Weaknesses of business practices of certain schools will not be discussed in this analysis.

This study allows

for comparisons with other surveys and studies of similar chracteristics. An estimate of needs as well as other pertinent information must be kept on file for public inspection by all schools.

Estimate of needs must be formulated prior

to the year of actual expenditure.

These expenditures,

once adopted, must serve for the period intended.


3 a successful budget, purchasing, distribution, school house planning, and the like are all part of business procedure. A uniform code of accounting practices has been drafted in 1944 by the California State Department of Education.

This code is mostly concerned with classifi­

cation of expenditures and does not include other important business practices.

With the hope that a more practical

program of business procedures would help to insure an adequate educational program, this study was undertaken. Scope of the study.

This study was concerned with

business procedures in the elementary schools in Califor­ nia.

It is not concerned with the educational and the

supervisory aspects of elementary education.

Nor is it

concerned with secondary or advanced public education. Assumptions of the study.

There are a series of

;major assumptions upon which this study has been made. They are as follows: 1.

Non-instructional services are of paramount

importance. 2.

The principal or superintendent function is

that of administering the school program, not directing the business affairs of the school. 3.

Business procedures are necessary in the

4 public school. 4.

Business procedures are one of the necessary

non-instructional services of the elementary school. Definitions of terms.

The terms used in this study

are confined to that of California schools. 1.


This term is used to designate

those activities having as their purpose the regulation, *

direction, and control of affairs of the school district as a whole. 2.

Business office.

The term "business office" as

used in this study means the office directly connected with the school that carries out the financial duties of the school. 3.-- Business procedure.

This term Implies the

method used in carrying out the school functions. 4.


The term "school" was taken to mean

elementary school with kindergarten.through the 6 th grade located within the State of California. 5.

Secondary schools.

The term "secondary schools"

was used in reference to schools containing grades seven through twelve. 6.


The term "non-academic" is used

with reference to supplemental duties that are of neces­ sity a part of the normal school business affairs. 7.

School plant.

This term includes the school

5 site, the school building, and the school equipment.


This report was constructed through a

study of available materials found in recent publications, accounting practices and business procedures.

Office equip­

ment and the like were considered as part of the study. Special help was secured from three principals, one business manager and a superintendent.

An individual

elementary school district was selected as the core of the report. Sources of data.

Adequate surveys made by a com­

petent body of authorities in administration were used in constructing this project.

These surveys were based on

conditions existing in elementary schools of Southern California and were compiled by members of the faculty in administration at the University of Southern California. Other sources were the Education Code and recent books on administration. Approval of the project.

The approval of this

project Indicates that the Chairman of the Committee is satisfied that a satisfactory investigation and study of the problem has been made.

It does not imply that the

Chairman is in complete agreement with all of the

6 recommendations. ORGANIZATION OF THE REMAINDER OF THE PROJECT Chapter II discusses the administrative organization, school income, conditions of the budget as they effect the business office, school income, and budget classification. Chapter III takes into consideration the accounting system of the elementary school as it pertains to revenue and expenditures. Chapter IV reviews the administration of the school plant.

Steps in planning, construction, and financing of

the school building is considered from the standppint of need and u s e . Chapter V discusses the financial statement and reports.

The statement of audit is also discussed.

Chapter VI takes into consideration the management and accounting .of school property.

Classification of

property, insurances of various types are discussed from the standpoint of the elementary school, and insurance records as maintained by the business office are discussed. Chapter VII contains conclusions and recommendations that are necessary in the elementary school.



Due to the tre­

mendous amount of detail required by law In the management of a school district's business affairs It is recommended that all elementary school districts of I500 pupils or over establish a position of business manager.

The need for

this position will become increasingly evident as our present population advances through the elementary schools. Schools having no provisions for the establishment of such an office are placing an unjust burden upon the adminis­ trative staff that should be carrying out the educational functions of the school.

It is recommended that the prin­

cipal and/or superintendent be divorced from carrying out the duties of the business manager and that, the business manager be divorced from administrative duties of the elementary school.

It is advisable that the elementary

school maintain principals in all the school plants of the district.

Closer supervision of instruction will be main­

tained only by maintaining adequate personnel.

Some phases

of business procedure of the elementary school will be impaired if the business manager or others are responsible for supervising the educational staff.

A continuance of

8 such, conditions can lead ultimately to the neglect of the intended educational and business functions for which the district exists. 1 Position responsible to the business manager.


recommendations for the position of business manager as listed in The Report of the Survey of the San Gabriel School District^ state that there are major functions that are important integral parts of administrative duties. They are: 1.

Prepare and administer the budget.


Financial reporting and accounting.


Purchasing and management, supplies, equipment,

insurance, transportation, warehousing and cafeteria management. 4.

Maintenance of buildings, equipment, and

grounds. 3.

Property accounting.


Supervise student body funds.


Signing of warrants.


Administer civic center use of the school plant.


Attendance reporting and accounting.

1 Irving R. Melbo and Staff, The Report of the Survey San Gabriel School District, Los AngeTes, California? University of Southern California, 1949, p. 28. 2 Ibld-, P. 27.

9 10.

Business and financial research.


Direct and coordinate attached personnel.

Administrative channels.

Channels of administra­

tion of school policies by employees of various schools are constantly being abused.

It is of paramount importance

that professional ethics be stressed, and that proper procedures and channels be explained to the employees of the elementary school district.

These violations create

nothing but chaos, and efficiency of the business office is greatly diminished.

Chart 1 indicates the recommended

flow of authority that would help to eliminate conflict and waste. School income.

Schools are business concerns, and

as such, a source of revenue must be maintained to carry out the operational functions of the enterprise. of income are many and varied.


No set interval of time

can be allocated for collection of revenue due to various laws governing the collection of taxes.

Taxable values of

the school district bear important weight on the finances of schools in California.

The present assessed valuation

per pupil in grades 1-8 for all school districts of Los Angeles County averages $14,146 per

.A .D .A ^

3 Melbo and Staff, op. clt., p. 30.

Table I


Board of Trustees

Superintendent of Schools

Business Manager f ~?---------------------Special personnel


Business Office staff r Supervisor of buildings _ a n d "grounds r

1 ---------------------------------- . !

Maintenance Certificated Gardeners personnel"" and Cafeteria Manager custodians '7 I

Bus Drivers



County average per A.D.A.

Fiscal year

Total valuation

L.A. County 1-8 A.D.A. Previous year



3 4 2 ,3 6 0 *






3 ,3 0 0 ,5 1 1 , 0 8 0


1 1 ,0 6 0

1 9 4 5 .4 6




1 9 4 4 .4 5


2 8 0 ,8 8 9



2 ,7 7 8 ,8 2 3 , 8 8 0





2 5 2 ,2 9 6











*If the kindergarten attendance is included for Los Angeles County, the A.D.A. becomes 3 8 0 , 0 5 3 and the valuation per pupil is then $12,744 in Los Angeles County.

4 I M d - , P. 34.

12 Indicates the assessed valuations and A.D.A. and county average-per A.D.A. since 1940.

This would indicate that

the average and above average districts are capable of securing revenue to carry on the normal functions of their school plants. sources.

School revenue is secured from three main

They are, the state, local, and federal.

It has

been recommended by competent authorities that the state provide 8 5 per cent, the local 10 per cent and the federal Ejlper cent.

Other sources of revenue may be derived from

solvent credits, county tax prior to 1933-34, transfers from other districts and miscellaneous receipts.


business office would do well to provide special form so that proper records may be maintained.

Each source would

be accounted for according to good accounting practices and procedures.

Mort and Reusser5 state that:

• The school, like any other going concern, finds it necessary to maintain a payroll for teachers and other personnel and to purchase various materials a n d .supplies; it has, besides, numerous other bills and' obligations to meet at more or less regular intervals. In order that it remain solvent, there must be money on hand with which to pay current obligations when they become due. The ideal situation, in a school system as in a business enterprise, would be to have income flowing into the treasury at regular intervals in amounts at least equal to or, if possible, in excess of the regular monthly expenditures. Since this condition usually does not exist, various methods must be found for bridging the gap between income

5 Paul R. Mort and Walter C. Reusser, Public School Finance, (New York: McGraw-Hill Book Company, "1941), p. 179.

13 received at various times and expenditures that must he made more continuously. It may be stated that of necessity accurate records should be maintained by the business office to eliminate waste. Mort and Reusser^ state further that: In the management of school income, the board of education and the superintendent must have accurate information concerning not only the amount of income tliat is to be expected, but also the approximate dates on which the larger amounts of the funds, such as state aid and tax receipts, will be turned into the district treasury. Knowledge of these facts may be obtained by a careful tabulation of income of preceding years, with provisions for any changes in policy that may have been made since the collection of the information. This information, likewise, may be tabulated from the expenditure distributions of preceding years. When the amount and time of income and expenditures are known, school officials will have a basis for taking steps to finance the schools during any interim period when income is low. Another consideration that requires accurate information, as well as skill in management, is the safeguarding of all moneys collected and disbursed or invested by the school officials.


The budget although a relatively new

development in public school administration, has been sufficiently well recognized to insure its thorough estab­ lishment in the elementary schools.

Kinkade? writes in

6 Mort and Reusser, _op. cit., p. 179. 7 Arthur Kinkade, "Public School Fiscal Records from the Viewpoint of an Auditor," American School Board Journal, Vol., 67, No. 2, pp. 43-45, Aug.,' 1'9?3.

14 American School Board Journal that; The construction of a budget Is nothing more or less than an estimate of the expenses of remaining in business during the year for which the budget is compiled. The first step is to estimate as accu­ rately as possible the total income from all sources; the second step is to allocate certain amounts of the total to various accounts as a guide in limita­ tion for the year’s expenditures that need to be made in order to live within the estimated income. Education is of necessity a local responsibility. As such, the willingness of the community to support the school is of great importance.

Mort and Reusser^ contend

that; The ultimate budget is a balancing of positive factors flowing from educational objectives with willingness to support. Neither the educational program nor the independent estimate of financial resources can be considered paramount. Budgetry procedure should be such that the resulting budget expresses the amount the community is willing to spend in the light of the kind of educational . program it wishes to buy. Purposes of the budget.

Depressing financial con­

ditions -during the past world-wide money panic has brought to the fore a need for budgeting school revenue.


which in the judgment of thoughtful school officials, have been and are selected to yield the greatest returns to children and to the community.

No budget can be built

until the program it proposes to carry out has been

® Mort and Reusser, op. clt., p. 133.

15 accepted by tbe community and the several elements of the people Involved In administering the program.

In order

to assure proper budgetary practices and procedures, Section 6 3 3 3 ^ of the Education Code requires that the annual budget be submitted as part of the- yearly financial statement.

This requirement is met generally throughout

the state as well as in local school districts.


should be set up to show the per cent of the current expenses (see Table II) for budgeted items. Budgetary classifications.

The business office is

justified in classifying expenditures according to the need of the classification. Young^0 state that:

Mort and Reusser quoting De

The preparation of a school budget

consists of the formulation of three plans:

(1) the edu­

cational plan, which defines the policies of the school and the school program that is to be carried on; (2) the expenditures plan, which translates'.the educational pro­ gram into costs; and (3) the financing plan, which sets forth the means of meeting the cost of the educational program.

The educational plan will not be covered here.

9 State of California Education Code (Sacramento: Supervisor of Documents, 1945), p. 414. Mort and Reusser, op. cit., p. 136.



L.A. County L.A. City Elementary Elementary

Dr. Nelson’s suggested plan for • elementary


N,,E .A.



Teachers Salary

6 5 .1 8



Other expense


6 .7 1



7 2 .1 0


Total instruction72.3


4 .1 0 $


Operation of plant



7 .5 1





4 .2 0


Auxiliary service 5.3




Fixed charge



6 .3 0





10 0$

c.s. 1 . 3 1 U.R „ .99 100$


Lloyd Nelson, School Finance and Business Management, (Department of* Administration and Supervision, School of Education, University of Southern California, Los Angeles, California; 1948), p. 17.

17 The financing plan has been discussed in another section. The expenditures plan is probably the most important in carrying out the business procedure of the business office. Administration.

An examination of Table II reveals

that the administrative unit should be allocated 5 per cent of the money budget for school expenditures.


administrative employees in the elementary school should consist of a superintendent, a business manager, secre­ taries, bookkeepers, and a clerk.

The administrative

office expense also is Administration.


expenses should be itemized so that unnecessary purchases and waste is eliminated. Teachers' salary.

To attract and retain adequately

trained, good teachers, it is recommended that an adequate salary be paid to the teaching staff.

Low salaries have

no doubt contributed to the inability on the part of many districts to get a fair share of superior teachers and to* retain for a long period of time those it does attract. It is recommended that 68 per cent of the current expend­ itures are devoted to this classification.


salaries,for special teachers are not fully paid through instructions.

Many factors enter to make it inadvisable

or Impossible to consider one's true status as an instructor.

Athletic directors may be evening and summer

18 playgrounds supervisors.

Coordinators, although they are

considered part of the administrative staff, are part of the instructional group.

The business office should not"

work "to” this recommended norm but "from" it. of the employees should be weighed carefully.

The status Extreme

caution should be the keynote while working with per­ centages.

There are no set rules as to the amount of

remuneration that will be apportioned to the athletic director from this classification.

The per cent may

vary depending on the locality and the financial ability of the school. Other expenses.

This classification includes

instructional supplies, library, audio-visual and salaries of clerks that are directly connected with instruction, and carrying out the instructional program.

In Table II

it is recommended that 6 per cent of the budget be appro­ priated for this classification. Total instruction.

The total combined instruc­

tional expense should represent J4 per cent of the bud­ getary expenditures.

This classification is composed of

teachers' salaries, salaries of clerks, and allied instructional supplies and equipment. Operation of p l a n t . This classification Includes

19 the expense of keeping the school buildings and grounds in condition for use.

Salaries of custodians and gar­

deners, custodial supplies, and utility expenses are charged to this classification.

This classification Is

given approximately 9 per cent of the total budgeted revenue. Maintenance.

According to the California School

Accounting Manual, "this classification includes all expense for the maintenance of school property at or restoration of school property to approximately its ori­ ginal condition of completeness or efficiency." Maintenance expenditures are generally classified as repairs (includ­ ing upkeep) and as replacements.

Repairs generally

involve payments for labor and for the replacement of worn out, missing or broken parts.

Approximately 4 per

cent of the budget is adequate for this service. Auxiliary services.

Any expense closely related

but not a part of the regular program is included in this classification.., Two subordinate classifications make up this classification.

The first "transportation," includes

salaries of bus drivers, and the costs of gas, oil, repairs, and storage of buses.

The second,

"other Auxiliary

Services," included expenditures for attendance super­ visors, school nurse, doctors, and cafeteria supervision.

20 Under this section salaries for medical employees and a cafeteria supervisor are provided.

Usually a part time

doctor is secured, while the full time Is required of a nurse and only the time used in actual management of the cafeteria should he considered. Fixed charges.

Generally, Fixed Charges will

fluctuate from the recommended ^ per cent set down in Table II.

This is due to local teacher retirement plans.

By state law all schools must Include their non-certifi­ cated employees in the state retirement system.


which have not already included the retirement plan will be subject to the new retirement plan which Is keyed to age 6 0 with compulsory retirement at age 7 0 . Efficient handling of the insurance program will contribute greatly to lowering the costs of this classi­ fication in the elementary school. Total current Expenditures. '• The preceding six major budget classifications constitute the ’’total current expenses: of a school district.

The total amount spent

for these six classifications divided by the average daily attendance gives the total current cost per pupil.


total current expense should equal 1 0 0 per cent of the budget.

12 Melbo and Staff, op. eft., p. 51.

21 Other services.

There are other necessary services

that- are particularly Important in administering the facilities of the elementary school.

These services are

Capital Outlays and Community Services. Capital Outlays are necessary in that equipment, buildings and sites are needed to efficiently carry out the educational program of the community. should be approximately $6 .0 0

This charge

(six dollars) per pupil.

The school should be the center of community acti­ vities, and as such special funds should be provided for these Community Services.

These activities should not be

restricted to sectarian usages.

The public should at all

times be free to use the facilities of the schools.


classification includes all current expense for operating Community Services which are not exclusively for pupils or are not related to the instructional program and there­ ofore should be segregated and not included in expenditure totals which are employed in computing pupil costs.


charged to this classification are after-school playgrounds, civic center activities, recreational programs and free meals to needy children.

School districts should from a

financial standpoint provide facilities, equipment, grounds, and janitorial services needed for community recreational programs. The Undistributed Reserve and General Reserve also

22 form part of the budget.

The Undistributed Reserve Is made

up of moneys that were In excess of the prepared budget. While the general reserve Is held over for the business of the early part of tbe following year. Summary.

The business office is an important part

of the school plant.

It is necessary that proper facilities,

supervision and management are carried out fully by the office and Its personnel.

The duties are many and varied.

Therefore, efficiency is of paramount importance.


management breeds waste which must not be tolerated. It is important that channels of administration be followed for the efficient execution of the educational program.

Lack of professional discipline may lead to dis­

content, and finally to a total collapse of efficient practices which are so necessary in providing an adequate education for the children of the community. The school budget is a systematic plan for the management of the schools both from a fiscal standpoint and from an educational outlook.

The preparation of the

budget Involves the planning of three types of programs: the educational program, the financial program, and the spending program.

Provisions for determining the amount of

money to be expended for the schools and the amount that is to be raised for their support lie wholly with the elected representatives of the people.


There are two major divi­

sions of financial accounting in the public schools.


are concerned with accounting for district revenues and expenditures, and internal accounting.

The accounting

system concerns itself with recording, presenting and interpreting the financial facts related to the operation, maintenance, and capital outlay of the school.

Most of

this revenue comes from sources outside the school and may be considered external accounting.

The revenue for

internal accounting comes from moneys originating within the school.

These may consist of cafeteria funds and class

moneys. The California School Accounting

M a n u a l

^3 presents

the' present framework for accounting practices in the elementary school.

The manual is divided into four major

classifications, namely: Part I, "Classification of Expenditures";

Part II, "Abatements of Revenue and

Expenditures"; Part III, "Supplies and Equipment"; and


California State Department of Education, California School Accounting Manual (Sacramento; State Supervisor of Documents,Vol. XIII, No, 2, June 1944), 71 PP.


Part IV, "Accounting Terminology." Revenue.

No business venture can be fully carried

out without a proper accounting system.


of receipts according to revenue and non-revenue receipts > are important. Revenue receipts are recorded as taxing units and derived from Federal, state, county, and local, leasing of school lands and receipts from specific taxes while non-revenue receipts are derived from sale of bonds and property, insurance adjustments and loans of various types.

It has been mentioned in another section that

special provisions should be made to keep special accounts of all sources of revenue.

Upon the legal structure of

financing public education depends in a large measure the success or failure of the local school unit to provide the kind of program which isvd'esired and which will most adequately meet the needs of the elementary schools. Inadequate provisions for maintaining financial records hamper certain districts in the conduct of their educa­ tional program. Accounting for district expenditures.

The business

office has charge of all accounting, scheduling of work, designation of jobs and purchasing.

It is appropriate

here to list various important steps that are necessarily a part of the business procedures of the elementary school.

25 Personal services, payroll procedure and purchasing of supplies and materials as well as labor will be discussed. Personal services. consider in this category. and full-time employees.

There are two major groups to Namely, part-time employees A part-time employee may be any

person employed for less than a full teaching day and for less than a full school year.

Various occupational groups

may be considered a part of personal services.

A doctor,

dentist, etc., may be employed for less than a school year; a bus driver may be employed only for mornings and even­ ings; summer school teachers may be employed for less than one year; night school teachers are employed for less than a day.

These and similar positions should be considered

part-time. The largest group of full time employees in the school system are the classroom teachers.

This group is

employed by means of a legal contract adopted by the board of education.

Such contracts should be brief.

They contain the name of the person employed; length of employment; salary, and length and number of pay periods. According to the United States Office of Education,1^

^ Emory M. Foster, Financial Accounting for Public Schools (Washington/ United States Office of Education, Circular No. 204, Federal Security Agency), p. 8 .

26 obligations incurred with respect to part time employment should be handled as follows; Assignments of part time employees should be made in all cases by special Memoranda, letter or work order from the superintendent or other properly designated administrative official. No personal service should be rendered save upon the basis of some legal form of authorization. Good business procedure requires that the board of trustees establish definite rules covering the employment and termination of employment for each employee involved. Engelhardt and Engelhardt1!? would give highest ratings to schools in which the board of education has established the following rules;

(1) length of term,

(2) holidays,

(3 ) deductions for absence, pensions and refunds, and periods of payment, tion of salary schedule, release from contract.

(3 ) manner of payment,

(4) dates

(6) opera­

(7 ) place of payment, and (8 ) These rules can further be amended

to read that proper certification be placed on file for part-time and regular employees and detached contractual statements be on file for every employee.

The elementary

school would rank high in all the aspects mentioned herein if the following provisions were carried out;

(1) certifi-

15 N.L. Engelhardt and Fred Engelhardt, Survey for the Business Administration in Public School Systems (New York: Teachers College,~TJoTurrib£a University, Bureau of Publications, 1936), pp. 48-49.

27 cation should constantly be checked,

(2 ) contracts should

be provided that conform to the established rules above, and (.3 ) records should be maintained to cover every employee of the district. Payroll procedure,

Individual accounts should be

kept for good orderly business reports.

This may be pro­

vided by individual cards or by sheets with such informa­ tion as must be kept.

The payroll form should have col­

umnar provisions for the following items: (2 ) name,

(3 ) position,

per day interval,

amount due,

(4 )~salary per year,

(6 ) salary per diem,

(8 ) days absent allowed,

(5 ) salary

(7 ) days absent,

(9 ) days absent deducted,

(1 1 ) pension deduction,