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Content This dissertation has been microfilmed exactly as received 67—17,687 HILL, LaM ar L u ciu s, 1909- MATTOX, Frank L ero y , 1 9 2 6 - PROGRAM BUDGETING IN PUBLIC SCHOOL DISTRICTS. Both authors rec eiv ed d e g r e e s at U n iv ersity of Southern C aliforn ia, E d .D ., 1967 Education, adm in istration University Microfilms, Inc., A nn Arbor, M ichigan Copyright by LAMAR LUCIUS HILL & FRANK LEROY MATTOX 19 6 8 PROGRAM BUDGETING IN PUBLIC SCHOOL DISTRICTS A Dissertation Presented to The Faculty of the School of Education The University of Southern California In Partial Fulfillment of the Requirements for the Degree DOCTOR OF EDUCATION by LaMar Lucius Hill and Frank Leroy Mattox June 1967 This dissertation, written under the direction of the C J hair man of the candidate's Guidance Committee and approved by all members of the Committee, has been presented to and accepted by the Faculty of the School of Education in partial fu lfilm en t of the requirements for the degree of Doctor of Education . Date JUNE, 1?67....... ..................... Dean Guidancc C om m ittee Chatrmai TABLE OF CONTENTS Chapter Page I. THE PROBLEM 1 Introduction Statement of the Problem Importance of the Problem Hypotheses Assumptions Scope of the Study Delimitations Limitations Procedure Definitions of Terms Organization of the Dissertation Introduction Traditional School Budget Historical Development of Program Budgeting Program Budgeting and Performance Budgeting Acceptance of Program Budgeting Purposes, Advantages, and Disadvantages of Program Budgeting Structure of Program Budgeting Program Budgeting in Education Summary of the Chapter III. FINDINGS FROM THE POSTCARD AND QUESTIONNAIRE Introduction The Preliminary Postcard Survey The Questionnaire Survey Summary of the Chapter II. REVIEW OF RELATED LITERATURE 27 SURVEYS 68 ii Chapter Page IV. INTERVIEW FINDINGS ............................. 121 Introduction California School Districts Out-of-State School Districts Responses to Team Interview Questions Major Findings from Team Interviews V. SUMMARY, FINDINGS, CONCLUSIONS, AND RECOM MENDATIONS ....................................... 220 The Problem The Procedure Summary of Findings Review of the Hypotheses Conclusions Recommendations Suggestions for Further Study BIBLIOGRAPHY .............................................. 258 APPENDICES....................................................270 iii LIST OF TABLES Table Page 1. Program and Performance Budgeting Practices by Government Units ........................... 3 9 2. Distribution of Survey Postcards Mailed and R e t u r n e d ....................................... 71 3. Number and Percentage of Organizations to Whom Postcards Were Sent That Were Using Some Program Budgeting Procedures, Tech niques , and Formats........................... 7 3 4. Distribution of Questionnaires Sent and Returned ........................... ..... 74 5. Purposes of Program Budgeting That Were Rated Very Important by the Respondents.......... 77 6. Purposes of Program Budgeting That Were Rated Either Very Important or Important by the Respondents..................................... 8 0 7. Sources of Impetus for Adopting Program Budgeting That Were Rated Very Important by the Respondents................................ 83 8. Sources of Impetus for Program Budgeting That Were Rated Either Very Important or Impor tant by the Respondents...................... 84 9. Criteria for^Designing a Program Budget That Were Rated Very Important by Respondents . 8 6 10. Criteria for Designing a Program Budget That Were Rated Either Very Important or Impor tant by the Respondents...................... 89 11. Advantages of Program Budgeting Identified by Respondents..................................... 92 iv Table Page 12. Shortcomings or Weaknesses of Program Budgeting That Were Identified by the Respondents . . 94 13. Conversion Problems in Program Budgeting That Were Identified by the Respondents .... 96 14. Responses to Items VII Through XIV of the Questionnaire ................................. 99 15. Indirect Cost Distributions--District D . . . 153 16. Instruction Programs ........................... 174 17. Summary of Appropriations by Major Programs — City School District of the City of New York (District W ) ............................. 177 18. Early Childhood Education— School District of Philadelphia (District X) ................... 180 19. Elementary Education— School District of Philadelphia (District X) ................... 181 20. Junior High School Education— School District of Philadelphia (District X) .............. 182 21. Senior and Technical High School Education— School District of Philadelphia (District X) 183 22. Health Service— School District of Phila delphia (District X) ........................ 185 23. 1967 Appropriations— School District of Pittsburgh (District Y) ..................... 188 v CHAPTER I THE PROBLEM Introduction Elements of program budgeting have been used sporadically in various parts of the federal budgetary process almost from its beginning until the 1930's when both the Department of Agriculture and the Tennessee Valley Authority employed program budgeting. However, the fiscal aspects of budgeting traditionally received the greatest emphasis until the 1949 Hoover Commission report. One recommendation had a profound effect upon budgetary think ing, not only in federal departments, but in state and local governments as well. The term "performance budget" has been widely adopted by city governments to identify a concept of the budget as a program planning process which becomes an integral part of the management process of relating costs to work performed rather than primarily a fiscal procedure (8:312-13). The Hoover Commission stated: We recommended that the whole budgetary concept 2 of the federal government should be refashioned by the adoption of a budget based upon functions, activities, and projects; this we designate a per formance budget. Such an approach would focus attention upon the general character and relative importance of the work done, or upon the service to be rendered, rather than upon the things to be acquired, such as personal services, supplies, equipment, and so on. These latter objects are, after all, only the means to an end. The all impor tant thing in budgeting is the work or the service to be accomplished, and what that work or service will cost. (24:8) The second Hoover Commission, in 1955, re-emphasized its first recommendation and in the process, "in the inter est of clarity," used the phrase program budget rather than performance budget. The commission recommended: That the executive budget continue to be based upon functions, activities, and projects adequately supported by information on program costs and ac complishments, and by a review of performance by organizational units where these do not coincide with performance budget classifications. That the agencies take further steps to synchronize their organization structures, budget classifica tions and accounting systems. That executive agency budgets be formulated and administered on a cost basis. (25:11-15) In recent years the California Association of Pub lic School Business Officials (CAPSBO) has recognized increasing evidence of the need for a comprehensive study of school district budgeting procedures. The only official budget publication is a bulletin (which is now out of print) of the California State Department of Education dated May, 1959, entitled "School Business Administration Publication No. 7— Administration of the School District Budget." This bulletin was directed to a wide audience, including not only school superintendents and business man agers, but also board members and the general public as well. As a result, it was not appropriate to incorporate in this document many of the technical problems associated with budget development nor to explore in depth budgetary problems facing the larger school districts. Other pertinent materials on school district budgeting are noticeably lacking except in isolated in stances. A notable exception is a handbook used by the San Bernardino City Unified School District entitled, "Budget Policies for Financial Control," which provides an outline of some of the basic budget policies essential to sound budget development (35). A March, 1965 report by a California Senate Fact- Finding Committee on Revenue and Taxation included program budgeting as one of the committee's thirteen proposals. The report suggested that the State Department of Education investigate the feasibility of establishing a uniform system of school accounts under which the concept of 4 program budgeting can be applied. The rationale for the Senate Committee proposal was that program budgeting makes it possible for any interested person to make detailed comparisons of the functional allo cation of educational resources, and that such information should be useful in making choices about which educational programs should be expanded and which ones should be con tracted (22:15). The need for more study of public school budgeting was again recognized by the California legislature which, in December, 1965, appointed an Advisory Committee on School Budgeting and Accounting to the Subcommittee on School Efficiency and Economy, Assembly Interim Committee on Edu cation. The seven members of this committee included two members of CAPSBO and one member of the California Associa- tion of School Administrators (CASA). Other members repre sented the Taxpayers Association, accountants, and county governments. This advisory committee was charged with the responsibility of investigating possible new ways of making school district budgeting and accounting in California more understandable. The advisory committee grew out of the problems encountered by a Subcommittee on School Finance which attempted to study a selected number of school districts from the standpoint of expenditure patterns in order to establish bench marks for state support of public education. The October, 1966 final report of the Advisory Committee on School Budgeting and Accounting contains recommendations for substantial revisions in state law and customs relating to accounting and budgeting for public school purposes. The committee recommended immediate mod ifications, simplifications, and changes in the detailed methods of preparing and presenting school district budgetary and accounting data to make it more understand able to the taxpaying public through the eventual adoption of a recognized and acceptable plan of program budgeting for California public schools. This concept stresses pur pose before structure and performance as opposed to expenditures (18:9-15). On January 6, 1966, the Board of Directors of the California Association of Public School Business Officials (CAPSBO) established a state-wide School Budget Research Committee to cooperate with its Accounting and Data Processing Committees to develop some recommendations for program budgeting procedures and techniques as opposed to budgeting by function. When the Budget Research Committee was formed CAPSBO's concept of program budgeting was not to replace the basic functional classification of expenditures now employed in developing comparable expenditure data, but it was intended to provide the basis for expanding the budget and expenditure data to meet the unique requirements of individual districts. However, if the proposed chart of accounts presented to the CAPSBO Board of Directors June 2, 1966 (and at subsequent committee meetings called by Mr. Albert C. Wells, Jr., systems consultant for the staff of the Educational Data Processing Project, California State Department of Education) is officially adopted it will cause numerous changes in the California school district budget form, accounting procedures, and techniques and pro vide for program budgeting and program cost accounting. The state of California, for the fiscal year July 1, 1965 to June 30, 1966, has taken the first steps toward the ultimate goal of program and performance budgeting. The eighteen new sample program budgets are designed to describe objectives and program services of the state together with related costs, rather than simply to list the details of proposed salaries and materials by organiza tional structure. The purpose is to give the legislature the opportunity to evaluate various activities individually against the total needs and priorities of the state. Departments within the federal government, large cities, and a relatively few public school districts in California and the United States are now using program budgeting. Statement of the Problem The purpose of this study was to ascertain the purposes, procedures, techniques, and formats of program budgeting, its strengths and weaknesses, as compared with traditional public school district budget procedures, techniques, and formats, and to develop appropriate recom mendations with respect thereto. More specifically, the study sought answers to the following questions: 1. What are the major purposes of program budget ing? 2. What are the major sources of the impetus for adopting program budgeting procedures, tech niques , and formats? 3. Has the adoption of program budgeting proce dures , techniques, and formats improved budgetary procedures? 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 8 Has the use of program budgeting procedures, techniques, and formats increased the length and volume of budget documents? Did the use of program budgeting procedures, techniques, and formats violate any of the commonly accepted standards for budgeting and accounting? What are the advantages of program budgeting? What are the shortcomings or weaknesses of program budgeting? Has the conversion from conventional budgeting procedures to program budgeting procedures and techniques caused any internal problems? To what extent is data processing equipment being utilized to do program budgeting? What program budgets include only direct costs? Are both direct and indirect costs assigned to a program budget? If indirect costs are prorated to a program budget, what method is used to prorate indirect costs? Are indirect costs eliminated if the program is eliminated? 14. What cost elements are included in each pro gram budget? 15. What criteria are used to design a program budget? 16. What program budgets are included in the total budget format? Importance of the Problem The recommendations (October, 1966) of a California Advisory Committee on School Budgeting and Accounting to the Subcommittee on School Efficiency and Economy Assembly Interim Committee on Education regarding program budgeting for schools indicates the importance of and current need for a program budget study. This advisory committee averred that substantial improvements can be made in reporting the proposed activi ties of school districts to school boards, to interested citizens, and to governmental bodies which have a legiti mate interest in the affairs of our public school system. It asserted that a budget should be for more than the list ing of sources of revenue and of costs by objects of expenditure, that a budget should state in financial terms the community's ideas as to what it expects from its 10 investment in education, and that adoption of a system of program budgeting by local school districts in California would serve to accomplish this worthwhile goal. It added that the legislature should take appropriate steps to encourage the adoption of program budgeting in local school districts (18:9,10). The advisory committee explained its concept of program budgeting as follows: A program may be defined, in general, as a series or an aggregate of related activities which are designed to accomplish stated objectives. In broad terms, the fundamental objective of a public school system is to educate individuals to the greatest extent possible so that they may function as well-informed, useful and productive members of our society. The nature and composition of the education that the individual obtains from our school system will depend primarily upon the rela tive emphasis that the community places on the diverse areas of available knowledge and upon the abilities, interests and goals of the individual pupils. Program budgeting, then, is a budgetary system which will develop and communicate in finan cial terms the costs of the programs which are designed to accomplish the stated objectives of our local school districts. (18:10) Advantages of program budgeting, according to the advisory committee report, are as follows: Since the educational process is a resource consuming activity, it is imperative that those responsible for planning and directing this process be supplied with information which will facilitate making rational decisions regarding the allocation 11 of the limited resources available to most local school districts. The Committee believes that adoption of program budgeting would be an impor tant first step in satisfying this information need. Such information would not only be useful to persons directly responsible for planning the details of an educational program, but it would also point out to the general public in the clear est possible terms the purposes for which the resources are to be expended. (18:11) The report quoted from a speech by Mr. Joseph M. Heikoff, Director of the Bureau of Community Planning of the University of Illinois, who stated that "program budgeting aims at organizing information about governmental activities so that management may compare program pro posals, relate them to current activities, evaluate them in terms of priority, and then increase or decrease allocation of resources to them." Budgets presented in terms of pro grams provide "a factual basis upon which to compare pro posed activities, their relative costs, and their political implications" (18:11). To implement the concept of program budgeting effectively, the advisory committee recommended that a state commission on school district budgeting and account ing be appointed to advise the State Board of Education, and that the legislature appropriate approximately $50,000 to finance the activities of this commission (18:11,12). 12 The recommended composition of the commission is one appointee of the Speaker of the Assembly, one appointee of the Senate Rules Committee, and nine other members appointed by the State Board of Education, with at least one member representing: 1) taxpayers' groups, 2) busi ness, 3) the education profession, 4) county government, 5) school boards, and 6) the accounting profession (18:12). The duties of the commission would be: 1) to select a firm of independent and qualified consultants to formulate the details of a program budgeting and accounting system for local school districts; 2) to evaluate the report of the consultants and recommend procedures for implementing program budgeting in the public school system. The committee further recommended that, effective July 1, 1967, the legislature establish at least one full time professional staff position in the Department of Education, Division of Public School Administration, to assist the commission, and that it promote the system of program budgeting through cooperative working arrangements with the California Association of Public School Business Officials, school boards, and district offices (18:12,13). The advisory committee reviewed examples of work in program budgeting for schools being undertaken outside of 13 California, specifically in Philadelphia, Chicago, and Pittsburgh, and several county offices within California which have begun to pioneer in this area. This committee believes that California schools should be in the forefront of this new development, which seems to be proving itself in school systems elsewhere (18:15). Program cost accounting is now mandatory in Cali fornia for the junior college program and classes for adults, and its use is recommended for other programs if a district maintains special programs and wishes to know the cost of them or the cost of the regular programs (20:VI-1). If the advisory committee's recommendation is adopted by the state legislature a system of program budgeting will also be developed and school districts will be encouraged to use it. California school districts are now required at the end of the fiscal year to make program area expenditure reports from the summary of financial transactions con tained in the accounting records of the district. The required program area expenditure reports are as follows (20:VI-1;VI—2): 1. Automobile driver training 2. Classes for adults 14 3. Educationally handicapped minors 4. Culturally disadvantaged children 5. Mentally gifted minors 6. Mentally retarded 7. Physically handicapped minors in individual instruction 8. Physically handicapped minors in other special day classes 9. Physically handicapped minors in regular day classes 10. Physically handicapped minors in remedial classes 11. Regular classroom 12. Severely mentally retarded 13. Summer school (California School Account M.VI-Z) When a system of program budgeting is adopted all of the above program areas will be designed into the budget to show their estimated costs, and income when available or needed, and submitted to the board before the beginning of the fiscal year. Costs may be identified as to major account classes, grades, and program area. Some of the costs are classed as direct costs; some may be classed as indirect costs; but all costs are made a part of the 15 accounting records. As long as the cost is related to one specific program no problem arises. However, this is often not the case. Cost proration and distribution procedures must be developed to enable the school district to provide accurate cost information by program areas for reporting purposes. The major purpose of this study was to study all aspects of program budgeting and develop appropriate recom mendations and guidelines for the use of program budgeting in California school districts. "Perhaps the most out standing weakness in school budgeting in the United States today is the fact that knowledge of procedure has outrun the development of the financial structure in which budgeting in the local school system must be carried on." (10:156) Hypotheses As the problems of this study came more clearly into focus, certain hypotheses emerged and had a strong influence on both the structure of the questionnaire and the team interview guide. They are stated as follows: 1. Adoption of some of the program budget pro cedures and techniques will improve public school district budgeting. 16 2. Program budgeting procedures and techniques will increase the length and volume of public school district budget documents. 3. The use of program budgeting will not violate any of the commonly accepted standards for school district budgeting. Assumptions This study was based on the assumption that a budget will continue to be a legal requirement for Califor nia public school districts. Scope of the Study The study was national in scope, including in-depth studies of selected public school districts, California cities and the state government, and selected large busi nesses. Sample program budget material was obtained from most of the organizations indicated below. Delimitations This national study was limited to the following organizations which were using some or most of the proce dures, techniques, and formats of program budgeting: 1. California public elementary, high, and unified school districts having 7,500 or more average daily attendance, as reported by the Bureau of Educational Research, California State Department of Education for 1964-65. Large public school districts in the United States with enrollments of 50,000 or more, as reported in the Education Directory, 1964-65, Part 2, Public School Systems, U.S.O.E. California city governments with a population of 50,000 or more, as reported in the Municipal Yearbook. All of the fifty-eight California county govern ments . All fifty state governments within the United States. Selected departments within the federal govern ment . Selected large businesses from the list of the 500 largest United States businesses, as reported in the Fortune magazine, July, 1965. Limitations Some of the limitations of the study were as 18 follows: 1. A national postcard survey indicated that few public school districts were using program budgeting procedures and techniques. 2. A questionnaire was used to obtain information from most of the organizations using program budgeting, and materials they were using. 3. The team interview technique was employed, although it was expensive and time-consuming. Procedure A review of the limited published and unpublished literature was made. Organizations using program budgeting were requested to send copies of the materials they were using. Literature from the organizations contacted indi cated wide variations in their concept and implementation of a system of program budgeting. Letters of endorsement were obtained from the International Association of School Business Officials, California Association of Public School Business Officials, and the Los Angeles County Trustees Association. A finan cial sponsorship was received from the Los Angeles Trustees Association. 19 A double-postcard survey was made to identify the large school districts in the United States, California city and county governments, state governments, departments within the federal government, and large United States businesses which were using program budgeting procedures and techniques. A second postcard request was necessary to increase the number of responses, although the return card was self-addressed and stamped. A questionnaire was developed and sent to those organizations which indicated in the postcard survey that they were using program budgeting. Accompanying the ques tionnaire was a letter of transmittal, letters of endorse ment and sponsorship, and a self-addressed, stamped return envelope. The questionnaire was developed so that each question could be answered with a check mark, and space was also provided to encourage unstructured responses. An interview guide was developed, after some writ ten responses to the questionnaire were received, to make it more possible to obtain in-depth data required to meet the specific study objectives. Time was saved and a more thorough coverage of the topics insured when each interviewer brought into the situation a different background of experience. 20 One respondent gave negative reactions to both interviewers, but with two interviewers it was still pos sible to carry out efficiently the major portion of the interview. The interview team worked together in reviewing and analyzing respondent answers, which reduced the chances of personal bias and reduced considerably the time consumed in preparing the interview report. Team interviews were held with selected chief school business officials and finance and budget directors. The members of the California Association of Public School Business Officials, the Southern Section and State School Budget Research Committee, the Los Angeles Trustees Association Project Committee, and city managers were used several times to evaluate the study proposal, the question naire, and the interview guide. Their suggestions resulted in many improvements in the study documents. Experts in business management, accounting, elec tronic data processing, system analysts, university profes sors, school superintendents, business executives, and chief accountants were asked for their advice and counsel during all phases of this study. All pertinent data that lent itself to tabulation were tabulated, analyzed, and evaluated in terms of the 21 questions to be answered and the hypotheses posed. The findings were summarized, conclusions stated, and recommendations were made, based on the findings. The study was accomplished by the active efforts of both candidates, with the work divided on an equal basis. Each candidate assumed responsibility for the entire study. Definitions of Terms To insure clarity of understanding, specific mean ings of certain terms used in this study are set forth below. Account class. A descriptive heading or numeric code under which are recorded similar financial transac tions as to purpose, or object, or source (52:214). Activity. An organized effort. Appropriation. An allocation of funds made by a governing authority for specific purposes, usually limited as to the time when it may be spent (20:VII-1). Benefit. Program output expressed in terms of the worth either in dollars or educational achievement. Budget. A statement of the estimated income and expenditures for financing various aspects of agreed-upon programs during a twelve-month period (6:28). 22 Budgetary control. Control or management of busi ness affairs in accordance with an approved budget with a view of keeping- expenditures in balance with available appropriations of income (20:VII-3). Budget document. The written presentation by a school district which translates the objectives and educa tional program proposed for the coming year into costs and indicates by sources the estimated and needed revenues (13:87). Budget documents. Instruments used by the budget makers to present all aspects of a budget to the governing authority. Budgetary process. A continuing, cyclic process, consisting in planning, coordinating, interpreting, pre senting, approving, administering, and appraising (13:96). Chart of accounts. A detailed and systematic organization of the account class structure for expendi tures and income. Cost-benefit studies. Quantification of costs and benefits for consideration of alternatives. Cost elements. Personnel services, contracted services, materials and supplies, fixed charges, and equip ment. 23 Direct costs. Costs which can be charged directly to or prorated as a part of the cost of a product or serv ice, department, operating unit, or program, and eliminated if a program is eliminated, or added if a program is added (20:VII-5). Evaluation. Comparison of objectives with actual accomplishments. Estimated income. All income estimated to accrue during a given period, regardless of whether it is col lected during the period. Expenditures. Amounts paid or liabilities incurred for all purposes. Fiscal year. A period of one year, beginning July 1, and closing June 30 (20:VII-6). Function. A group of services or expenses incurred which accomplish a certain purpose or objective. Goals. Objectives in the future. Indirect costs. Those costs which cannot be readily or accurately traced or identified with a specific service, program, or unit of output, and are not entirely eliminated if a service, program, or unit of output is eliminated, nor added because they are added. Management. All decision-makers, including the 24 governing body, chief executive administrative staff, department heads, and directors. Objective. The end product or goal toward which particular program activities are directed, and related to the over-all goals of the organization. Objects. Articles purchased or services obtained (20:VII-9). Performance budgeting. Budgeting that emphasizes a statement of the work to be performed and its purpose with cost data to measure the accomplishments and work performed within a program. Program budgeting is somewhat broader; its estimates precede and set the framework for performance use at and below the departmental level. Program. A program is a series of related services or activities which are in closer relationship with each other than with those outside of the program and are designed to accomplish stated objectives (18:10). Program budgeting. Budgets designed to embody related services or activities as meaningful program areas and placed in the budget format prior to adoption with a brief description of the program services and objectives together with estimated related costs. Budget decisions are made by the governing authority, chief executives, 25 legislative bodies, or department heads, after comparing and evaluating present programs with proposed programs before allocating to the various programs the resources necessary to achieve the organization's objectives. The major stress is on programs rather than on objects of expenditures. Program input. Resources allocated to a program. Programming. Continuous program analysis. Program output. Product of a program. Program statement. A description of program objec tives, authority, need, general description, workload plan, input, and output. Proration of costs. The assignment or distribution of costs to two or more program areas in proportion to the benefits which expenditures provide according to a formula or other agreed-to, often arbitrary, procedure— e.g., time spent, time-floor area, hour consumption, number of stu dents involved, quantity consumed, etc. (20:vi-5). Subprogram. A program which is a meaningful part of a larger program. Resources. All the assets owned by an organization including land, buildings, cash, and the like, income and estimated income not realized, and, in case of certain 26 funds, bonds authorized but not issued, and personnel (20: VII-11). Organization of the Dissertation This chapter has presented the background and importance of the problem, hypotheses, assumptions, scope of the study, delimitations, limitations, procedure, defi nitions of terms, and the organization of the dissertation. Chapter II includes the review of the related pub lished and unpublished literature and information from organizations using program budgeting. Chapter III covers the responses to the postcard and questionnaire surveys and presents tabulations and evaluations in terms of the questions to be answered and the hypotheses posed. Chapter IV is devoted to an in-depth study of eleven selected school districts in the United States which were using program budgeting at the time of the survey. Team interview responses are reported and working samples are given. Chapter V reviews the hypotheses, summarizes the findings, and presents conclusions and recommendations based on the findings. CHAPTER II REVIEW OF RELATED LITERATURE Introduction As stated in Chapter I, the purpose of this study was to ascertain the purposes, procedures, techniques, and formats of program budgeting, its strengths and weaknesses, as compared with traditional public school district budget procedures, techniques, and formats, and to develop appro priate recommendations with respect thereto. It became apparent early in the study that little had been written about the concept of program budgeting as it relates to education; however, a great deal had been written about the concept and implementation of program budgeting as it relates to federal governmental activities. It was necessary, therefore, to draw heavily upon the lit erature dealing with program budgeting within the federal government. While the organization, objectives, and activities of education differ from those of the federal government, the elements of the planning-programming- 27 28 budgeting system as developed in the federal government can be identified and evaluated in terms of their applicability to education. This chapter deals briefly with the traditional school budget and the historical development of program budgeting, and examines the purposes, procedures, strengths and weaknesses of program budgeting. Traditional School Budget While it was not the purpose of this study to examine extensively the traditional budgetary principles and practices in education, it was necessary to examine the current objectives and format of the school budget in order to evaluate program budgeting and its applicability to education. Almost any standard book on school finance gave a good background on the traditional school district budget. Roe defines the school or educational budget as "the trans lation of educational needs into a financial plan which is interpreted to the public in such a way that when formally adopted it expresses the kind of educational program the community is willing to support, financially and morally, for a one-year period" (13:81). Linn refers to the school budget as "a complete financial forecast of both expendi tures and receipts, based on an educational plan" (11:138) while Johns and Morphet conceive of the budget as "the statement of the plan for financing the various aspects of the educational program to be provided during the year or other stated period of time" (12:28). Purposes and Objectives Some of the more important purposes or objectives of the traditional school budget, as listed by Johns and Morphet, are: 1. To provide a comprehensive view of all services in order to make equitable provision for each service (6:395) 2. To provide an accurate forecast of anticipated receipts and expenditures over a definite period of time (6:395) 3. To provide a means by which quality and quan tity of services needed can be determined (6:396) Some of the important purposes listed by Roe (13: 83) are: 1. To establish a plan of action for the coming 30 year 2. To require an appraisal of past activities in relation to planned activities 3. To serve as a public information device Some of the important purposes listed by Linn (7:140,41) are : 1. To aid in the administering of the school eco nomically 2. To give an overview and aid in analysis 3. To stimulate confidence among the taxpayers Structure In California the major classes of expenditures are related to general functions such as administration, in struction, and maintenance, rather than to objects such as books, salaries, or supplies (20:27). The objects of expenditures are recorded within each major function. The typical budget document presented to the board of education in California for review and adoption includes a detail of objects of expenditures by major function. An example of a combined function-object budget classification system which is included in the California School Accounting Manual is as follows (20:22): INSTRUCTION (function) Certificated Salaries of Instruction Principals' Salaries (object) Supervisors' Salaries (object) Teachers' Salaries (object) Other certificated salaries of instr. (object) Classified Salaries of Instruction (object) Textbooks (object) Other Books (object) The above function-object classification of expen ditures is followed in general by school districts through out the United States (52:27-35). Historical Development of Program Budgeting The concept or idea of program budgeting can be traced back to 1912. President Taft's Commission on Economy and Efficiency recommended drastic changes in the then existing budgetary procedures. The commission stated The best that a budget can do for the legis lator is to enable him to have expert advice in thinking about policies to be determined. His review of the economy and efficiency with which work has been done should be based on facts set forth in the annual reports of expenditures which would supplement the budget. To the administrator the advantage to be gained 32 through a budget is the ability to present to the legislature and to the people, through the Chief Executive or someone representing the administra tion, a well defined, carefully considered, lucidly expressed welfare program to be financed, and in presenting this, to support requests for appropria tion with such concrete data as are necessary to the intelligent consideration of such a program. To the Executive [i.e., the President] the advantage to be gained lies in his ability to bring together the facts and opinions necessary to the clear formulation of proposals for which he is willing actively to work as the responsible officer. To the people the advantage is the fact that they are taken into the confidence of their official agents. Therein lie the practical use and purpose of the budget. (38:30) Taft's commission went on to propose, first, a comprehensive executive budget; second, a classification of the budget in terms of programs or functions, and also a classification based on the distinction between capital and current items; and, third, a thorough and systematic review of the budget after the fact. Due to the political climate of the time, no action was taken toward implementing the recommendation of Taft's commission. It was not until 1921, with the passage of the Budget and Accounting Act, that some of the commission's recommendations were put into effect. The President was now required to submit a comprehensive executive budget, and set up the Budget Bureau as the agency to assist him. 33 The comprehensive budget was a necessary step in the development of program budgeting but fell far short of the over-all recommendations made by Taft's commission. During World War II some program techniques were utilized in providing for the allocation of natural resources in the war effort. The Controlled Materials Plan adopted in late 1942 was, according to Novick, the first program budget used in the federal government (39:4). However, the Controlled Materials Plan was adopted to meet a wartime emergency and, consequently, real prog ress toward adoption of program budgeting had to wait until after World War II when, in 1949, the Hoover Commission stated: We recommend that the whole budgetary concept of the federal government should be refashioned by the adoption of a budget based upon functions, activities, and projects; this we designate a per formance budget. Such an approach would focus attention upon the general character and relative importance of the work to be done, or upon the service to be rendered, rather than upon the things to be acquired, such as personal services, supplies, equipment, and so on. These latter objects are, after all, only the means to an end. The all impor tant thing in budgeting is the work or the service to be accomplished, and what that work or service will cost. (24:8) The second Hoover Commission in 1955 recommended a program budget and, also, recommended improvements in the federal 34 government accounting system that would facilitate budget ing on a cost basis. The commission stated: The growing use of program budgeting has been accompanied by broader and more comprehensive appropriation classifications. At the beginning of World War II there were more than 2,000 current appropriation items. They have been reduced in number to about 375 in the budget for the fiscal year 1955. A broad appropriation structure is required for administrative efficiency. Therefore, the appro priation structure should be as broad as possible and yet adequately relate the provision of funds to the attainment of important policy objectives. (25:11-15) In 1961 Charles J. Hitch, Comptroller under McNamara, Secretary of Defense, proposed a programming system in which military plans were divided into broad pro gram packages. This budget plan was to cover a five-year period; thus, each year's set of programs was but a part of a five-year plan. This was the start of program budgeting in the United States Defense Department (68:117). In August of 1965, President Johnson informed his cabinet that program budgeting which has been so successful in the Defense Department was now to be applied to all the departments and agencies of the federal government (39:10). After a long history, dating back to Taft's com mission in 1912, program budgeting has been adopted by the 35 federal government as directed by the President and is now in the process of being implemented into a total planning- programming-budgeting system (39:10). Program Budgeting and Performance Budgeting The main purpose of this study, as stated earlier, had to do with program budgeting. Because of the confusion that existed in the literature between the terms program budgeting and performance budgeting, an analysis of the distinction between these two terms as found in the litera ture was necessary. The terms program, performance, activity, and func tion are all used more or less interchangeably in the literature. While there may be some differences among them, there seemed to be no common pattern. Burkhead referred to this problem by stating: "There has been a tendency to make program budget and performance budget synonymous terms, and this has contributed a great deal to the terminology confusion" (3:139). Burkhead made several distinctions between these two terms. First of all, program was defined in relation to a higher level of organization than performance. "A program embraces a number of performance units." Programs 36 may include broad summary costs of performance units (3: 139) . "Program and performance may also be distinguished according to their time dimension." Program budgets are forward-looking while performance must be based on the past (3:139). In recent years the term performance budgeting has been widely adopted by cities, counties, and states to identify a concept of the budget as a program planning process which becomes an integral part of the management process rather than primarily a fiscal procedure (5:62). One of the major characteristics of a performance budget is that it is based "upon programs of accomplishment, which are practically synonymous with work programs. Whereas, the conventional type of work program deals with highly objective functions— such as building roads, streets, or sidewalks, and cleaning and maintenance of streets— per formance budgets require that every possible estimate of requirements be reduced to terms of work to be accom plished" (9:45). Anshen and McKean summarized the various meanings of program budgeting into four statements, as follows (16: 2) : 37 1. A restructuring of budget exhibits or a group ing of costs in more meaningful categories 2. A budget that employs a longer time horizon than is found in the traditional budget 3. A budget that includes, in addition, the use of cost-utility analysis, a logical and measur ing relationship of inputs and outputs 4. A budget that includes all the foregoing plus arrangements for enforcing the allocative deci sions through appropriate implementation provisions which may lead to an institutional reorganization George A. Terhune made the distinction between pro gram budgeting and performance budgeting in terms of measurement of output. "A performance budget shows the functions to be performed by a given agency or unit of gov ernment, the programs or activities involved in carrying out such functions, and the measurement of the output of that agency or unit in some objective manner, in order that performance may be evaluated.” A budget that focuses "at tention upon the functions performed and the programs or activities involved therein without attempting to measure output for performance evaluation purposes" is known as a 38 program budget. In short, program budgeting can be regarded as an intermediate step in the eventual establish ment of a performance budgeting system" (49:1). Acceptance of Program Budgeting In 1961 the Municipal Finance Officers Association of the United States and Canada's Committee on Budgeting conducted an up-to-date inventory of present-day budgeting practices throughout the United States and Canada. The committee circulated a basic questionnaire on budgeting to 651 cities, 153 counties, 180 school districts, and 180 special districts. Completed questionnaires were received from 398 cities, 64 counties, 49 school districts, and 37 special districts, or a total of 548 jurisdictions. A tabulation of the results of this survey is presented in Table 1 (49:1-3). Of all jurisdictions reporting, approximately 23 per cent indicated they were using some form of performance or program budgeting. Since this study was primarily con cerned with program budgeting for schools, it was interest ing to note that out of 180 school districts that were sent questionnaires, only 49 responded and, of those who did respond, only eight had adopted some form of program or 39 TABLE 1 PROGRAM AND PERFORMANCE BUDGETING PRACTICES BY GOVERNMENT UNITS3 Number reporting practices Performance Number and program Program Type of unit reporting budgeting budgeting Total U. S. Cities Over 1,000,000 5 4 — 4 500,000-1,000,000 16 4 1 5 250,000- 500,000 23 6 4 10 100,000- 250,000 55 9 6 15 50,000- 100,000 132 15 16 31 25,000- 50,000 31 3 3 6 10,000- 25,000 52 5 3 8 Under 10,000 41 5 4 9 Total U. S. Cities 355 51 37 88 Canadian Cities Over 50,00 0 20 2 2 4 Under 50,000 23 4 1 5 Total Canadian Cities 43 6 3 9 Total All Cities 398 57 40 97 Counties 64 11 3 14 School Districts 49 6 2 8 Special Districts 37 5 5 10 Total All Jurisdictions 548 79 50 129 Table adapted from Performance and Program Budgeting in the United States and Canada, by George A. Terhune (49:3). 40 performance budgeting. Purposes, Advantages, and Disadvantages of Program Budgeting Purposes In his book, Program Budgeting, Novick stated: Planning, programing, and budgeting constitute the process by which objectives and resources, and the interrelations among them, are taken into account to achieve a coherent and comprehensive program of action for the government as a whole. (38:3) He added: "The task of making the necessary compromises among various objectives is the function of planning, pro graming, and budgeting" (38:3). According to Novick, two of the main purposes of program budgeting are to assist in the pursuit of objec tives and to assist in the allocation of resources among the programs (38:2). Budgeting is the focus of the process of comparison and coordination and, as such, it involves (38:4) : 1. Appraisals and comparisons of various govern ment activities in terms of their contribution to national objectives 2. Determination of how given objectives can be attained with minimum expenditure of resources 41 3. Projection of government activities over an adequate time horizon 4. Revision of objectives, programs, and budgets in the light of experience and changing cir cumstances Before the Joint Committee on the Organization of the Congress, August 31, 1965, Charles L. Schultze, U. S. Budget Director, defined the chief purpose of program budgeting as "a system which will provide the kind of specific information and analysis on the basis of which both Congress and the Executive can make better choices of where and how to allocate budgetary resources" (54:1779). According to Schultze, such a system would include four elements (54:1779-80): 1. The definition of program objectives in con crete terms, capable of being analyzed 2. The development of indicators that tell us how well— or how poorly— we are doing 3. The development of comparison of alternate ways of doing the job 4. The three elements, definition of objectives, measures of effectiveness, and examination of alternatives put into a framework which allows 42 comparison of program performance with program costs For years one of the major purposes of a government budget was to establish and maintain detailed accountabil ity of expenditures, which led to the establishment of line-item budgeting. While this practice did establish budgetary control, it also deprived management of the necessary discretion to achieve the objectives and goals set by the policy-making body. Program budgeting centers attention on broad summary costs and thus tends to elim inate the presenting of a line-item budget. As stated by Pfiffner and Presthus, "performance budgeting is expected to aid the legislature to make decisions on the basis of large over-all issues concerning programs, instead of becoming bogged down in detail such as how many typewriters or gallons of gasoline are needed" (12:400). One of the more serious problems governmental organizations face is that of developing a budget that is understandable to the public they serve. Ray Zeman wrote in the Los Angeles Times: "Some of the miles of red tape now snarling school budgets and the flood of 'gobbledegook’ issued to explain them may be eliminated in a couple of years if the Legislature heeds the latest advice of an 43 advisory committee of tax experts" (66:4). The committee referred to by Zeman was the Advisory Committee on School Budgeting and Accounting. This committee recommended that program budgeting be implemented in the public schools of California (18:9). Lyman F. Anderson gave as one of the advantages or purposes of performance budgeting the ease with which the public can understand it because it "highlights the pro grams and services which citizens receive and pay for rather than a maize of complicated figures which few can comprehend" (14:379). In a management memorandum dated May 17, 1966, Hale Champion, Director of Finance for the State of California, listed the major objectives of program budgeting for the state as follows (23): 1. Provide top management with more concrete and specific data on which to base decisions 2. Define more specifically the objectives of government programs 3. Provide for a more systematic analysis of alternate courses of action for a comparison of the benefits and costs of alternate choices 4. Produce a full, continuing cost rather than a 44 partial cost estimate of a program or a change in a program 5. Provide for the review of objectives and the conduct of program analysis and accomplishments on a continuing year-round basis rather than on a crowded schedule as under former budget prep aration procedures Disadvantages The uncritical lauding of performance budgeting and the overlooking of its limitations may lead citizens and legislators into a pseudo-scientific attitude dangerous to government itself. They may be led to believe they have found a yardstick which is truly objective and scientific in its nature. (34:24) Program budgeting is by no means a panacea for all budget problems, nor is it void of certain disadvantages. In implementing program budgeting there are certain ele ments that must be taken into consideration. In Performance Budgeting, by Anderson, the following disadvantages were listed (14:371-79): 1. The validity of work units for some activities and the yardsticks for measurement of perform ance are difficult, elusive, and in some cases as yet nonexistent. 45 2. The initiation and continuance of a system of performance budgeting gives rise to additional costs and staff requirements which may or may not be justified by benefits to be gained from the performance approach. 3. Qualified budget specialists must be available, not only to install a system of performance budgets, but to operate it and adapt it to changing circumstances on a continuous basis. Gladys M. Kammerer recognized that, while program budgeting is an improvement over traditional line-item budgeting methods, it has its limitations and disadvan tages. The implementation of program budgeting is a rather costly adventure involving the development of a complex accounting system as well as the acquisition of expensive equipment. The major limitations discussed in Kammerer's report are described as follows (34:17-23): 1. Only the larger organizations may be able to justify its cost. 2. So many factors enter into the comparison of unit costs other than monetary measurement that valid comparisons may be very difficult, if not impossible. Some of the factors, other 46 than monetary measurement, would be quality of service, weather conditions, diversity and character of population, extent of geographic area to be served, and prevailing wage and salary levels. 3. Unit cost factors tell nothing of qualitative levels of service. 4. Only a few governmental functions can be reasonably computed on the basis of work units or unit costs. Some of those activities that do not lend themselves to such comparison are public health service, public welfare programs, research activities, legal service, and plan ning services. Anshen and McKean discussed several problems that would be confronted in the operational phase of program budgeting (16:a,8,10): 1. Activities that make a logical program package are often found throughout the various depart ments, bureaus, and divisions. Operating techniques would need to be developed to iden tify and bring together these activities for budget presentation and decisions. 47 2. It is impossible to devise program elements (or even broad programs) that are not, in some degree, interdependent. This will result in a considerable groping at first for an improved program element structure. 3. There is likely to be a trend toward a prolif eration of program elements. In order to make program budgeting more effective and to avoid or reduce the difficulties that might be encountered, Anshen and McKean listed the following elements that should be a part of the design of a program budgeting system (16:18,19): 1. A diversity of arrangement should be provided for. A single arrangement that applies uni formly to all governmental programs or all components of programs should be avoided. 2. Program budgeting should be linked to the annual budget cycle. 3. Future flexibility should be maintained. If commitments should be postponed, it would be better not to record tentative decisions in the official program. 4. Keep considerable decision-making authority in 48 the hands of lower levels. This would keep top levels from being overburdened with minor decisions and help to maintain flexibility. Structure of Program Budgeting The structure of program budgeting is concerned with the establishment of a set of categories oriented primarily toward end-product or end-objective activities. Emphasis is placed on provision for an extended time hori zon. This is in marked contrast with the traditional budget structure which stressed a functional and/or object classification and a very short time horizon (28:7). Hirsch, in Toward Federal Program Budgeting, pre sented an example that clearly describes the organization of programs within the budget and the role played by each program. He stated: One of the nation's goals is the economic and social development of our human resources. To achieve this broad goal, allocation decisions must be made; for example, for a vocational retraining program to develop new skills for our work force, and for a college education program to improve the level of scholarly, scientific, and artistic con tributions in the United States. These two sub programs compete with each other for resources and federal funds. Each, in turn, is made up of alternative subprograms which compete with each other for resources as inputs for achieving the objectives of the program of which it is a part. 49 Thus, teaching the operation of a turret lathe, and physical therapy, can be viewed as alternative forms of vocational training, and are more competi tive with each other than they are with studies of political science, economics, and philosophy. (32:4) The elements or basic building blocks of programs, such as manpower, material, and buildings, can be combined and recombined into various packages or programs that pro duce the desired results. This allows a decision-maker a great deal of flexibility for reformulation to accommodate changes in perspective and objectives (32:4). The way in which programs are organized can have a profound effect on the decisions reached by management. The designation of certain activities as programs, however, is not simple. Smithies recommended the following criteria for the establishment of programs (45:21): 1. It should permit comparison of alternative methods of pursuing an imperfectly determined policy objective. 2. Programs may consist of a number of complimen tary components, none of which can be effective without the others. 3. A separate program may be needed where one part of an organization supplies services to several others. 50 4. The time span over which expenditures take effect should be considered. Research and development may be connected or identified with a program, but because of the long time span involved, they should be dealt with as separate subprograms. Steiner listed the following elements of a pro gram (69:45-46): 1. Programs are end-product oriented. 2. Programs are functional, rather than a mixture of component programs, installations, equip ment , maintenance and operations, research and development. 3. Meaningful programs should be concerned with specific objectives covering an appropriately long period. Novick listed some key characteristics of a useful program category in the field of education (38:141): 1. It directly and effectively relates to the national major education objectives, and in this sense it should be end-product oriented. 2. It lends itself to a meaningful breakdown into program elements that can readily be related 51 to each other. 3. It has administrative relevance and provides for administration effectiveness. 4. It directly relates to sources of funds and facilitates viable inter-governmental fiscal relations. In a Rand Corporation report to the city of New York, the recommendation was made that a program budgeting system be applied to education. In making this recommenda tion, it was pointed out that under New York's present budgeting system it was practically impossible to plan or evaluate performance in terms of educational objectives, and that it was also impossible for those charged with the responsibility of approving the budget to make a meaningful analysis of the budget (42:33). As seen by the Rand Corporation, a program budget ing system applied to education would call for (42:34): 1. Clear definition of educational objectives 2. Definition of budget categories in terms of programs that pursue these objectives 3. Identification of program costs 4. Measurement of the effectiveness of programs in terms of progress toward stated objectives 52 5. Determination of the most economical means to achieve these objectives 6. Regular review and revision of objectives, programs and budgets in the light of experience and of changing conditions 7. Long-range planning and cost projections Program Budgeting in Education The adoption of program budgeting by school dis tricts is gaining in favor among writers in the field, but little has been written regarding its implementation. In a recent article in The Education Digest, James presented recommendations for changes in the present school budgeting processes. Although James did not use the term program budgeting, he did advocate a program budgeting procedure by pointing out that currently there is insufficient informa tion available at the policy-making level to provide a rational basis for the resources of the district. In order to provide the necessary information at the policy-making level, James made the recommendation that "a system of accounts should be devised that will break down the expend itures into subsystems within the total system." The accounting should be done by subsection, making information 53 available at the policy-making level to assist in making budgetary decisions. Also, with this information, responsible administrators at lower levels would be able to advise those at the policy-making level concerning the consequences of alternative allocation to each subsystem (63:13—17). Burkhead stated: "A public budget is . . . an expression of a philosophy, or a set of value judgments about the proper amount of resources that is to be channel ed from the private sector for the pursuit of public objectives" (17:180). Burkhead recommended the adoption of program budgeting in order to require the examination of educational objectives in relation to the resources devoted to them (17:190). Another authority of program budgeting, Hirsch, stated: One government activity which can benefit from improved resource allocation through program budgeting is education. Education decisions, un like defense decisions which are in the hands of a monolithic Federal agency, are made by literally tens of thousands of administrative units. (3 0:sum mary) Thomas suggests cases in which performance budget ing may be both appropriate and useful to the administra tion of education, in spite of the difficulty in measuring 54 its outcome (50): 1. The budget for a special educational project where its goals of the project would be stated in terms of budgeted performance increments and these increments would be related to the expenditures which are required to produce them. 2. The second case would be for the justification of increasing expenditures (increase in top rate) in order to improve written English. In this case, a performance budget should clearly show, in relatively precise terms, the changes in pupil performance which are anticipated as a result of the increased expenditures. 3. The performance budget concept might be useful in the analysis and evaluation of specific programs within the total educational program. The specific program so budgeted could vary year to year. Program budgeting in education was advocated by Benson as a means by which special programs such as teacher recruitment, in-service training, research, and curriculum development could be identified and improved. The whole 55 budget, however, need not be put into a program budget format, as it is impossible for a school board to examine all of its problems of choice simultaneously. "The essence of the budgetary process is making choices among realistic alternatives" (1:500). Not all references to program budgeting found in the literature are in accord with the idea of program budgeting in education. Ovsiew and Castetter, in their book Budgeting for Better Schools, make a case against a program and perform ance approach to school budgets. According to Ovsiew and Castetter, the performance budget is not a new or revolu tionary form of budget. Sound budgeting principles have always stressed the relationship between objectives and budget items, the need for appraisal of all educational activities to purpose, and the need for improved reporting of educational objectives (11:290). The results of the classroom teacher, however, are not subject to measurement, nor are there cost standards for the education of children. "In short, the standards which are effective in budgeting for snow removal and gar bage disposal are not equally applicable in budgeting funds for the education of children" (11:290). 56 In a recent article in the American School Board Journal Elaine Exton raised the fear that federal program budgeting is a step toward centralized education planning. One of the questions raised was, "Can this mission-oriented budgeting process of the defense department be modified to apply to public education without trading off state and local autonomy for funds for federally specified purposes?" The real question is one of federal control of education. Exton stated: . . . since, if state and local boards of education adopt the federal pattern of planning-programing- budgeting and the three systems are linked together, as is now proposed, the school boards would become operating arms of the federal government . . . (61:42) There are, however, pressures building up that are causing school districts seriously to consider its adop tion. Resources available for public education are in a more critical state than ever before, while at the same time there is mounting pressure for adding programs and expanding existing programs (17:184). One of the major problems in applying program budgeting is the extreme difficulty in measuring the per formance or output of education. It is possible to have a program budget with only selected performance measures 57 related to the program. According to Burkhead, such activ ities as maintenance, food services, and attendance serv ices appear to have end-products that can be defined with relative ease and can be made subject to measurement in terms of performance. Burkhead also suggested that, even though it may be very difficult and hazardous, the educa tional output in terms of student achievement should be compared with their related costs (17:186). The Chicago Public School System has incorporated many of Burkhead's recommendations in developing their system of program budgeting. In describing Chicago's pro gram budget. Hill stated that the unit of measurement for an educational program such as English is class membership or number of pupils served. Hill recognized that this unit of measurement fails to take into account pupil achieve ment, and indicated that a great deal of research is now underway in an attempt to relate expenditures to expected outcomes in more specific terms (29:191). In a recent publication of the U. S. Department of Health, Education, and Welfare (53:2) it was stated: "In providing federal funds for education. Congress has identi fied specific educational objectives to be achieved by each program. It is, therefore, necessary that federal funds 58 for education paid to a state for use by the state and/or local agencies, be identified at state and local agency levels with the purposes for which the funds were pro vided. " Through its official publication the California State Department of Education reported that both federal and state legislation making funds available for compensa tory education require that educational achievement be measured and evaluation of the program be made (59:24,26). Recognizing the need for improvement in the budget ing process in the public school system, the California Senate Fact-Finding Committee on Revenue and Taxation made the recommendation that "the State Department of Education investigate the feasibility of establishing a uniform sys tem of school accounts under which the concept of program budgeting can be applied" (22:15). The Advisory Committee on School Budgeting and Accounting to the Subcommittee on School Efficiency and Economy of the California Assembly Interim Committee on Education recommended the adoption of program budgeting by the school districts of the state and, in addition, recom mended a thorough study at the state level leading to the implementation of program budgeting on a state-wide basis 59 (18:10,12). Senate Bill 13, by Senator Alquist, wai introduced in the California State Senate January, 1967. This bill provides for, among other items, the establishment of a State Advisory Commission on School District Budgeting and Accounting to advise the California State Board of Educa tion on school district program budgeting and accounting systems. It also requires the commission to employ con sultants to formulate details for program budgeting and accounting systems. Several of the authorities on program budgeting who advocated its application to education made suggestions or recommendations regarding the types of programs that might be included in a program budget for education. Hirsch listed the following recommended education programs in an "idealized" federal budget (30:20): I. Federal Education Budget A. Primary Education B. Secondary Education 1. College preparatory 2. Vocational C. Higher Education 1. Junior college 2. College 3. Postgraduate 60 D. Adult Education 1. Continued general (liberal) education 2. Continued vocational (professional) education a. Government employees b. Nongovernment employees 3. Retraining E. Library Service F. Research (and development) G. International Education Governor Edmund G. Brown presented to the Califor nia Legislature sample program budgets for the fiscal year July 1, 1965 to June 30, 1966. Included in this report was the following budget for one of the California state col leges (131:60-65): II. State College Budget A. Instruction 1. Business 2. Arts and Sciences a. Fine and applied arts b. Humanities c. Social Science d. Science B. Instructional Services 1. Computer center 2. Audio-visual center 61 C. Library Program D. Administrative Support 1. General administration 2. Student and general instructional services a. Office of the Dean of Students b. Admissions and Records c. Student Personnel d. General Institutional Services E. Plant Operation 1. Cleanliness and appearance 2. Maintenance of structures 3. Utilities 4. Safety and security 5. Other F. Reimbursed Programs Burkhead discussed the kinds of programs that could be included in an educational program budget and grouped them as follows (17:188-90): III. Local School Districts A. Programs supported by detailed performance data 1. Food services 2. Attendance services 3. Business office a. Accounting b. Purchasing 4. Library services B. Programs supported by some performance data 1. Guidance 2. Counseling 3. Testing 4. Psychological services 5. Maintenance 6. Some remedial and special education pro grams C. Programs not supported by performance data 1. General administration D. Programs supported by performance data in a broad educational sense 1. Instruction a. By subject matter b. By grade level In California a cooperative research project has been developing the "California Total Educational Informa tion System." This total system will be implemented in Regional Educational Data Processing Centers located throughout the state to serve local school districts. The total system will consist of four subsystems: business services, personnel/payroll, instructional materials and equipment, and pupil reporting system (21:iii). The coding structure that will be used in the regional educational data processing centers will provide for four main categories or programs: 1) regular programs, 2) special funded programs, 3) local programs, and 4) non program (21:18). The regular program may be divided into 999 63 subdivisions, such as mathematics, English, history (21:68). The special funded programs are those programs which are outside of or in addition to the normal local educational program (regular). Local programs are those which are maintained by and accounted for by local districts but are not considered part of the educational programs. The coding structure that will be used by the regional educational data processing centers will provide for a classification system by function, as well as by program (21:18). Summary of the Chapter Program budgeting is not a new concept in the fed eral government. It can be traced back to Taft's Commis sion of 1912. The major impetus for program budgeting in the federal government came with its successful implemen tation in the Defense Department under McNamara. In recent years there has been encouragement by authorities and the California Legislature for the adoption of program budgeting in education. Program budgeting is in the process of being implemented in the U. S. Office of Education. Some school districts have started the develop ment of program budgeting. 64 The following findings emerged from the review of related literature: 1. The concept or idea of program budgeting can be traced back to Taft's Commission on Economy and Effi ciency in 1912. 2. Some program budgeting was used in the federal government during World War II. 3. The impetus for program budgeting in the fed eral government came as the result of a decision by President Johnson in 1965, based upon the success of program budgeting in the national Defense Department. 4. Program budgeting has been adopted by a rela tively small number of cities, counties, states, busi nesses, departments within the federal government, and school districts in the United States. 5. The purposes of program budgeting are: a. To assist in the pursuit of objectives b. To assist in the allocation of resources among the programs c. To assist in making decisions based on large over-all issues concerning programs d. To provide for a more systematic analysis of alternate courses of action for a comparison 65 of the benefits and costs of alternate choices e. To provide top management with more concrete and specific data on which to base decisions f. To make the budget more understandable g. To assist in the projection of government activities over an adequate time horizon 6. Disadvantages of program budgeting are: a. Difficulty in deciding what is a program b. Excessive division of program c. The need for more and better trained personnel d. Increased costs e. The necessity for expensive equipment f. Difficulty in measuring output or performance g. Unit cost factors that tell nothing of quality levels of service h. Factors other than monetary measurement that enter into the comparison of unit costs; e.g., quality of service, character of population, prevailing wage and salary levels 7. Some criteria for the establishment of a useful program are: a. It must permit comparison of alternate methods of achieving policy objectives 66 b. It must relate directly to objectives of the organization c. It must have administrative relevance and pro vide for administrative effectiveness d. It must lend itself to a meaningful breakdown into program elements that can readily be related to each other e. It must relate directly to sources of funds and facilitate viable intergovernmental fiscal relations f. It must provide for decentralization of decision making 8. Authorities in program budgeting recommend the adoption of program budgeting in education. 9. There is some fear that program budgeting in education will lead to the centralization at the federal level of the setting of educational objectives. 10. The major problem in applying program budgeting to education is the extreme difficulty in measuring per formance or output of education. 11. Programs in education may be developed by grade level, by organization (e.g., administration, food serv ices, accounting) by instructional area (e.g. , English, 67 science, business) and by special programs, such as physically handicapped and driver training programs. 12. In California the adoption of program budgeting for school districts has been recommended by an advisory group to the Assembly Interim Committee on Education to be implemented on a state-wide basis for education. CHAPTER III FINDINGS FROM THE POSTCARD AND QUESTIONNAIRE SURVEYS Introduction Three instruments of research were used in conduct ing this study: a double postcard, a questionnaire, and a team-interview guide. This chapter is concerned with reporting findings derived from the surveys conducted by means of the first two instruments, the double postcard and the questionnaire. The purpose of the postcard survey was to identify what large school districts within California and the United States, and what California city and county govern ments , state governments, departments within the federal government, and selected large United States businesses were using program budgeting procedures and techniques. The questionnaire was designed to obtain pertinent informa tion from those organizations which reported on the return postcard that they were utilizing program budgeting 68 69 procedures, techniques, and formats. Included in these surveys were public school dis tricts with enrollments of 50,000 or more, school districts in other parts of the nation with enrollments of 50,000 or more, selected California city governments with populations of 50,000 or more, California county governments, state governments, selected departments within the federal gov ernment, and selected large businesses in the United States. The primary reason for the selection of California public school districts with enrollments of 7,500 or more was that districts of this size or larger usually have more well trained personnel to cooperate in this kind of study. Dis tricts outside of California with enrollments of 50,000 or more were selected because such districts were considered more likely to be using some sophisticated program budget ing procedures, techniques, and formats. Other governmen tal agencies and large businesses were selected because of the likelihood that they could provide information on approaches to program budgeting that might be useful to public school districts. To facilitate analysis, the data obtained from the postcard survey and the responses to the questionnaire were tabulated and structured into tables. Failures to respond 70 and qualified responses were not included in the tabula tions. Accompanying each table is an analysis of the data contained therein. The Preliminary Postcard Survey A double postcard, bearing the following statement on one card, was mailed to 428 organizations: 100 Cali fornia school districts, 63 school districts in other parts of the nation, 165 representatives of city, county, state, and federal government offices, and 100 representatives of large businesses (see Table 2): The California Association of Public School Business Officials (CAPSBO) is doing a study on "program" budgeting. "Program" budgets are designed and placed in the budget format with a brief description of the various program services and objectives together with the total direct and/ or related costs. Management uses "program" budgets for decision-making after comparing program proposals, relating them to current programs, and evaluating them against the total needs and prior ities of the organization. Although program cost accounting or reporting is a necessary part of the total process, this study is concerned primarily with "program" budgeting procedures, techniques, and format. Budget program examples: adult educa tion, summer school, health services, police pro tection, etc. We need your help to identify organizations using program budgeting. Please answer the ques tion on the attached card. Thank you! The question which appeared on the other card was 71 TABLE 2 DISTRIBUTION OF SURVEY POSTCARDS MAILED AND RETURNED Cards Returned Organi zation mailed No. % GROUP I: Calif. School Districts Elementary 24 22 92 High school 16 15 94 Unified 60 53 88 Total Group I 100 90 90 GROUP II: Other U.S. School Dists. 63 48 76 GROUP III: Cities 51 43 84 Counties 58 44 76 States 50 39 78 Federal government 6 4 67 Large businesses 100 46 46 Total Group III 265 176 66 TOTAL ALL GROUPS 428 314 73 72 worded as follows: Is your organization using some "program" budgeting procedures, techniques, and formats? Yes_________________ No______ Table 3 shows the distribution of the "yes" responses to the postcard survey. As may be seen in the table, some program budgeting procedures, techniques, and formats were reported by 164 organizations, representing 47 per cent of the three different types of California school districts with enrollments of 7,500 or more, 48 per cent of other United States school districts with enrollments of 50,000 or more, 100 per cent of the departments within the federal government, 54 per cent of the California city governments with a population of 50,000 or more, 34 per cent of county governments, 74 per cent of state governments, and 61 per cent of the largest United States business corporations. The Questionnaire Survey Table 4 shows the distribution and return of the questionnaires that were sent to organizations identified by the postcard survey. Out of the 164 organizations identified in the postcard survey as using program budgeting and to whom questionnaires were mailed, 83 per cent of the California public school districts responded, 57 per cent 73 TABLE 3 NUMBER AND PERCENTAGE OF ORGANIZATIONS TO WHOM POSTCARDS WERE SENT THAT WERE USING SOME PROGRAM BUDGETING PROCEDURES, TECHNIQUES, AND FORMATS Using some program budgeting, procedures, and formats Organization No. % (N - 164) GROUP I Calif. School Dists.: Elementary 6 2 7 High school 9 60 Unified 2 7 51 Total 4 2 4 7 GROUP II Other U.S. School Dists. 23 48 GROUP III Cities 23 54 Counties 15 34 States 29 74 Federal government 4 100 Large businesses 28 61 Total 99 56 TOTAL ALL GROUPS 164 52 TABLE 4 DISTRIBUTION OF QUESTIONNAIRES SENT AND RETURNED Questionnaires Returned Organization Sent No. % GROUP I (N=l64) Calif. School Dists.: Elementary 6 3 50 High school 9 6 67 Unified 21_ 26 96 Total 42 35 83 GROUP II U.S. School Dists. 23 13 57 GROUP III County governments 15 2 13 City governments 23 12 52 State governments 29 14 4 8 Federal government 4 2 50 Large businesses 2Q_ \2_ 4_3 Total £9 42 42 TOTAL ALL GROUPS 164 90 55 75 of the other United States public school districts respond ed, and 42 per cent of the governmental and business organizations responded. Upon receiving the questionnaire, 12 of those who had indicated in the postcard survey that they were using program budgeting acknowledged they were not. These 12 returned the questionnaire unanswered and sent supplementary material (budget documents and reports) for review. All but one of the large businesses who answered the survey declined to furnish budget and/or other documents involved in their program budgeting procedures. The final sample consisted of 35 California school districts, 13 other United States public school districts, and 42 governmental and business organizations. Few of those who "completed" the questionnaire answered all questions. Percentages of response were com puted by dividing the total number of responses to the question under consideration into the total group number who returned completed questionnaires. Therefore, in most cases the total percentage for any given item or question does not total 100. Rank orders were determined by the highest percentage of the responses, by group. 76 Purposes of Program Budgeting In item I of the questionnaire the respondents were asked to rate selected purposes of program budgeting as "very important," "important," and "not important." The purposes, which were taken from the literature, were as follows: 1. Evaluation of present programs 2. Evaluation of program proposals in terms of objectives 3. Allocation of financial resources in terms of total needs and priorities 4. Assistance in cost control and analysis 5. Appraisal of program performance 6. To make the budget more understandable 7. Other (please specify) Table 5 presents a tabulation of the "very impor tant" responses to this item of the questionnaire. As may be seen in the table, all three groups ranked "allocation of financial resources in terms of total needs and priori ties" as the most important purpose of program budgeting, 71 per cent of group I, 77 per cent of group II, and 6 9 per cent of group III marking this purpose "very important." Both group II and group III ranked "evaluation of present program" the second most important purpose of TABLE 5 PURPOSES OF PROGRAM BUDGETING THAT WERE RATED VERY IMPORTANT BY THE RESPONDENTS Purpose Group I______ ____ % who rated purpose very Rank important Rank Group II Group III % who rated % who rated purpose very purpose very important Rank important Allocation of financial re sources in terms of total needs and priorities 71 77 69 Assistance in cost control and analysis 51 23 33 To make the budget more understandable 49 46 52 Evaluation of present programs 4 46 62 64 Evaluation of program propos als in terms of objectives 5 Appraisal of program performance 6 34 26 3 4 46 46 3 5 60 48 78 program budgeting, 64 per cent of group II and 62 per cent of group III marking it very important. In contrast, only 46 per cent of group I considered this purpose very impor tant. Equal percentages of group II (46 per cent) consid ered "evaluation of program proposals in terms of objec tives," "appraisal of program performance," and "to make the budget more understandable" very important, causing each of these purposes to rank in third place. Group III made some distinction among these three purposes, their ratings causing the first to rank in third place, the sec ond in fifth place, and the third in fourth place. Except for "allocation of financial resources in terms of total needs and priorities," group I was not in agreement with either group II or group III in its ranking of purposes. "Assistance in cost control and analysis" was rated very important by 51 per cent of group I, while only 23 per cent of group II and 33 per cent of group III rated this purpose very important. No purposes other than those listed in the ques tionnaire were given a "very important" rating. The distinction of "very important" and "important" 79 was made on the questionnaire to identify those purposes considered most important by the respondents. In order to identify all purposes considered important to any degree, the "very important" and "important" responses were com bined and tabulated in that manner. Table 6 reveals the data resulting from that tabulation. The data revealed that, while in many cases a par ticular purpose may not have been rated very important it was, nevertheless, considered one of the essential purposes of program budgeting. For example, only 52 per cent of group III rated "to make the budget more understandable" a very important purpose but, as indicated in Table 6, 93 per cent of group III rated this purpose either very impor tant or important. As may be seen in the table, all of the purposes listed on the questionnaire were considered important to some degree by 66 per cent or more of the respondents in group I, 77 per cent or more of the respondents in group II, and 86 per cent or more of the respondents in group III. Group I placed the least emphasis on "appraisal of program performance," 66 per cent of this group rating it either very important or important. Those in group III were more nearly unanimous in their ratings than were those / TABLE 6 PURPOSES OF PROGRAM BUDGETING THAT,WERE RATED EITHER VERY IMPORTANT OR IMPORTANT BY THE RESPONDENTS Group I Group II Group III Purpose Rank % who rated purpose imp. or very imp. Rank I who rated purpose imp. or very imp. Rank % who rated purpose imp. or very imp. Allocation of financial re- sources in terms of total needs and priorities 1 89 1 92 4 91 Assistance in cost control and analysis 2 86 2 92 5 91 To make the budget more under standable 3 86 5 77 2 93 Evaluation of present programs 4 74 3 92 1 98 Evaluation of program proposals in terms of objectives 5 71 6 77 3 91 Appraisal of program performance 6 66 4 85 6 86 1 o o 81 in either groups I or II, the lowest percentage in this group rating any purpose either important or very important being 86 per cent. The purpose, "assistance in control and analysis," while rated very important by a very low percentage of groups II and III (23 per cent and 33 per cent, respective ly) was ranked quirt; high when the "important" ratings were added to the "very important" ratings (accorded by 92 per cent of group II and 91 per cent of group III). Source of Impetus for Adopting Program Budgeting In item II of the questionnaire the respondents were asked to identify the sources of impetus for adopting program budgeting and to rate each source according to its importance. The following sources were listed for the respondents' convenience in replying: 1. Own initiative 2. Management reporting 3. Administrative or executive decision 4 . Citizen committee request 5. Tax rate or bond election 6. State and/or federal laws or regulations 7. Other (please specify) 82 In Table 7 the "very important" responses to Jhis question are tabulated in order to show those sources that were considered most instrumental in causing the adopti on of program budgeting. All three groups were basically in agreement as to the major sources of impetus for adopting program budget ing, a majority of the respondents in each group indicating that "administrative or executive decision" was one of the very important sources of impetus. A large number of respondents in each of the three groups also considered "management reporting" and "own initiative" very important sources of impetus. No sources other than those listed were specified as being very important. In Table 8 the "important" and "very important" responses were combined in order to identify those sources of impetus which were recognized by the respondents as having some degree of importance. The importance of "state and/or federal laws" as a source of impetus to groups I and II becomes more apparent when the responses of "very important" and "important" are considered together, as 83 per cent of group I and 69 per cent of group II accorded one or the other of these ratings TABLE 7 SOURCES OF IMPETUS FOR ADOPTING PROGRAM BUDGETING THAT WERE RATED "VERY IMPORTANT" BY THE RESPONDENTS Group I_______ Group II Group III % who rated % who rated % who rated source very source very source very Source of Impetus Rank important Rank important Rank important Administrative or executive decision 1 Own initiative 2 Management reporting 3 State and/or federal laws or regulations 4 Tax rate or bond election 5 Citizen committee request 6 54 49 37 1 3 2 54 46 54 1 2 3 71 48 38 34 11 3 4 5 6 23 23 8 4 6 5 17 0 2 00 U ) TABLE 8 SOURCES OF IMPETUS FOR PROGRAM BUDGETING THAT WERE RATED EITHER VERY IMPORTANT OR IMPORTANT BY THE RESPONDENTS Source of Impetus Rank Group I______ % who rated source imp. or very imp. Group II Rank % who rated source imp. or very imp. Group III % who rated source imp. Rank or very imp. Own initiative 1 Management reporting 2 State and/or federal laws or regulations 3 Administrative or executive decision 4 Tax rate or bond election 5 Citizen committee request 6 89 83 83 74 40 29 2 1 3 5 6 85 92 69 77 39 39 2 3 1 6 5 79 74 31 90 5 12 85 to this source. Criteria for Designing a Program Budget In item III of the questionnaire the respondents were asked to evaluate selected criteria for the design of a program budget by indicating "very important," "impor tant," or "not important" opposite the following criteria: 1. The program meets a major objective of the organization. 2. It covers activities that are related to each other. 3. It has administrative relevance and provides for administrative effectiveness. 4. It directly relates to sources of funds and facilitates viable interorganizational fiscal relations. 5. It directly relates to different levels of the ultimate objective. 6. It provides for some quantitative information concerning output or results. 7. It provides for the decentralization of decision making. 8. It permits comparison of alternative methods of pursuing policy objectives. 9. Other (please specify). In Table 9 the percentage of respondents who accorded "very important" ratings to the above criteria are shown to identify those criteria considered most important TABLE 9 CRITERIA FOR DESIGNING A PROGRAM BUDGET THAT WERE RATED "VERY IMPORTANT" BY RESPONDENTS Group I Group II Group III Criteria Rank % who rated criteria very imp. Rank % who rated criteria very imp. Rank % who rated criteria very imp. Directly related to sources of funds, and facilitates viable interorganizational fiscal relations 1 71 3 46 6 31 Program meets a major objective of the organization 2 60 1 69 1 71 Provides for some quantitative information concerning output or results 3 43 7 8 4 48 Has administrative relevance and provides for administrative 4 37 2 62 3 50 effectiveness Permits comparison of alterna tive methods of pursuing 5 34 6 15 5 43 policy objectives TABLE 9— Continued Group I Group II Group III % who rated % who rated % who rated criteria criteria criteria Criteria___________________________Rank very imp. Rank very imp. Rank very imp. Program activities that are related to each other 6 29 4 39 2 55 Directly related to different levels of the ultimate objective 7 26 5 31 8 17 Provides for the decentraliza tion of decision-making 8 14 6 8 7 21 88 by the respondents. The criterion "Program meets a major objective of the organization" was rated very important by more than 60 per cent of each of the three groups. "Has administrative relevance and provides for administrative effectiveness" was so rated by 50 per cent of group III and 62 per cent of group II. "Directly related to sources of funds and facil itates viable interorganizational fiscal relations" was rated very important by 71 per cent of group I. No "very important" criteria other than those listed in the questionnaire were specified by the respond ents . In Table 10 the combined responses of "very impor tant" and "important" for this item of the questionnaire are presented. It was noted that, while only two of the selected criteria were considered very important by over 50 per cent of groups I and II, over 50 per cent of each of these two groups rated all of the selected criteria either very important or important, and that, while only three of the selected criteria were rated very important by 5 0 per cent or more of group III, all of the selected criteria were rated either very important or important by 50 per cent or more of this group. TABLE 10 CRITERIA FOR DESIGNING A PROGRAM BUDGET THAT WERE RATED EITHER "VERY IMPORTANT" OR "IMPORTANT" BY THE RESPONDENTS Criteria Group I______ % who rated criteria imp. Rank or very imp. Group II____ % who rated criteria imp, Rank or very imp, Group III_____ % who rated criteria imp. Rank or very imp. Directly related to sources of funds, and facilitates viable interorganizational fiscal relations 91 85 52 Has administrative relevance and provides for administra tive effectiveness 89 92 93 Program meets a major objective of the organization 83 92 93 Permits comparison of alterna tive methods of pursuing policy objectives 83 69 67 00 l £ > TABLE 10— Continued Group I Group II_____ Group III_____ % who rated % who rated % who rated criteria imp. criteria imp. criteria imp. Criteria Rank or very imp. Rank or very imp. Rank or very imp. Provides for some quantita tive information concerning 5 77 6 77 3 88 output or results Program activities that are related to each other 6 74 3 85 4 81 Directly related to different levels of the ultimate 7 69 5 77 5 67 objective Provides for the decentrali zation of decision-making 8 57 8 54 8 50 91 Advantages In item IV of the questionnaire the respondents were asked to indicate advantages of program budgeting by marking "yes" or "no" opposite one or more of the follow ing listed advantages: 1. More understandable budgeting 2. Facilitates decision-making 3. More intelligent allocation of financial resources 4. Better budgetary control 5. Aids in the evaluation of program alternatives in terms of objectives and costs 6. Facilitates making long-range projections 7. Other {please specify) In Table 11 a tabulation of the responses to this item of the questionnaire is given. Not all respondents replied to this item; hence, the percentages shown do not add to 100 per cent. Over 90 per cent of the respondents in each of the three groups identified "Facilitates decision-making" as an advantage, and over 90 per cent of the respondents in groups II and III identified "More intelligent allocation of financial resources" as an advantage. Over 69 per cent of the respondents in each group 92 TABLE 11 ADVANTAGES OF PROGRAM BUDGETING IDENTIFIED BY RESPONDENTS Percentage of respondents Group I Group II Group III Advantage Yes No Yes No Yes No More understandable budget ing 86 11 85 0 93 5 Facilitates decision-making 94 3 92 0 91 7 More intelligent allocation of financial resources 89 11 92 0 93 5 Better budgetary control 77 17 85 8 7 6 21 Aids in the evaluation of program alternatives in 91 9 77 15 88 10 terms of objectives and costs Facilitates making long- range projections 71 26 69 23 79 17 93 identified each of the items listed in the questionnaire as an advantage of program budgeting. No advantages other than those appearing in the questionnaire were specified by the respondents. Shortcomings or Weaknesses In item V of the questionnaire the respondents were asked to identify shortcomings or weaknesses of program budgeting by marking "yes" or "no" opposite one or more of the following: 1. Increased length and volume of budget documents 2. Difficulty in assigning costs to a program 3. Problem of deciding what is a meaningful program 4. Excessive division of programs 5. Requires additional personnel 6. Requires better trained personnel 7. Other (please specify) Table 12 shows the percentage of respondents in each group who identified the different shortcomings listed. Group I's responses ranked each of the six short comings or weaknesses considerably higher than did those of either group II or group III. "Increased length and volume of budget documents," "Requires better trained personnel," 94 TABLE 12 SHORTCOMINGS OR WEAKNESSES OF PROGRAM BUDGETING THAT WERE IDENTIFIED BY THE RESPONDENTS Percentage of respondents Shortcoming or Weakness Group Yes i I No Group Yes II No Group Yes III No Increased length and volume of budget documents 83 17 62 31 57 38 Difficulty in assigning costs to a program 63 31 23 62 41 52 Problem of deciding what is a meaningful program 40 54 31 54 29 64 Excessive division of pro grams 43 54 15 69 24 69 Requires additional per sonnel 54 34 15 69 41 48 Requires better trained personnel 60 31 54 31 55 36 95 and "Difficulty in assigning costs to a program" stood out as the shortcomings or weaknesses most frequently identi fied by the respondents. No shortcomings other than those listed in the questionnaire were specified by the respondents. Conversion Problems In item VI of the questionnaire the respondents were asked to identify conversion problems in implementing program budgeting. This list of suggested possible conver sion problems was provided for the respondents1 convenience in replying: 1. Financial— increased cost 2. Personnel— need more and/or better trained personnel 3. Administrative reorganization— decentralization vs. centralization 4. More need for electronic data processing equip ment 5. Other (please specify) Tabulation of the responses to this item is pre sented in Table 13. Not all respondents answered the ques tion; hence, the percentages do not add to 100 per cent. Three of the four listed conversion problems were of concern to over 68 per cent of the respondents in group 96 TABLE 13 CONVERSION PROBLEMS IN PROGRAM BUDGETING THAT WERE IDENTIFIED BY THE RESPONDENTS Percentage of respondents Problem Group Yes i I No Group Yes II No Group Yes III No Financial— increased cost 71 26 31 54 38 50 Personnel— need more and/ or better trained personnel 69 23 54 46 60 26 Administrative reorganiza tion— decentralization vs. centralization 29 63 54 31 26 60 More need for electronic data processing equipment 69 23 62 31 52 41 97 I. The three which were of concern to group I were, 1) financial— increased cost (71 per cent); 2) personnel— need more and/or better trained personnel (69 per cent); and 3) more need for electronic data processing equipment (69 per cent). The three conversion problems of most concern to group XI were, 1) more need for electronic data processing (62 per cent); 2) personnel— need more and/or better trained personnel (54 per cent); and 3) administrative reorganization— decentralization vs. centralization (54 per cent). The two conversion problems of concern to group III were, 1) personnel (60 per cent), and 2) more need for electronic data processing equipment (52 per cent). Items VII through XIV The following questions constituted items VII through XIV of the questionnaire: VII. Has the adoption of program budgeting proce dures and techniques improved your budgetary procedures? VIII. Has the use of program budgeting procedures and techniques increased the length and volume of your budget documents? IX. Does the use of program budgeting procedures 98 and techniques violate any of the commonly accepted standards for budgeting or accounting? X. Are you utilizing data processing equipment to do your program budgeting? XI. Do you include direct costs only in your program budgeting? XII. Are you using a combination of direct costs and indirect costs in program budgeting? XIII. Is the program cost procedure indicated in either of the preceding two questions used for all of your programs? XIV. Are you prorating indirect program budget costs? A tabulation of the responses to these items is presented in Table 14. Not all of the respondents answered each of the questions; therefore, the percentages do not add to 100 per cent. For question VII ("Has the adoption of program budgeting procedures and techniques improved your budgetary procedures?"), a majority of each of the three groups of respondents (74 per cent of group I, 62 per cent of group II, and 81 per cent of group III) responded in the affirma tive. It was noted that, while over 94 per cent of group I and over 92 per cent of group III responded to this question, only 69 per cent of group II responded. This TABLE 14 RESPONSES TO ITEMS VII THROUGH XIV OF THE QUESTIONNAIRE Percentage of respondents Group I Group II Group III Item Yes No Yes No Yes No VII. Has the adoption of program budgeting procedures and techniques improved your budgetary procedures? 74 20 62 8 81 12 VIII. Has the use of program budgeting procedures and techniques increased the length and volume of 89 6 39 46 60 36 your budget documents? IX. Does the use of program budgeting procedures and techniques violate any of the commonly accepted 3 91 0 77 7 88 standards for budgeting or accounting? X. Are you utilizing data processing equipment to do your program budgeting? 40 54 77 0 60 38 XI. Do you include direct costs only in your program budgeting? 63 29 54 23 41 52 XII. Are you using a combination of direct costs and indirect costs in program budgeting? 40 51 39 39 52 36 vD <D TABLE 14— Continued Percentage of respondents Group I Group II Group III Item Yes No Yes No Yes No XIII. Is the program cost procedure indicated in either of the preceding two questions used for all of 69 26 85 0 67 19 your programs? XIV. Are you prorating indirect program budget costs? 49 40 31 54 45 48 101 could be an indication that a sizable percentage of the respondents in group II were not certain whether program budgeting had improved their budgetary procedures. To item VIII of the questionnaire ("Has the use of program budgeting procedures and techniques increased the length and volume of your budget documents?") 87 per cent of group I and 60 per cent of group III, but only 39 per cent of group II, replied in the affirmative. A sizable percentage of both groups II and III (46 per cent and 36 per cent, respectively) replied no to this question. In response to item IX, only 3 per cent of group I and 7 per cent of group III indicated there was some con flict between program budgeting procedures and techniques and good budgeting or accounting standards, while 91 per cent of group I, 77 per cent of group II, and 8 8 per cent of group III indicated there was no conflict. In their responses to item X, a majority of the respondents in group II (77 per cent) and group III (60 per cent) indicated they were using data processing equipment to do their program budgeting. None of the respondents in group II, and 38 per cent of those in group III indicated they were not using data processing equipment. Only 4 0 per cent of group I responded to this question in the 102 affirmative; 54 per cent indicated they were not using data processing equipment in their program budgeting. The question asked in item XI of the questionnaire was "Do you include direct costs only in your program budgeting?" The definition of direct costs was given as "those costs that are eliminated if a program is eliminated or added if a program is added." In answering this ques tion, 63 per cent of group I and 54 per cent of group II reported they were using direct costs only in their program budgeting. Fewer than one-half (41 per cent) of group III were using only direct costs. In item XII the respondents were asked: "Are you using a combination of direct costs and indirect costs in program budgeting?" Indirect costs were defined as "those costs that are not eliminated if a program is eliminated, nor added because a program is added." Over one-half (52 per cent) of the respondents in group III responded to this question in the affirmative, but only 40 per cent of group I and 39 per cent of group II said they were using both direct and indirect costs in program budgeting. The question of including direct costs only or both direct and indirect costs in program budgeting was not answered decisively, as a rather large percentage of the 103 respondents indicated they were including only direct costs, while a rather large percentage of respondents indi cated they were including both direct and indirect costs. This question was explored in depth during the personal interview survey described in Chapter IV. In item XIII the question asked was, "Is the pro gram cost procedure indicated in either of the preceding two questions used for all of your programs?" In answer to this question 26 per cent of the respondents in group I, none of those in group II, and 19 per cent in group III said "no." Most of the respondents were using a consistent procedure in all programs regarding their treatment of direct and indirect costs. This question was also explored in depth during the personal interview survey. In item XIV the question asked was, "Are you pro rating indirect program budget costs?" The responses to this question did not indicate a common practice of either prorating or not prorating indirect costs by any of the three groups. However, the responses to this question were consistent with the responses given to items XI and XII. The entire question of how to treat indirect costs in pro gram budgeting was explored during the interview phase of this study and is discussed in detail in Chapter IV. 104 Comments With but few exceptions, the respondents in each of the three groups accepted the invitation to add candid remarks regarding the over-all strengths and weaknesses of program budgeting and/or any other areas not covered by the questionnaire. Some of the more noteworthy comments made by respondents representing California school districts were as follows. 1. It is relatively new in our district; there fore, I feel we really don't have enough information to answer some questions intelli gently. At present, I would say our program is rather weak. 2. Program budgeting is an excellent management tool; however, this district was required to hire one additional accountant due to the increased work load. This system does assist in advance planning and also in preparation of audit and internal control of program funds. 3. Since the older type budgets using state accounting format was harder for nonfinancial people to understand we have found that our program budget format greatly helps in the administration, control and understanding of the budget and its financial implications. I believe districts not having access to data processing services would find the procedure more costly and complicated. We have our own data system. 4. Program budgeting tends to decentralize and 105 encourage decision-making at the lower levels of administration. Yet - provides adequate and meaningful accounting controls to guide policy decisions. Eliminates multiplicity of record keeping by each reporting unit. The following comments were made by respondents in large school districts in other states of the nation: 5. Our efforts in program budgeting have been limited to summarizing appropriations into four programs— elementary, secondary, college, and special education. This "summary budget" at this time is used almost exclusively for presentation to the Board of Education's Budget Committee for reviewing appropriations for the next fiscal year. No attempt is being made at this time to incorporate this "summary budget" into our accounting system or for use in budget control. 6. The program budgeting as used by the schools is presently in the process of refinement to provide in greater detail specific learning areas throughout the school system rather than in the area of a specific attendance unit within the system. The data processing pro cedures presently utilized will require further analysis to broaden the numeric system of classification used. The present programs of instruction at the secondary level are more complete and are more easily identifiable than at the elementary level. It is our future plan to bring the entire common school program of learning to an identifiable manner; to provide the adminis trative tools to more accurately analyze present accomplishments and to provide for more 106 useful future objectives. 7. Program budgeting requires the administrator to assess his program and relate his needs accordingly. In the process of assessment, he finds that, in some cases, his needs (additional funds for personnel, supplies, services, equipment, etc.) are not related to his programs. We have received several com ments from school principals who complimented the program budgeting system because it forced them to evaluate their school programs. The results, in many cases, were "eye openers" for them, because many deficiencies were uncovered in their school programs. It has enabled the administrators to discuss programs more intelligently and relate personnel, sup plies, equipment, books, etc. to the programs. As a result, the administrators have become more responsible. The program budget can be used as a request document, expending frame work and evaluation tool. The following comment was made by a respondent rep resenting city government in California: 8. We feel program budgeting is desirable in itself— focusing analysis on competing pro grams in gross cost terms within the total of financial resources available. It does not provide, however, the data neces sary to make rational, informed decisions about unit costs and program quality. In order to accomplish these ends, carefully con structed work units must be defined for each program area and valid work unit reporting systems must be devised and implemented; all of which must be integrated into a consistent accounting whole. In an organization of any size this almost certainly requires computer support. 107 Any decisions regarding program quality would require supplemental qualitative analysis. A respondent who represented county government in California made this remark: 9. Actually, our budgeting is what I would call a modified program approach. That is, the budget tabulation is line item, but the analy sis is by program wherever the function is significant enough to warrant development of program measures. We are working to improve our cost systems in order to produce true program cost units— a combined statistical- cost measure. Among the comments made by respondents representing state government were the following: 10. Program budgeting is only good to the extent that it is accepted by middle and top manage ment. This acceptance requires a managerial staff cognizant to the advantages and disadvan tages of program budgeting. It requires individuals who have the guts to make hard-nose decisions when alternatives present themselves. It requires the unqualified support of manage ment at all echelons of activity. 11. Our first objective has been to define by pro gram each agency operation, with an appropriate justification for the next fiscal year request, and we then budget accordingly. Enough informa tion has been collected so that, should questions from the legislature occur along the former "line item" approach, answers can be given. Some major hurdles are: to get the legislature to appropriate by program; develop long-range, 5-year projections, for all agencies; establish cost accounting procedures within agencies, where feasible, so that measures of effectiveness 108 can be developed; analyze all agency programs for duplicity, long-range goals and measures of effectiveness. Budgeting ideas instead of dollars requires rigid control upon the determination of accomplishments. This comment was made by a respondent representing a department within the federal government: 12. On the basis of experience I am convinced that program budgeting is a necessity in today's environment. It has tremendous potential for better management and use of public funds. On the other hand, effective installation and use is an evolutionary process— there are many problems, and you don't get startling results overnight. Typical of the comments made by respondents in large businesses were these: 13. The strength of program budgeting lies in its "way of looking at problems" as expressed by Mr. Charles Hitch in his Economics of Defense in the nuclear age. The secret lies in the concept of "economic choice" in the allocation of scarce resources. Such a choice cannot be made unless competing programs are designed to fit into an over-all mission framework which enables resource "inputs" to be measured in terms of resource "outputs" or "effectiveness" in accomplishing a task. Furthermore, costs must be projected over the life cycle of the program and not be considered on a one-year basis. The primary weakness of the program budget system lies in its inability to ensure that a program bears its fair share of indirect and overhead costs, and the ability to measure over-all effectiveness of the program. 109 14. For a commercial organization the planning, budgeting, and reporting of major programs is necessary to the understanding of and manage ment of a business. Frequently, programs represent expenditures in one period and bene fits in another. The matching of program costs with anticipated benefits is a necessary part of the review and approval of annual budgets and long-range forecasts. 15. This system of cost control is an effective method of financially documenting the plans for those areas of the company covered by pro gram budgeting. Typical areas of business cost that can be segmented into projects on programs are: cap ital additions, advertising expenditures, and research and development expenses. Summary of the Chapter In analyzing the responses to the questionnaire survey the following findings emerged: 1. Purposes of program budgeting which were con sidered very important by 5 0 per cent or more of the respondents representing California school districts, and the percentages who rated the purposes very important, were: a. Allocation of financial resources in terms of total needs and priorities (71 per cent) b. Assistance in cost control and analysis (51 per cent) 110 2. Purposes of program budgeting which were con sidered very important by 5 0 per cent or more of the respondents representing large school districts in other parts of the nation, and the percentages who rated the pur poses very important, were: a. Allocation of financial resources in terms of total needs and priorities (77 per cent) b. Evaluation of present programs (62 per cent) 3. Purposes of program budgeting which were con sidered very important by 50 per cent or more of the respondents representing city, county, state, and federal government, and large businesses, and the percentages who rated the purposes very important, were: a. Allocation of financial resources in terms of total needs and priorities (69 per cent) b. Evaluation of present program (64 per cent) c. Evaluation of program proposals in terms of objectives (60 per cent) d. To make the budget more understandable (52 per cent) 4. All of the following purposes were considered Ill either very important or important by 66 per cent or more of each group of respondents: a. Evaluation of present programs b. Evaluation of program proposals in terms of objectives c. Allocation of financial resources in terms of total needs and priorities d. Assistance in cost control and analysis e. Appraisal of program performance f. To make the budget more understandable 4. A source of impetus for adopting program budgeting that was considered very important by 5 0 per cent or more of the respondents in California school districts, and the percentage who rated the source very important, was administrative or executive decision (54 per cent). 5. Two sources of impetus for adopting program budgeting that were considered very important by 50 per cent or more of the respondents in large school districts in other parts of the nation, and the percentage who rated the sources very important, were: a. Administrative or executive decision (54 per cent) b- Management reporting (54 per cent) 112 6. A source of impetus for adopting program budgeting that was considered very important by 50 per cent or more of the respondents in city, county, state, and fed eral government and in large businesses was administrative or executive decision (71 per cent). 7. In addition to the sources of impetus listed in number 4 above, the following were considered either very important or important by 5 0 per cent or more of the respondents in California school districts: a. Own initiative (89 per cent) b. Management reporting (83 per cent) c. State and/or federal laws or regulations (83 per cent) 8. In addition to the sources of impetus listed in number 5 above, the following were considered either very important or important by 5 0 per cent or more of the respondents in large school districts in other parts of the nation: a. Own initiative (85 per cent) b. State and/or federal laws or regulations (69 per cent) 9. In addition to the sources of impetus listed in number 6 above, the following were considered either very 113 important or important by 50 per cent or more of the respondents in city, county, state, and federal government, and in large businesses: a. Own initiative (79 per cent) b. Management reporting (74 per cent) 10. Criteria for designing a program budget that were considered very important by 5 0 per cent or more of the respondents in California school districts, and the percentages who rated the criteria very important, were: a. Directly related to source of funds, and facilitates interorganizational fiscal relations (71 per cent) b. Program meets a major objective of the organization (60 per cent) 11. Criteria for designing a program budget that were considered very important by 50 per cent or more of the respondents in large school districts in other parts of the nation- and the percentages who rated the criteria very important, were: a. Program meets a major objective of the organization (69 per cent) b. Has administrative relevance and provides for administrative effectiveness (62 per cent) 114 12. Criteria for designing a program budget that were considered very important by 50 per cent or more of the respondents in city, county, state, and federal govern ment, and in large businesses, and the percentages who rated the criteria very important, were: a. Program meets a major objective of the organization (71 per cent) b. Program covers activities that are related to each other (55 per cent) c- Has administrative relevance and provides for administrative effectiveness (50 per cent) 13. All of the following criteria were considered either very important or important by 50 per cent or more of the respondents in each group: a. Program meets a major objective of the organization b. Program covers activities that are related to each other c. Has administrative relevance and provides for administrative effectiveness d. Directly related to sources of funds, and facilitates viable interorganizational fiscal relations 115 e. Directly related to different levels of the ultimate objective f. Provides for some quantitative informa tion concerning output or results g. Provides for the decentralization of decision-making h. Permits comparison of alternative methods of pursuing policy objectives 14. The following were identified as advantages of program budgeting by 6 9 per cent or more of the respond ents in each group: a. More understandable budgeting b. Facilitates decision-making c. More intelligent allocation of financial resources d- Better budgetary control e. Aids in the evaluation of program alterna tives in terms of objectives and costs f. Facilitates making long-range projections 15. Shortcomings or weaknesses of program budgeting that were identified by at least 50 per cent of the respondents in California school districts, and the per centages who identified each shortcoming, were: 116 a. Increased length and volume of budget docu ments (83 per cent) b. Difficulty in assigning costs to a program (63 per cent) c. Requires better trained personnel (60 per cent) d. Requires additional personnel (54 per cent) 16. Shortcomings or weaknesses of program budgeting that were identified by at least 50 per cent of the respondents in large school districts in other parts of the nation, and the percentages who identified the shortcom ings , were: a. Increased length and volume of budget documents (6 2 per cent) b. Requires better trained personnel (54 per cent) 17. Shortcomings or weaknesses of program budgeting that were identified by at least 50 per cent of the respondents in city, county, state, and federal government, and in large businesses, and the percentages who identified the shortcomings, were: a. Increased length and volume of budget documents (57 per cent) 117 b. Requires better trained personnel (55 per cent) 18. Conversion problems in program budgeting that were identified by 50 per cent or more of the respondents in California school districts, and the percentages who identified the problems, were: a. Financial— increased cost (71 per cent) b. Personnel— need more and/or better trained personnel (69 per cent) c. More need for electronic data processing equipment (69 per cent) 19. Conversion problems in program budgeting that were identified by 50 per cent or more of the respondents in large school districts in other parts of the nation, and the percentages who identified the problems, were: a. More need for electronic data processing equipment (62 per cent) b. Personnel— need more and/or better trained personnel (54 per cent) c. Administrative reorganization-decentral- ization vs. centralization (54 per cent) 20. Conversion problems in program budgeting that were identified by 50 per cent or more of the respondents 118 in city, county, state, and federal government, and in large businesses, and the percentages who identified the problems, were: a. Personnel— need more and/or better trained personnel (60 per cent) b. More need for electronic data processing equipment (52 per cent) 21. The majority of the respondents in each group indicated that program budgeting had improved their budget ary procedures. This was reported by 74 per cent of the respondents in California school districts, 62 per cent of those in large school districts in other parts of the nation, and 81 per cent of the respondents in city, county, state, and federal government, and in large businesses. 22. That the use of program budgeting had caused an increase in the length and volume of budget documents was reported by 8 9 per cent of the respondents in California school districts, 39 per cent of those in large school dis tricts in other parts of the nation, and 60 per cent of the respondents in city, county, state, and federal govern ment and large businesses. 23. That the use of program budgeting procedures had violated commonly accepted standards for budgeting or 119 accounting was reported by 3 per cent of the respondents in California school districts, none of the respondents in large school districts in other parts of the nation, and 7 per cent of those in city, county, state, and federal gov ernment and large businesses. 24. That data processing equipment was utilized for program budgeting was reported by 4 0 per cent of the respondents in California school districts, 77 per cent of those in large school districts in other parts of the nation, and 60 per cent of the respondents in city, county, state, and federal government and large businesses. 25. That direct costs only were included in their program budgets was reported by 6 3 per cent of the respond ents in California school districts, 54 per cent of those in large school districts in other parts of the nation, and 41 per cent of the respondents in city, county, state, and federal government and large businesses. 26. That a combination of direct costs and indirect costs was included in their program budget was reported by 40 per cent of the respondents in California school dis tricts, 39 per cent of those in large districts in other parts of the nation, and 5 2 per cent of the respondents in city, county, state, and federal government and large 120 businesses. 27. That the same program cost procedure (including or not including indirect costs) was used in all programs was reported by 69 per cent of the respondents in Califor nia school districts, 85 per cent of those in large school districts in other parts of the nation, and 67 per cent in city, county, state, and federal government and large businesses. 28. That indirect costs were prorated was reported by 4 9 per cent of the respondents in California school dis tricts, 31 per cent of those in large school districts in other parts of the nation, and 45 per cent in city, county, state, and federal government and large businesses. CHAPTER IV INTERVIEW FINDINGS Introduction The responses to and comments regarding the four teen questionnaire items indicated a need for more informa tion than was being obtained by that survey. Therefore, a team-interview guide was developed and used to study in depth those program budgeting procedures, techniques, and formats used in seven large California school districts and four large out-of-state city school districts. This chap ter contains a report of the findings derived from the use of this instrument in personal interviews conducted with chief business officials in these districts. It was found from the questionnaire survey that all seven of the selected large California school districts who granted personal team-interviews were using some program budgeting procedures, techniques, and formats. This was particularly true for federally funded programs and, in some cases, state-aided excess cost programs such as those 121 122 for the educationally and physically handicapped, and for the mentally retarded. Two of the school districts were using primarily a program cost accounting approach. The four large out-of-state city school districts were using some program budgeting procedures, techniques, and formats to varying degrees. California School Districts Sacramento City Unified (District A) The chief business official in the Sacramento City Unified School District, referred to also as District A for purposes of brevity, believed the major strength in their approach to program budgeting was emphasis upon a narrative explanation of the different programs in an obvious effort to de-emphasize minute detail information. He indicated that this approach is not inherently related to program budgeting, but that it is an essential aspect of good budgeting and should be given considerable attention in discussing the attributes of program budgeting. Their effort in this regard has been to put the spotlight on major policy questions which the board of education needs to face in reaching budget decisions, as opposed to the concept of a line item budget which diverts the board's 123 attention from major issues to minutiae. District A has found that the weakness of their approach lies primarily in the fact that they have not pro ceeded in great depth in identifying programs. Rather, their approach has been to use an organizational basis, which in itself has some good features, but they think there is a need to expand and identify specific individual programs. Their summary of programs covers three major categories: 1) administrative services, 2) instructional programs and services, 3) supporting services. These cat egories are further subdivided into subprograms showing three format elements: a brief explanation of the objec tives, the name of the program, and its direct costs. The interviewee from District A emphasized that they did not make any attempt to identify estimated income in the budget document with specific programs other than by references in the narrative material. He believed that it is basically unsound to identify, allocate, or prorate income to budget programs, as this approach frequently results in the "sale" of a program on the basis that it is financed separate and apart from other funds. Unfortunate ly, this is the case with respect to various federally funded programs, and the interviewee thought this is an unfortunate development. At the same time, he thought that it would be a basic error to use this approach in identify ing programs which are a part of the district's regular program. He maintained that programs should be proposed, defended, and approved on the basis of the merits of the program and not merely because of the financial support implications of the particular program. He pointed out, for example, that the summer school program, which is under the present apportionment formulas, can be financed entirely by additional state apportionments. The obvious conclusion is that this program is almost unlimited in terms of its financial support, and yet the summer school program should be developed, proposed, and approached on the basis of. the merit of the program, not merely because unlimited financing is available. He had no objections to including this kind of information in cost studies of var ious programs, and his objection related only to injecting this question into the budget development process itself. It was the interviewee's belief that this approach to pro gram budgeting tends to compartmentalize and divide the district's total program into small pockets of vested interests, and that programs should stand the tests of budget deliberations on the basis of comparisons with other 125 programs which are competing for the school district's financial resources. District A's budget document is outlined in four parts below. Part One: General Fund Budget Resources— Summary Appropriations and Expenditures— Summary by State Classification Appropriations and Expenditures— Summary by Program Resources— Detail Appropriations and Expenditures— Detail by Program Appendices Staffing and Supplies Special Projects (Federally Funded) Part Two: Budgets Other Than General Fund Building Fund Bond Interest and Redemption Fund Cafeteria Account Children's Center Fund Special Reserve Fund Part Three: Statistical Information Tax Rates— Ten-year Trend Assessed Valuation 126 Enrollment and Average Daily Attendance Class Size Resources and Income— Graphs Current Expense of Education--Trends Comparison: Personnel and Other Costs The Budget Dollar District Schools Part Four: Financial Statements, 1965-66 General Fund Building Funds Cafeteria Accounts Children's Center Fund Statement of Combined Funds District A's concept of program budgeting is an approach to interpreting meaningfully the financial plan ning of a school district for a budget year. According to the chief business official, this approach is superior to the former method used, which provided excessive detail with little explanation of the programs or the services to be accomplished. Their program budgeting approach provides the narrative and explanatory information needed by the public and the board in understanding the financial plan ning and the programs and costs of a school district. 127 The mean feature of their program budgeting approach is their use of three major program budget cate gories: 1) administrative services, 2) instructional pro grams and services, and 3) supporting services. These major programs are subdivided into subprograms. Other expenditures and disbursements are classified in accordance with the California School Accounting Manual, but are related to the ongoing instructional program of the dis trict. The first category, administrative services, is used to identify appropriations for the following: Board of education Office of superintendent Personnel services Planning and research Business services In the second category, instructional programs and services, are those services directly involved with the instructional program of the district: Administration instructional services Curriculum development and material services Staff training services Special services 128 Special programs Elementary schools Junior high schools Schools for adults Continuation high school Summer schools Summer demonstration schools Special projects (federally funded) District A has not been faced with the need for dividing major subject areas into programs, such as art, English, business education, but are fully aware that this type of program could be coded and programmed into their electronic data equipment for both accounting and budget purposes. The third category, supporting services, covers the various budgeted activities for supporting the instruc tional program, as follows: Transportation Maintenance and operations Fixed charges Community services General capital improvements The detailed budget analysis which follows the 129 above has been organized in accordance with District A's program concept and provides explanatory material. A con version table has been developed to reconcile the dis trict's classification codes with the budget classification codes listed in the California School Accounting Manual, Volume XXXIII, No. 2, June 1964, of the State Department of Education. District A used only direct costs for their differ ent budget programs. They maintained that this procedure allowed for flexibility in expanding, contracting, or eliminating programs. However, their program cost account ing procedures and techniques were coded so that they were able to prorate indirect costs in special funded projects for claim purposes. Nevertheless, they were using only broad summary direct costs for their presentation of budget programs in order to put the spotlight on major policy questions which the board of education needs to face in reaching budget decisions and to avoid being diverted by minutiae. The only place District A indicated an "income producing" program was in federally funded programs, and this was done in the narrative material. They believed that all budget programs should be proposed, defended, and 130 approved on the basis of the merits of the program and not merely because of financial support implications of the particular program. They recognized the need of showing a program's income for cost accounting reporting and claim purposes. Berkeley Unified School District, Berkeley, California (District B) Berkeley Unified School District (District B) has developed a system of program accounting which is included in their budget document. Program accounting is used as a means of isolating costs and related income with appropri ate expenditures. The chief business official described their system of program accounting as an accounting system which differentiates from one another: 1. All income and expenditures for specially funded programs, regardless of whether the source of income is federal, state, county, local, grants, matching aids, local property tax revenue, or miscellaneous types of income. 2. Any special or enrichment program which is not specially funded, but for which, in the interests of the operation of the program, it is desired to be able to break out the costs of the program, 131 such as summer school, elementary instrumental music, curriculum development. The Regular Program Income includes: 1. Nonrestricted beginning balance 2. Federal PL 874 income 3. State apportionment (non-excess cost) 4. County taxes and miscellaneous income 5. Local general tax rate income 6. Local miscellaneous income (excepting special grants and restricted income) Berkeley's system of program accounting is not in tended to be an accounting system on a subject area basis. Due to their school district organization they are able to break out costs according to grade levels— K-6, 7-8, 9, 10- 12, continuation, and adult education. Berkeley's format or structure for their regular instructional program is typical of their procedures, tech niques, and format used for other programs: Program format or structure. The following is a typical example of the format used in all educational activities not covered in the special programs from kinder garten through grade twelve. 132 Funding Level Basis Federal In lieu of taxes under PL 874 State Regular pupil apportionment County Solvent credits tax and equal ization offset tax District General purpose taxes and override Income 1964-65 Actual 1965-66 Actual 1966—67 Budget Federal $ 255,000 $ 260,300 $ 280,000 State 2,243,631 2,253 ,750 2,295,200 County 12 8,803 109 ,959 112,000 District 6,183,913 6,623,714 7 ,842 ,734 Total $8,811,347 $9,247,723 $10,529,934 Average Daily Attendance 1964-65 Actual 1965-66 Actual 1966-67 Budget 15,080 15,025 15 ,200 Expenditures 1964-65 Actual 1965-66 Actual 1966-6 7 Budget Direct $ 9,204,805 $ 9,754,672 $11,114,049 Prorated (393,458) (506,949) (584,115) Total $ 8,811,347 $ 9,247,723 $10,529,934 133 Expenditures per A.D.A. 1964-65 Actual 1965-66 Actual 1966-67 Budget Federal funded $ 17 $ 17 $ 18 State funded 149 150 151 County funded 9 7 7 District funded 409 441 517 Total $584 $615 $693 Berkeley has not broken out costs by subject matter for the following reasons: 1. An instructional procedure at any given level, i.e., elementary, junior high, senior high, is a total procedure and not one which lends itself to note worthy dissection. The best instructional program is one which meets the needs of the children and comparison of costs by subject level is a useless statistic without comparable statistics on the needs of children. 2. In a school district with a salary schedule of two to one, or where the top step and class earns twice as much as the beginning step and class comparison 134 of cost data can be skewed significantly by the placement of teachers within certain grades or subject areas. Unless these facts are readily available, cost comparisons are meaningless. 3. Another reason for not maintaining costs by subject matter is that the cost of maintaining such data would be inordinately high and would be a wasted and costly effort if cost comparisons are not valid. 4. Costs per average daily attendance are maintained throughout California and most of the United States, but subject matter comparisons would require that the average daily attendance be maintained on a per-period basis. This would be a time-consuming and expensive procedure unless a better unit for comparison is developed. Advantages of program accounting in Berkeley. The chief business official of Berkeley stated that the goals and advantages of program accounting are likewise goals and advantages of program budgeting. The concept of program accounting and program budgeting is such that to discuss one is to discuss the other. This is especially true if, 135 in the course of budgeting, planned expenditures can be programmed together with anticipated income. Further, pro gram accounting greatly facilitates cost accounting and, thus, program accounting can also refer to cost accounting. The chief business official and his assistants think that the most important advantage of program account ing is that it marks the end of confusion in budgeting. The board of education and the citizenry of the district can now be completely aware of the budgeted and prorated costs of many and diverse programs that comprise the offer ings and operations of the district. They maintain that the format of their program accounting system is such that any district can adapt its system to meet tne needs of the individual district, and that their budget class designations are readily and easily compatible with the California State Accounting Code. San Bernardino City Unified School District San Bernardino, California (District C) The San Bernardino City Unified School District began using some'program budgeting and accounting proce dures, techniques, and formats during 1965-66. Their experience with the system demonstrated to them its value in many areas of internal operation within various 136 departments. They believe it is now appropriate for them to start implementing a more comprehensive system of pro gram budgeting and accounting. The assistant business manager stated, "We are convinced of the need for program budgeting and will implement it for 1967-68. The trouble area is in indirect costs and general income." A brief description of some of the major features of San Bernardino's program budgeting and accounting proce dures, techniques, and formats follows. Programs. The programs listed below are those which are planned for 1967-68. 1. Federal/State Programs— Limited Duration Distributive Education Adult Basic Education Elementary and Secondary Education Act— I Elementary and Secondary Education Act— II National Defense Education Act Neighborhood Youth Corps Project Head Start Teacher Employment Program Vocational Education Act 2. Other Programs Regular Day School 137 Adult Education Driver Training Educable Mentally Retarded Educationally Handicapped Home Teaching Mentally Gifted Remedial Physical Education Speech and Hearing Summer School Trainable Mentally Retarded Visually Handicapped and Blind Orthopaedically Handicapped Principal types of expense allocation. One of San Bernardino's basic considerations of program budgeting and accounting is the method and extent of expense allocation. 1. Direct Expenses— Those expenses which can be charged directly as a part of the cost of a product or service, or of a department or operation unit, when the expense is incurred. Examples: Adult school teacher salaries TMR instructional supplies Head Start classroom rental ESEA field trips Direct Prorated Expense— Those expenses which are directly related to the cost of a product or service, or of a department or operating unit, and can be prorated on a readily deter mined basis, preferably when the expense is incurred. Examples: Special Education Coordinators 1 salary Junior High Teachers' salary (4 periods regular class, 2 periods mentally retarded) Custodial salaries, supplies, and utilities (school with 10 regular and 4 educationally handicapped classrooms) Indirect (Overhead) Expense— Those expenses neces sary in the provision of a service which are of such a nature that they cannot be readily or accur ately identified with the specific service, and are charged to a total or undistributed account at the time the expenditures are originally recorded. Examples: Central administration costs (unless specifically designated otherwise) 139 Maintenance overhead costs Pupil transportation, regular home-to-school trips Bases for proration. These bases apply to direct prorated expense and indirect expense: 1. Time Method— Expenses are prorated in proportion to the time spent. Example: Junior high counselor assigned three periods as NDEA counselor and three periods as regular counselor. Charge time half and half. 2. Time-Area Method— Expenses are prorated in propor tion to the gross floor area and the length of time such floor area is used. Example: Head Start class uses 2,000 sq. ft. of a 20,000 sq. ft. school for 1/2 day. Operating expense would be 1/10 of 1/2, or 1/20 of the total school ex pense . An alternate to the time-area method is the hour- consumption method. In the above example, if Head Start classes were in session for 8 hours/day out 140 of a total schedule of 168 hours, the proration would be 1/21. 3. Number of Pupils Method— Expenses are prorated in proportion to the number of pupils involved— ADA or enrollment, as appropriate. In some cases, it may be necessary to convert certain programs to an ADA or enrollment equivalent. Example: If a doctor examines 100 trainable mentally retarded pupils per year, and his total examinations are 1,000, 1/10 of his salary would be charged to the TMR program. 4. Quantity Consumed Method— Expenses are prorated in proportion to the actual amount of material con sumed. Example: If 50 reams of paper are received by a school, and 2 0 reams are used by a mentally gifted class, 2/5 of the paper would be charged to that class. Expense allocation factors. To determine the total cost of a program, all three types of expense (direct, direct prorated, and indirect) must be allocated to it. 141 The following procedures are based on this premise. Gen erally, direct and direct prorated expenses are charged to the program at the time the expense is incurred. Indirect expense is charged to an intermediate account with distri bution to programs at a later date. 1. Direct and Direct Prorated Expense— Those charges that are to be posted directly at time of incur rence are in accounts that are designated as direct (including prorated) expense. Certain expenses are direct (including prorated) but are charged to indirect expense originally (see 2 below). 2. Indirect (Overhead) Expense— These expenses are charged to intermediate accounts designated as indirect expense. As noted above, certain expenses that are direct, but are chargeable to a budget category that is designated as indirect, will be charged in the latter group. If this type of expense is material, appropriate notation will be made and taken into consideration at the time indirect expenses are prorated. Principal types of income allocation. The second basic consideration of program budgeting and accounting is 142 the method and extent of income allocation. 1. Designated Income— Income from any source that is granted for, or restricted to, an identified pro gram and computed on the basis of specific data outlined as necessary for the program by the appro priate governing body; and is credited to the program at time of receipt without proration being required. Example: TMR excess expense apportionment Vocational Education Act, PL 88-210 Adult Education Fees 2. Designated Prorated Income— Income from any source that is granted for, or restricted to, an identi fied program and usually having been computed on the basis of specific data outlined as necessary for the program by the appropriate governing body; and is credited to the program usually at time of receipt, based on analysis of receipts. Examples: General fund overrides taxes— adult education supplemental state support Grades 1-3 3. General Income— Income from any source which is not readily identifiable as being directly for, because 143 of, or on account of a specific purpose, and is credited to a total or undistributed account at the time the revenue is received. Examples: Interest earnings Secured taxes (except overrides) Basis for proration. The basis for proration of income will depend upon the type. 1. Designated Prorated Income— The normal and best basis is the formula on which the income accrued to the district. If there is no formula, the situa tion must be analyzed. Usually, ADA or enrollment will be used. 2. General Income— Most items of general income can be prorated on some basis. The situation must be analyzed. Usually, ADA or enrollment will be used, a. Criteria for proration to a program. Many items of income are receiv.d because the dis trict is in existence and/or because the pupils are in school. These items of income will not normally be credited to federal/state or dis trict programs which do not produce ADA. This criterion is further developed in the following 144 section concerning district taxes. The ration ale is that these "extra" programs do not generate the income and therefore should not be credited with them. The items of income include, but are not limited to, the following: P.L. 874 Miscellaneous state apportionments Tax on solvent credits Trailer coach fees In lieu of taxes Forest reserve funds Miscellaneous county income Sale of district property Rentals Interest Miscellaneous income (subject to analysis) 3. Methods of Prorating Income— The following methods apply to designated prorated income and to general income. Code a. Prorated on basis of ADA in the program. b. Prorate on basis of formula in which income accrued to the district. Prorate on basis of expenditures. Secured and unsecured over-ride taxes: Rev enue is prorated by applying the tax rate to the assessed value for each over-ride tax levied, at 100 per cent. As amounts are received, prorata credits will be made to the various programs until the computed amount at 100 per cent is realized. Over-ride taxes for specific programs such as Adult Education, EMR, TMR, and EH are credited entirely to the program. Over-ride taxes for retirement and health insurance will be prorated on the basis of salaries charged to the various programs. NOTE: Since secured and unse cured taxes are credited at 100 per cent of levy, prior year taxes will not be dis tributed for over-rides. Secured, unsecured, and prior year general purpose taxes: After allocating over-ride taxes in "d" above, the balance, which is general purpose, will be allocated to 146 applicable programs on the basis of com plete financing of the program. A surplus or deficit in the tax receipts after allo cation will be reflected as an increase or decrease in the reserves, f. Prorate on an ADA basis, after identifiable receipts are credited to specific programs. 4. Accrual of Income— Certain income such as state apportionment for excess expense is received in the following year, and must be reported then. Program reports will be annotated to explain differences between current receipts and amounts due. Other factors. Before examining the budgeting and accounting processes in detail, there are other related factors besides those of income and expense which must be considered. 1. Units and Standard Costs— The final factor to reckon with is actual cost— either total or detail. However, in the process of considering programs, other data have significance. Where applicable, units will be shown. For example, number of positions, rooms, ADA. Actual costs, particularly for personnel, may skew the program costs to such an extent as to make comparison or analysis difficult and impractical. For example, both the Educationally Handicapped and Trainable Mentally Retarded have similar pupil- teacher ratios. If there were eight teachers assigned to each program, and in one program four teachers were at maximum salary and in the other four teachers were at minimum salary, there would be little comparative significance in actual costs. Where appropriate, both standard and actual costs will be shown. Program and Workload Information Statements— The heads of programs will be asked to furnish basic information to be included with program budgets. It will be included with the budget form in the items below. This information will be reviewed annually. They will give the following: a. Program objectives and short and long-term results anticipated. General description of program. b. Grade levels. c. Program duration. 148 d. Physical locations involved e. ADA or enrollment estimated f. Staffing— ratios and number required g. Other expense— total requirements and/or formulae for each type of expense h. Special logistical requirements i. Financing of program j. Justification for changes in amounts and/or formulae k. Basis for program evaluation 1. Indirect costs and income (in conjunction with business office) Oakland, California (District D) Two of the top-level school business officials in Oakland, California (District D) displayed a questioning attitude toward program budgeting during the entire per sonal interview period. Both interviewees admitted that they were using program budgeting procedures and techniques in their district for federally funded programs. One stated, "Much needs to be done on prorating indirect costs. This will probably require legislation or change in admin istrative regulations, both on state and federal levels." 149 The interviewees expressed the opinion that program budgeting did not offer any advantages over their proposed school system of budgeting. They were then asked their candid opinion of program budgeting, and one stated, "Pro gram budgeting is not needed or applicable in school dis tricts," and the other did not disagree. Both interviewees supported the proposed school budget system described below. In order to meet the needs for clarity and com pleteness, it is proposed that "function" be eliminated as the prime basis for classification of expenditures, and that emphasis be placed upon "objects of expenditure," such as salaries, textbooks, and supplies. For example, instead of recording Certificated Salaries of Instruction, the several categories of salaries would be enumerated as teachers’ salaries, principals' salaries, etc. This would provide a ready basis for comparisons between districts, by object of expenditure, and would eliminate the confusion resulting from attempts to classify expenditures by function. In many of the special programs now being operated by school districts, it is difficult, if not impossible, to determine clearly the "function" being performed. For 150 example, under the Elementary and Secondary Education Act of 1965 (Public Law 89-10) services are being performed for combined groups of public, private, and parochial school pupils. Considerable difference of opinion exists as to whether these services are part of the instruction function or the community services function. Elimination of the functional accounting basis would automatically eliminate this type of problem. Classifying expenditures by object is relatively simple. Teachers' salaries would fall in only one place; hence, there would be no need to consider function and determine what portion pertained to instruc tion and what portion to community services. To evaluate adequately the effectiveness of special programs in light of the costs involved, some uniform method of cost accounting is required. This method should be as simple as possible, consistent with reasonable accu racy, yet should clearly show the costs for each special program or activity, and for the general educational pro gram. It should also make provision for allocation of "indirect expense" to each special program and to the general program. For the purpose of providing cost information by program, it is proposed that each expenditure be analyzed 151 and identified as one of these: 1. A direct cost of the general education program 2. A direct cost of a special program or activity 3. An indirect cost, not solely attributable to any special program or activity, or to the gen eral education program Direct costs would then be charged to the appropri ate object accounts, within the special or general program records. These charges are often the only ones for which reimbursement may be claimed under special programs, and they would be identified readily for this purpose. Indirect cost allocations present a special prob lem. There are many bases upon which indirect costs may be distributed. Most of these require detailed records on time utilization, space use, mileage traveled, or other data for measuring the relative cost to be allocated to the various programs and activities. The cost of collecting, evaluating, and maintaining such records is beyond the reach of many districts, and the information is often of questionable value even if available. In any event, the bases will vary from district to district, making cost comparisons between districts unrealistic. In order to provide a uniform method for all 152 districts, and to avoid unnecessary detailed accounting, it is proposed that indirect cost allocations to programs and activities be made on the basis of direct costs. The formula is simple: Total expenditures, less direct costs, equals indirect costs. Indirect costs are then distributed to programs and activities in proportion to the direct costs. For example, if a district's total expenditures were $1,000,000, with $800,000 of this total charged directly to the general education pro gram and $50,000 charged directly to special programs, there would remain an indirect expense amount of $150,000 to be distributed. This would be applied to programs in proportion to direct costs, with 800/850ths to the general program and 50/850ths to the special programs. Each special program would, of course, be charged with indirect expense according to the same formula, resulting in a complete allocation of indirect costs to programs, without a detailed break down by object of expenditure. A summary sample of such a cost distribution is presented in Table 15. TABLE 15 INDIRECT COST DISTRIBUTIONS— DISTRICT D D i r e c t Expense General Special Programs & Activities Indirect Expenditures Total Program Prog. A Prog. B Prog. C Expense Salaries & Wages: Teachers Principals Superintendents Clerical 800,000 20,000 18,000 200,000 750.000 8,000 • * 194.000 4 ,000 • • • • 1,500 . . 5,000 • • • • * • • • . . 500 41.000 12.000 18,000 4 ,000 Employee Benefits: Retirement Health/Welfare 70.000 50.000 • • • • • • • ■ • • • * • • i • 70.000 50.000 Supplies Equip. 180,000 167,000 3,000 2,000 5,000 3,000 Utilities 20,000 • • • * • • ■ * 20,000 Travel/Transp. 5,000 4 ,400 300 . . 100 200 Other expense 15,000 14,000 100 . . 200 700 Totals 1,378,000 1,137,400 8,900 2,000 10,800 218,900 Indirect cost dist. • • 214,801 1,681 378 2,040 (218,900) Total direct and indirect costs 1,378,000 1,352,201 10,581 2,378 12,840 . . H Ui GJ 154 With the elimination of functional accounting, establishment of object accounting, and distribution of indirect expenses on the basis of direct expense, much of the confusion about school district budgeting and account ing would be eliminated and a worthwhile service rendered to public education. It is hoped these suggestions will be thoroughly discussed and that from the discussion a truly modern school budgeting and accounting system will evolve. SUGGESTED CHART OF EXPENDITURE ACCOUNTS For California School Districts Code Account Title Salaries and wages 101 Teachers' salaries 103 Librarians' salaries 105 Counselors' salaries 107 Principals' salaries 109 Instructional supervisors' salaries 111 Nurses' salaries 113 Physicians' salaries 115 Teacher aides' salaries 117 Tutors' salaries 119 Yard supervisors' salaries 155 Account Code Account Title 121 School clerical salaries 123 Custodians' and matrons' salaries 125 School lunch workers' salaries 127 Gardeners' salaries 151 Governing board members' salaries 153 Superintendent's and assistants' salaries 155 Business managers' and assistants' salaries 157 Directors' salaries 159 Attendance and guidance supervisors' sal aries 161 Consultants' salaries 163 Psychometrists' salaries 165 Central office clerical salaries 17 5 Mechanics' salaries and wages 177 Foremen's salaries and wages 179 Storekeepers' salaries and wages 181 Deliverymen's salaries and wages 18 3 Watchmen's and patrolmen's salaries and wages 18 5 Playground directors' and supervisors' salaries 187 Civic center custodians' salaries and wages 200 Employee Benefits 205 State Teachers' Retirement System Annuity Account 300 156 Code Account Title Fund 210 State Teachers' Retirement System Permanent Fund 215 State Employees' Retirement System 220 Old Age and Survivors Insurance 225 Health and Welfare Plans 230 Workmen's Compensation Insurance 235 Group Life Insurance Supplies and Equipment 3 05 Textbooks 310 Library books 315 Miscellaneous books 320 Instructional supplies 325 Testing materials 330 School office supplies 335 First aid and medical supplies 340 Instructional publications 34 5 Noninstructional publications 350 Gardening supplies 355 Custodial supplies 360 Maintenance supplies 365 Central office supplies Account 400 500 600 157 Code Account Title 37 0 New equipment 375 Replacement equipment 380 Equipment rentals 385 Equipment repair Utilities 410 Water service 420 Gas and electric services 430 Garbage disposal and trash hauling 44 0 Telephone service 450 Miscellaneous utility services Travel and Transportation 510 Home-to-school transportation for pupils 520 Educational field trips for pupils 530 Miscellaneous transportation for pupils 540 Staff transportation allowances 550 Staff travel expense Facilities and Services 610 Laundry and cleaning services 620 Property surveys and appraisals 630 Legal advertising 64 0 Legal expense 650 Audit expense Account 700 800 158 Code Account Title 660 Rental of facilities 670 Civic center facility expenses Sites and Buildings 7 05 Purchases of land 710 Rental of lease of land 715 Site improvements 720 Construction or purchase of buildings 725 Alterations to buildings 730 Modernization of buildings 735 Repairs to buildings 740 Playground site purchases 74 5 Playground site improvements 7 50 Construction or purchase of playground buildings 7 55 Alterations to playground buildings 760 Modernization of playground buildings Insurance and Financing 805 Fire insurance 810 Liability insurance 815 Pupil accident insurance 820 Miscellaneous insurance 8 30 Interest on short-term loans 159 Account Code Account Title 84 0 Repayment on account of State School Build ing Fund 84 5 Repayment on account of Public School Building Fund 85 0 Bond redemption 855 Bond interest 860 Miscellaneous debt service 900 Miscellaneous Expense and Transfers 905 Junior high tuition for grades seven and eight 910 Tuition other than grades seven and eight 915 Election expense 92 0 Miscellaneous instructional expense 925 Miscellaneous health service expenses 930 Miscellaneous maintenance and operational expense 935 Miscellaneous central office expense 940 Interfund transfers 945 Miscellaneous transfers School District E School district E was using program budgeting for federal and state funded programs and general instructional grade levels. The rest of their budget system followed the 160 usual California school district pattern of "function and line item budgeting by object." District E's interviewees' responses to personal team—interview questions were as follows: I. What are your major purposes for program budgeting? 1. Allocation of financial resources in terms of total needs and priorities— very important. 2. Assistance in cost control and analysis— very important. 3. Make the budget more understandable— very important. 4. Evaluation of present and proposed programs and appraisal of performance— not important. II. What caused you to go into program budgeting? 1. Board and staff's own initiative— very impor tant . 2. State and federal laws and regulations on funded programs— very important. 3. Management reporting— important. 4. Administrative decisions, citizens request, and financial elections— not important. III. What factors do you use in deciding on a program budget? 161 1. Program is directly related to the source of funds and facilitates viable interorganiza- tional fiscal relations— very important. 2. Program activities or services are related to each other— important. 3. Has administrative relevance and provides for administrative effectiveness— important. 4. Meets major objective, different line objec tives, output, decentralization of decision making, and comparison of alternative methods of pursuing policy objectives— not important. IV. What program budgets are you now including in your total budget? 1. City College 2. Senior High Schools 3. Samuel Gompers 4. Trade and Industrial— Day 5 . Trade and Industrial— Evening 6. Adult Schools 7. Junior High Schools 8 . Elementary (including kindergarten) 9. Special Schools 10. Federally Funded Programs What do you consider are the major advantages of your program budgeting? 1. More understandable budgeting— "yes" 2. Facilitates decision-making— "yes" 3. More intelligent allocation of financial resources— "yes" 4. Better budgetary control— "yes" 5. Aids in the evaluation of program alternatives in terms of objectives and costs--"yes" 6. Facilitates making long-range projections— "no" What are some of the shortcomings and weaknesses of your program budgeting? 1. Difficulty in assigning costs to a program— " ye s " 2. Problem of deciding what is a meaningful pro gram— "yes" 3. Excessive division of programs— "yes" 4. Requires additional personnel— "yes" 5. Requires better trained personnel— "yes" 6. Increased length and volume of budget docu ment— "yes" What problems did you encounter in converting to program budgeting? VIII. IX. X. XI. XII. XIII. XIV. 163 1. Increased budgeting and accounting costs— "yes" 2. Needed more and better trained personnel— "yes" 3. Required some decentralization of the adminis trative organi zation— "yes " 4. More need of the use of electronic data processing equipment— "yes" Is your program budgeting always compatible with good accounting practices? "Yes" What program budgets include only direct costs? "All of them." What programs show both direct and indirect costs? "None." What cost elements do you include in each program budget? "Salaries, supplies, and equipment." If you are prorating indirect costs, what method are you using? "None, except we usually use ADA when making claim reports on funded programs." What was your total enrollment on your 1966 October report? "127,000." What is your candid opinion of program budgeting? "O.K. within due and reasonable bounds, and we anticipate using more of it." 164 Palo Alto Unified School District Palo Alto, California (District E) Palo Alto Unified School District prepared and presented budgets for each school within the district, many departments, and special programs. Capital outlay and major maintenance budgets are presented by detail, item by item. During the academic year this district completed a comprehensive school cost analysis study for a Citizens' Systems Analysis Committee. This committee was created to comply with a request of a prior citizen's committee on finance in connection with the success of a $1.10 tax in crease. The purpose of the study was to prepare and present to the Systems Analysis Committee an assemblage of total cost figures relative to a specific school and assignable to the various academic subject areas within the school on a per-pupil basis. No attempt was made to make recommendations or value judgments relative to educational programs in regard to the various cost-factor relation ships . The distribution of costs was based upon a specific rationale of allocations made directly to the various aca demic subject areas. Indirect costs were compiled on the 165 basis of area utilization, enrollment figures, usage, and other appropriate accounting methods before making alloca tions directly to the specific subject matter areas. It was stated that any comparisons made between the various schools studied, or the various subject areas, must be done discreetly and with utmost caution. This was necessary because of many variables involved, particularly with respect to teacher salaries, class size, transporta tion, and maintenance. The chief business official was asked if the type of cost analysis would be used as a regular procedure in developing information for program budgeting. He doubted that it would be used in the near future, but thought the use of electronic data processing equipment may make this type of system analysis a common, easier, and less expen sive way to develop broad summary costs for program budget ing . San Diego Unified School District, San Diego, California (District G) Failure of the voters in the San Diego Unified School District to approve a proposed tax override in November, 1963 prompted Superintendent Ralph Dailard to 166 solicit the views of local businessmen and civic groups regarding where communication with the public, on financial matters, had broken down. The responses were revealing: 1. Reporting methods should be simplified. 2. Costs of specific programs should be evaluated. 3. Cost information should be directed specifically to those segments of the community the district is trying to reach. 4. It should be in the form of "bite-size" releases over an extended period of time. Equipped with these clues to the community's thinking, the district developed a three-pronged attack: 1. The Public Information Department, through the District's semi-monthly publication, Your Schools, stepped up coverage of specific financial problems. 2. The Budget Department regrouped expenditure accounts to reflect function and level. The number of control accounts was reduced from 3,160 to 600. 3. An illustrated budget summary, expressed in lay man's language, was prepared for public consump tion. Responses in all three areas, thus far, have been encourag ing . 167 Further to "shore up" public communication on school finances, San Diego school officials are now evalu ating various program budgeting concepts. Some conclusions that already are beginning to emerge are as follows: 1. The primary value of budgeting for specific pro grams appears to be in its ability to explain complex financial transactions in simple terms. It has less value as a device for administrative control. 2. To be meaningful, such budgeting must provide an accurate basis for apportioning the costs of administration, employee fringe benefits, insur ance , and other general overhead to program objectives. 3. As long as the state requires such expenditures to be grouped functionally (except for the fixed charges category which in reality is little more than a collection of odds and ends) and administra tive convenience requires that they be grouped organizationally, the merging of these two require ments with the program concept could only create an unworkable number of account classifications. Needed, then, is a device for translating the 168 control accounts into program objectives so that they may be incorporated in the budget document as a separate presentation. The San Diego City Schools have developed a conversion system to accomplish this mechanically and are employing it in the budget to be presented to the Board on April 4, 1967. Chart of accounts for program budgeting. The fol lowing chart of accounts is now being developed by the San Diego Unified School District. 100 Basic educational programs 110 Child care 120 Pre-school 130 Kindergarten 140 Elementary schools 150 Junior high schools 160 Senior high schools 170 Continuation and adjustment schools 180 Junior colleges 190 Adult education programs Programs for the gifted 240 Elementary school programs 250 Junior high school programs 169 260 Senior high school programs 300 Programs for the handicapped 340 Elementary school programs 341 Educationally handicapped 342 Language handicapped 343 Reading handicapped 344 Mentally handicapped 34 5 Emotionally handicapped 346 Physically handicapped 350 Junior high schools 351 Educationally handicapped 354 Mentally handicapped 356 Physically handicapped 360 Senior high schools 3 61 Educationally handicapped 364 Mentally handicapped 366 Physically handicapped 400 Direct services to pupils 410 Counseling, advising, and programming 411 General 412 Career development 4 20 Pupil attendance 430 Testing (group tests, psychometric services, etc. ) 170 440 Health services (nursing, physicians, psychia trists , etc.) 450 Library services 460 Supervision of pupils (student noon-hour supervision) activitie 470 Transportation of pupils 480 Food services Direct services to teachers 510 Resource teachers 520 Instructional consultants 530 Subject area specialists 540 Instructional materials used by teachers 550 In-service education 560 Curriculum research and development of instructional guides 60 0 Instructional supervision and leadership 610 Principals and vice-principals 620 Other operational personnel including regional directors 7 00 Planning, maintenance, and operation of school buildings 710 Planning 711 Architectural services 712 Landscape services 713 Planning 171 720 Maintenance services 721 Plumbing 722 Electrical 723 Carpentry 72 8 Grounds 730 Operation of buildings 731 Custodial services 732 Utilities 8 00 Personnel services (recruitment, employment, employee relations, etc.) 900 School district operation and administration 910 Board of education 920 Office of the superintendent of schools 930 Public information 940 Administrative research and administrative information services 950 Budgeting, accounting, payroll 960 Purchasing and warehousing 97 0 Business management The budget director of San Diego gave as the major purpose of program budgeting better communication in sell ing the educational programs, teachers, and schools. He stated the primary source of impetus had been community pressure for more information about what the district was 172 giving them for their tax dollar before agreeing to support an election to increase the general purpose tax rate. The major advantage, according to the interviewee, is that it is more understandable to the public, board, and personnel. Assigning costs to a program was the only shortcoming men tioned. Out-of-State School Districts City School District of the City of New York (District W) The City School District of the City of New York, also referred to herein as District W, had some aspects of program budgeting and some phases of performance budget evaluation. They were planning to set up more comprehen sive and long-term program budgeting. The Deputy Superintendent for Business thought that his biggest difficulty was trying to determine what a pro gram really is and how program-making-decisions are evolved. His next most difficult problem was trying to develop ways in which programs can be made compatible with state, city, and federal accounting reports. He said, "What this really means is that many items in the budget have to be minutely coded, so that they can be 'thrown' into a variety of categories to meet the needs of these 173 multifaceted reports." This New York school district was currently using a well-known California research team to help set up long term program budgeting aspects of their operations. The acting administrator of business affairs, who has had extensive experience with the "planning-programming-budget- ing" system in the National Defense Department, stated, "What is to be a program should be answered by their pro fessional educators." He used a "grid" form to present his concept of how to compare program budgets and related costs for instruction, as shown in Table 16. By using the "grid" form the acting administrator of business affairs thought it possible better to compare, synthesize, and evaluate educational programs both on a grade level and subject area basis. He pointed out that by using significant information this type of an approach could be used to compare and analyze other budget problems. The acting administrator of business affairs advised against the use of system analysis or cost effec tiveness studies as a substitute for sound and experienced educational judgment, but rather as a method to place before the decision-maker the relevant data, organized in a way most useful to him. There are and there should be many TABLE 16 INSTRUCTION PROGRAMS Activities and subject areas P r o g r a m L e v e l s Pre- School Primary Elementary Junior H.S. Senior H.S. Adult Edu. Special Schools Totals Edu. activities xkx XXX XXX Art XXX XXX XXX XXX XXX xxxx Business education XXX XXX XXX XXX xxxx Driver education XXX XXX XXX xxxx English-Speech Arts XXX XXX XXX XXX XXX xxxx Foreign language XXX XXX XXX XXX XXX xxxx Home economics XXX XXX XXX XXX xxxx Industrial Arts XXX XXX XXX XXX xxxx Mathematics XXX XXX XXX XXX XXX xxxx Military Science XXX XXX XXX xxxx Music XXX XXX XXX XXX XXX XXX xxxx Physical education XXX XXX XXX XXX xxxx Reading and remedial XXX XXX XXX XXX XXX XXX xxxx Science XXX XXX XXX XXX xxxx Social studies XXX XXX XXX XXX xxxx Other subjects XXX XXX XXX xxxx Totals XXX xxxx XXXX xxxx xxxx xxxx xxxx xxxxx 174 175 other inputs to the decision-maker, particularly in the areas which are not susceptible in whole or in part to quantitative analysis. There is frequently a need for intuitive decision-making in education, particularly when human beings are involved. The real need is not in the form of the budget but in the substance of the budget. He predicted that educational program objectives will increas ingly become the focus of the budget process. Budgets and accounting systems will be set up in such a way that it will be possible to measure the effort expanded in specific educational objectives. The financial plan will develop from the educational plan, not dictate it. Educational accounting will be expanded to take in all the elements of management— not just dollars but pupils, staff, property, and programs. Greater emphasis will be placed on system atic research as a basis for solving problems. Following is a summary of the expense portion of the New York School District's budget. Board of education budget 1966-67. Departmental functions: To establish elementary, high, vocational, and other schools and classes necessary to meet the education needs and demands of the city; to establish and maintain 176 school libraries, playgrounds, and recreation centers; to authorize and approve courses of study and textbooks, to enforce state compulsory education and school census laws; to select and acquire school sites; to design and construct new school buildings and modernize existing school build ings; to care for any and have custody, etc. of all school properties and to adopt rules and regulations for their preservation; to appoint necessary personnel; to purchase and furnish necessary supplies, textbooks, etc.; to carry out the provisions of the State Education Law and the Charter of the city. A summary of appropriations by major programs is presented in Table 17. School District of Philadelphia (District X) The 1966-67 budget of the School District of Philadelphia represents a significant departure from their traditional concept of departmental budgeting to one of program budgeting. According to the budget director, "The advantage of program budgeting is that it shows in the clearest possible terms the purposes for which funds are to l be expanded. All appropriations are approved on a program basis. The programs in the budget reflected a balanced TABLE 17 SUMMARY OF APPROPRIATIONS BY MAJOR PROGRAMS— CITY SCHOOL DISTRICT OF THE CITY OF NEW YORK (DISTRICT W) Board of Education 1. Board of Education 2. Superintendent of Schools 3. Personnel and teacher training 4. Curriculum research and evaluation 5. Instruction 6. Design, construction, and physical plant 7. Business and administration 9. Federal elementary and secondary education act Total to be expended by the Board of Edu. Other City Departments 10. Medical, dental and health services (Department of Health) 11. Light, heat, and power (Department of Water Supply, Gas & Electricity) Authorized 1966-67 Total Personal service Other than personal service $ 469,873 $ 386,873 $ 83,000 2,507,606 2,206,586 301,020 3,402,034 3,270,934 131,100 5,463 ,415 4,416,105 1,047,310 626,233,387 593,018,677 33 ,214,710 91,509,917 58,340,325 33 ,169,592 223,950,136 23,433,637 200,516,499 51,974,822 41,508,619 10,466,203 $1 ,005,511,190 $726,581,756 $278,929,434 $ 9,060,300 $ 9,060,300 $ ........ 7,970,000 7,970,000 TABLE 17— Continued Authorized 1966-67 Total Personal service Other than personal service 12. Dept, service (Office of the Comptroller) $ 128,359,253 $128,359,253 Total to be expended by other city depart ments $ 145 ,389 ,553 $ 9,060,300 $136,329,253 Grand Total $1,150,900,743 $735,642,056 $415,258,687 179 effort to continue progress toward educational goals." The director of financial planning for this dis trict explained that "budget elements are expressed primar ily in terms of what we are getting out of our expendi tures, and secondarily in terms of what we are putting in. The budget presents the educational program by function and activity, according to objectives or ’outputs' and relates these objectives to the cost or 'inputs' needed to produce the 'outputs.' For example, 'output' is an improved kindergarten program; 'input,' thus, is a speci fied number of kindergarten aides, requiring a specified number of dollars." He called this "programatic" budget ing . Philadelphia's school district budget also presents expenditures in the more traditional way by department and object class in twelve functional categories, according to the general purpose served. The only activities not classified by purpose are those covered under the special allowance for contingencies. Some of the program budget formats used by this district are presented in Tables 18 through 22. 180 TABLE 18 EARLY CHILDHOOD EDUCATION— SCHOOL DISTRICT OF PHILADELPHIA (DISTRICT X) (Early childhood education provides a planned well-balanced school experience for children up to and including kindergarten.) Program by activities Amount Kindergarten Object classification No. o f positions $2,577,705 100 personal services Full-time Part-time sub. & other 312 (net) $2,448,605 24 ,000 300 materials 31,500 400 books 62,000 5 00 equipment 11,600 $2 ,577,7 05 181 TABLE 19 ELEMENTARY EDUCATION— SCHOOL DISTRICT OF PHILADELPHIA (DISTRICT X) (Elementary education is concerned with the development of skills, facts, habits, and attitudes for children in grades 1-6.) Program by activities Amount Art $ 99,536 Grades 1-3 18,779,129 Grades 4-6 14,158,394 Physical education 1,040,291 Music 4 01,725 Remedial education 2,219,913 Libraries & instructional materials centers 813,265 Other instruction 971,705 Counseling 1,752,724 Teachers for Sept. 1966 enrollment increase 462,000 Summer school 423,595 Supervision & clerical at schools 5,907,810 $47,030,087 No. of Object classification positions 100 personal services Full-time 5,609 $42,550,136 Summer program 4 2 3,595 Part-time substitutes and other (net) ____ 515,940 43 ,489,671 200 repairs & maintenance of equipment, rentals, etc. 140,2 00 300 educational materials & supplies, etc. 598,502 400 textbooks & library books 2,385,760 500 educational equipment & furniture 415,954 $47 ,030,087 182 TABLE 2 0 JUNIOR HIGH SCHOOL EDUCATION— SCHOOL DISTRICT OF PHILADELPHIA (DISTRICT X) (Junior high school education experiences are designed for the early adolescent period. These schools usually enroll pupils in grades 7-9.) Program by activities Art Grades 7-8 in elementary schools English Home economics Foreign languages Health and physical education Mathematics Music Remedial education Science Social studies Business education Industrial arts Libraries & instructional materials centers Other instruction Common learnings Junior high teacher aides Counseling Teachers for Sept. 1966 enrollment increases Summer school Supervision & clerical at schools Amount 5 925 2 ,183 2 ,696 1,053 351 1 ,477 2,170 631 699 1 ,771 2 ,521 411 1,336 330 74 1,222 17 856 429 139 2 ,607 ,059 , 574 ,559 ,499 ,121 ,116 ,844 ,933 ,117 ,212 ,566 ,544 ,717 , 937 ,412 ,589 ,800 , 088 ,000 ,225 ,853 Object classification 100 personal services Full-time Summer program Part-time substitutes & other No. of positions 2,904 (net) 200 repairs & maintenance of equipment, rentals, etc. 300 educational materials & supplies, etc. 400 books, textbooks, & library books 500 educational equipment & furniture $23 ,907 ,765 $21,795,330 139 ,225 315,000 22,249,555 101,255 273 ,130 1,067,446 216,379 $23,907 ,765 183 TABLE 21 SENIOR AND TECHNICAL HIGH SCHOOL EDUCATION— SCHOOL DISTRICT OF PHILADELPHIA (DISTRICT X) (The educational program for senior and technical high schools is more extensive and specialized than any of the other divisions. The typical grade span is 10-12.) Program by activities Amount Art Driver education English Home economics Foreign languages Health & physical education Mathematics Music Remedial education Science Social studies Business education Industrial arts & trade preparatory in senior high schools Vocational education in technical schools School work training Libraries & instructional materials centers Other instruction Common learning Counseling Teachers for Sept. 1966 enrollment increases Summer school Supervision & clerical at schools 462 356 3 ,415 486 1,225 2 ,253 2 ,195 413 572 2,180 2 ,530 3 , 334 1,516 1,050 37 341 177 495 1 ,062 187 406 3 ,270 ,899 ,668 ,654 ,404 ,733 ,983 ,317 ,255 ,687 ,045 ,454 ,863 ,686 ,062 ,360 ,593 ,572 ,747 ,098 ,000 ,275 ,062 $27,972,417 Object classification No. of positions 100 personal services Full-time 3,074 Summer program Part-time substitutes & other (net) $24,509,225 406 ,275 448 ,988 25 , 364,488 184 TABLE 21— Continued No. of Object classification positions 200 Repairs & maintenance of equipment, rentals, etc. 300 Educational materials & supplies, etc. 400 Books, textbooks & library books 5 00 Educational equipment & furniture 600 Scholarships Amount 105,333 473,540 1,329,994 199,062 500,000 $27,972,417 185 TABLE 22 HEALTH SERVICE— SCHOOL DISTRICT OF PHILADELPHIA (DISTRICT X) (School health services provide physicians, dentists, nurses, and related personnel to care for the health of students in public and non-public schools.) Program by activities Amount Dental Medical Nurse services Supervision and clerical $ 368,328 774 ,986 2,199,404 185,497 $ 3,528,215 Object classification 100 Personal services Full-time Part-time No. of positions 513 $ 3,250,204 64,900 $ 3,315,104 200 Contracted services, prin cipally nurses 300 Medical supplies, etc. 500 Equipment 113,367 89,644 10,100 $ 3,528,215 School District of Pittsburgh (District Y) The School District of Pittsburgh was actually mov ing into program budgeting from program accounting. The state reports on certain program areas, and the district itself has added some of its own programs. A combination of the state and district basic program codes is as follows 11 Elementary Education— Regular 17 Elementary Education— Special 21 Secondary Education— Regular 22 Secondary Education— Regular, Elementary (7th and 8th grades) 2 7 Secondary Education— Special 2 8 Secondary Education— Driver Education 2 9 Secondary Education— Vocational Schools 30 Summer Schools— Elementary Schools 31 Summer Schools— Secondary Schools 41 Account 2150 Adult Education Programs— Elementary Schools 4 2 Account 2150 Adult Education Programs— Secondary Schools 45 Other Adult Education Programs— Elementary Schools 4 6 Other Adult Education Programs— Secondary Schools 187 61 Homebound Instruction 65 Extension Recreation— Elementary 6 6 Extension Recreation— Secondary 99 Non-program Expenditures The use of two digits to denote schools requires that the same numbers be used for elementary and secondary schools. This practice would not confuse employees because the types of programs carried on in elementary and sec ondary schools are different, and clearly designated by the first two digits of the school code. The new coding makes it possible to designate clearly the type of program and the school in which it is located with one code. It also provides for one, two, or more separate programs at a particular school. The budget format used by the School District of Pittsburgh is presented in Table 23. Board of Education, City of Chicago (District Zj The General Superintendent of Schools, City of Chicago, reported that procedures for budgeting and for expenditures in specific learning areas throughout the school system as well as within specific attendance units of the system were being evaluated, and that the data 188 TABLE 2 3 196 7 APPROPRIATIONS— SCHOOL DISTRICT OF PITTSBURGH (DISTRICT Y) Other expenditures Function Salaries sup. & exp. Total Administration $ 1,401,779 $ 605,438 $ 2,007,217 Instruction 28,078,020 1,590,050 29,668,070 Attendance services 613 ,451 26 ,115 639,566 Health services 304,728 265,600 570,328 Trans, services - 454,704 454,704 Operation of plant 3,082 ,691 1,180,350 4 ,263,041 Maintenance of plant 1,057,377 1,647,600 2,704,977 Fixed charges - 3,501,022 3,501,022 Food services 736 ,277 306 ,047 1,042,324 Community services 51,300 - 51,300 Capital outlay 95 ,046 1,521,464 1,616,510 Debt service - 2,819,891 2,819,891 Outgoing trans. - 175,000 175,000 Budgetary reserve $100,000 — - 100 , 000 Totals $100,000 $35,420,669 $14 ,093 ,281 $49,613 ,950 Appropriations by Item 1 Salaries $35 ,420,669 2 Supplies 2 ,503 ,592 3 Expenses 4,143,278 4 Equipment 2 ,200 ,795 5 Contracted services 2,250 ,725 6 Debt service 2,419,891 7 Refunds 400 ,000 8 Outgoing transfers 175,000 0 Budgetary reserve 100,000 $4 9,613,950 189 processing procedures presently utilized would require further analysis to broaden the numeric system of classifi cations used. The present program budgeting of instructional appropriations at the secondary level is more complete and more easily identifiable than at the elementary level. It was the superintendent's future plan to implement program budgeting further to encompass all areas of the school system. The Board of Education, City of Chicago program budgeting procedures, techniques, and format provide budgeted programs for grade level learning areas, by school, and by subject on the secondary level. The budget prepara tion sequence provides for the construction and printing of two documents: 1) tentative budget, and 2) annual budget. The annual budget document becomes the legal document of the school system at the time of adoption by the board of education. The tentative budget document is designed to give, 1) a detailed statement of appropriations by fund, activity, or function, and object or purpose for each of the various organizational units; 2) planned programs for each calendar year related to available appropriations and to proposed expenditures; and 3) the annual tentative 190 budget appropriations compared with the previous calendar year final appropriations, indicating the increases and decreases in each activity; and total expenditures for two prior calendar years and the first nine months of the immediate, previous calendar year. The superintendent indicated he hoped that a pres entation of this type would facilitate the board of education's study of proposed expenditures as related to functions and planned programs for the current calendar year and each calendar year thereafter. Responses to Team Interview Questions The team interview responses presented below were given personally by the top-level business officials in all of the eleven selected large city school districts (seven in California and four out-of-state). For purposes of brevity, the districts are referred to by letter, as desig nated in the preceding sections of this chapter. Question I What are your major purposes for program budgeting? Responses of California School Districts A. Major purposes were to make the budget more understandable; evaluate programs in terms of objectives; allocation of resources in terms of total needs and priorities; and better control and analysis. Simplified entire program cost accounting; better communication tool; evaluate present and proposed programs; allocation of resource in terms of needs and priorities; and cost control and analysis. Primarily for board information and decision making; evaluation of all programs; allocation of resources; cost control and analysis; program per formance; and more understandable. Control and analysis; allocation of resources in terms of total needs and priorities; evaluate all programs and their performance; and more under standable . Allocation of resources; cost control and analysis and make budget more understandable. More understandable; allocation of resources in terms of total needs and priorities; better cost control and analysis. Needed a better budget communication instrument to sell our educational programs, teachers, and schools; and it will probably be mandated by 192 legislation. Responses of Out-of-State School Districts W. Need more information for decision-making; evaluate effectiveness of present programs; allocation of resources in terms of total needs and priorities; and long-term budget projections. X. Give the public knowledge about output; educate administrators; program managers approve changes in program activities upon the recommendation of the activity managers. Y. Pre-planning; evaluate present and proposed pro grams in terms of total needs and priorities; cost control and analysis; appraisal of program perform ance; and make budget more understandable. Z. Allocation of funds by programs; cost control and analysis. Question II What caused you to go into program budgeting? Responses of California School Districts A. Own initiative; board decisions and management reporting. B. Own initiative due to special funded programs. 193 C. Own initiative special funded programs; reporting; administrative decision-making; financial election; and citizen committee request. D. State and federally funded program regulations; own initiative; management reporting; administrative decision-making; and financial elections. E. Board's own initiative; state and federal funded program regulations; and management reporting. F. Tax override election; citizen committee request; management reporting; and state and federal fund regulations. G. Community leader's pressure for more information about what education the district was giving the citizens for their tax dollar before agreeing to support and election to increase the general pur pose tax rate. Responses of Out-of-State School Districts W. Improve budgeting; reporting and decision-making. X. Recommended by a professional task force on budget analysis and procedures; federally funded programs; and the public did not know what the schools were doing with their money. Y. Own initiative, and state and federal regulations. 194 Z. Federally funded programs and claim applications; needed more information on the cost of various programs. Question III What factors do you use in deciding on a budget program? Responses of California School Districts A. Program meets a major objective; activities that are related to each other; some quantitative infor mation concerning output or results; administrative effectiveness; source of funds; related to differ ent levels of ultimate objectives; and decentrali zation of decision-making. B. Source of income; problem areas and may change as needed; administrative review; meets major objec tive of organization; related activities; related to different grade levels and schools; quantitative information on output; decentralization of decision making; and compare alternative methods to pursue policy objectives. C. Objectives; source of funds; related activities; administrative effectiveness; quantitative informa tion concerning output; comparison of alternative 195 methods; different levels of ultimate objective; and decentralization of decision making. D. Source of funds; major objective of organization; related activities; administrative effectiveness; related to different levels of ultimate objective; quantitative information on output; decentraliza tion of decision making; and alternative methods of pursuing policy objectives. E. Source of funds; related services or activities; and administrative effectiveness. F. Cost analysis by subject area by school; meets a major objective of organization; administrative relevance and effectiveness; and comparison of alternative methods of pursuing policy objectives. G. Related services or activities by grade level, subject areas, and each school. Responses of Out-of-State School Districts W. Using research and consulting firm to develop cri teria for designing programs. Meets a major objective of the district; and has administrative relevance and provides for administrative effec tiveness . X. Objectives; related services or activities; and 196 source of funds. Y. Legislation; program meets a major objective; administrative relevance and effectiveness; and related to sources of funds. Z. Related activities; and source of funds. Question IV What program budgets are you now including in your total budget? Responses of California School Districts A. Administrative services with subprograms; instruc tional programs and services with grade level sub programs; supporting services with subprograms; and special funded programs. B. Program cost accounting on these levels, K-6, 7-8, 9, 10-12, but not on a subject area basis; funded programs; and community services. C. All federal and state funded programs; regular day school, adult education, and summer school. D. Federally funded programs. E. Levels of education— elementary, junior high school, senior high school, and special schools; state and federal funded programs; and community 197 services. F. Subject areas by each school and level; and state and federally funded programs. G. Basic education programs by grade level and school; also programs for exceptional children; supportive services; instructional resources; instructional improvement; health; school lunches; transporta tion; community of school facilities. Considered separately, then pro-rated: administration, opera tions, fixed charges, capital outlay, debt, and reserves. Responses of Out-of-State School Districts W. See summary of expense portion of budget. X. Twelve functional categories according to the gen eral purpose served. Y. Those required by the state and a few by the dis trict; and grade level. Z. Programs by organizational function, grade level, school, and subjects; and special funded programs. Question V What do you consider are the major advantages of your program budgeting? 198 Responses of California School Districts A. More understandable; decision making; intelligent allocation of resources; better budgetary control; and evaluation of program alternatives. B. More understandable; decision making; another level of detail or "third slice"; valuable in claim accounting; more intelligent allocation of resources; better budgetary control; evaluation of program alternatives; and facilitates long-range projections. C. Facilitates decision making; more understandable; more intelligent allocation of resources; better budgetary control; and evaluation of program alternatives. D. None. E. Better cost control and analysis; more understand able; facilitates decision making; intelligent allocation of resources; better budgetary control; and evaluation of program alternatives. F. More understandable communication instrument; facilitates decision making; more intelligent allocation of resources; better budgetary control; and facilitates long-range projections. G. More understandable, and better financial control. Responses of Out-of-State School Districts W. More understandable budgeting; facilitates decision making; more intelligent allocation of resources; aids in evaluating program alternatives; and facil itates long-range projections. X. Better public and administrators understanding; reduced the length of the budget from approximately one and one-half inch thick to about one-quarter of an inch; and shows allocation of resources to pro grams . Y. More understandable; facilitates decision making; more intelligent allocation of resources; and better budgetary control. Z. More understandable; decision making; allocation of funds; better cost control; evaluate present and proposed programs; and an effective communication tool. Question VI What are some of the shortcomings and weaknesses of your program budgeting? 200 Responses of California School Districts A. Difficulty in assigning costs to a program; and deciding what is a meaningful program. B. Increased length and volume of budget document; difficulty in assigning costs; deciding what is a meaningful program; and requires better trained personnel. C. Difficulty in assigning costs; and increased length and volume of budget document. D. Deciding what is a meaningful program; increased length and volume of budget document; excessive division of programs; and requires additional per sonnel. E. Difficulty in assigning costs; deciding what is a meaningful program; excessive division of programs; and requires additional and better trained person nel. F. Difficulty assigning costs to programs; increased length and volume of budget documents; excessive division of programs; and requires additional per sonnel . G. Increases the length and volume of the budget document; and difficulty of assigning costs. 201 Responses of Out-of-State School Districts W. The idea is so attractive that the expectations are too high; it does not make decisions, and is not a panacea. Specialists are needed and they are hard to find. Arbitrary decisions are necessary on service programs; increased the length and volume of the budget document. Hard to get programs com patible with city, state, and federal reports. X. Resistance problems in implementation; and elec tronic data processing coding to assign program costs. Y. Increased length and volume of budget documents. Z. Need to reduce the size and volume. Question VII What problems did you encounter in converting to program budgeting? Responses of California School Districts A. A research consulting firm recommended program budgeting, reorganization necessary and more elec tronic data processing equipment. Principals are the key personnel in enforcing the system. B. Increased workload cost; and need better trained 202 personnel. Greater need for electronic data processing equipment, and more and better trained personnel. C. Increased workload; required more equipment; and increased costs. D. Resistance against change; increased costs; and need for more electronic data processing equipment. E. Increased costs; needed more and better trained personnel; had to decentralize some operations; needed more electronic data processing equipment services. F. Increased cost; need more and better trained per sonnel; and need more electronic data processing equipment services. G. Designing meaningful programs for administration, operations, etc. Responses of Out-of—State School Districts W. Increased costs; need more and better trained per sonnel; had to decentralize some of the functions. X. Additional electronic data processing equipment and need for more trained personnel. Y. Reorganization of administrative staff; and needed more electronic data processing equipment. 203 Z. The respondents have only been in their present job for approximately three months. Question VIXI Is your program budgeting always compatible with good accounting practices? Responses of California School Districts A. "Have not encountered any problems." B. "No, but had to use a conversion table to be com patible with county's classifications." C. "Yes." D. "No." E. "Yes." F. "Yes." G. "Always." Responses of Out-of-State School Districts W. "Yes." X. "Yes— using encumberance system." Y. "Yes; improved cost analysis and control." ' Z. "Yes, within their limited experience." Question IX What program budgets include only direct costs? 204 Responses of California School Districts A. "Budget all direct costs by program and prorate indirect costs to programs only when making claims for income - Reason was to give a clearer and more accurate picture of what costs are really changed when a program is expanded, contracted, or elim inated . " B. "None." C. "Use primarily direct costs for budgeting, but indirect costs for reporting and claims on funded programs." D. "No program budgets except federally funded." E. "All of them." F. "All for budget purposes." G. "Subject area programs." Responses of Out-of-State School Districts W. "Yes." X. "All except federally funded now, but not in the future." Y. "All." Z. "Use direct costs on all programs then prorate indirect costs as needed for reporting, or for a claim." 205 Question X What program budgets show both direct and indirect costs? Responses of California School Districts A. "None for budgeting purposes. Indirect costs are prorated into special education programs, or state and federally funded programs, for reporting or claim purposes." B. "All of them." C. "State and federally funded programs." D. "Federal funded programs." E. "None." F. "Federally funded programs." G. "Each school, and all state and federally funded programs." Responses of Out-of-State School Districts W. "No; only special funded programs." X. "Prorate or estimate indirect costs to federally funded programs." Y. "Federally funded programs." Z. "Federally funded programs for reporting and claim purposes." Question XI What cost elements do you include in each program budget? Responses of California School Districts A. "Salaries, supplies, or expenses per each program. B. "Salaries, supplies, equipment, proration of dis trict overhead costs." C. "All current expense cost elements— salaries, sup plies, and equipment." D. "Federally funded program costs which are reim bursable . " E. "Salaries, supplies, and equipment." F. "All current expense cost items— salaries, sup plies, and equipment." G. "All programs, except subject areas, have four cost elements: 1) personnel, 2) district overhead expenses prorated, 3) supplies, and 4) plant equip ment." Responses of Out^of-State School Districts W. "Need a standard for cost elements." X. "Don't have a standard set." Y. "Salaries and other expenses." Z. "Salaries, supplies, and equipment." 207 Question XII If you are prorating indirect costs, what methods are you using? Responses of California School Districts A. "No prorating in the 'presentation' budget, but do in the working budget on special education or funded programs; maintenance and operation square footage, number of rooms and personnel, acreage, etc.; instruction, an actual dollars allowance per pupil; and capital outlay specific items." B. "A.D.A., time, space, etc. per California Account- ing Manual." C. "A.D.A., square feet, time, material consumed, hours spent, etc." D. "Use methods in California Accounting Manual for federal programs." E. "Usually A.D.A." F. "Those methods in California Accounting Manual." G. "All of those used in the California Accounting Manual, such as A.D.A., space, etc." Responses of Out-of-State School Districts W. "A.D.A., space, etc." X. "No particular one so far." 208 Y. "In most cases on a per-pupil basis." Z. "Enrollment, space, etc." Question XIII What was your total enrollment on your 1966 October report? Responses of California School Districts A. "Approximately o o o CM in B. 1 1 Approximately 15 ,200. " C. "Approximately 38 ,000. " D. "Approximately 66,492." E. "Approximately 127,000. F. "Approximately 16 ,727." G. "Approximately 150 ,000. Responses of Out-of-School Districts W. "Approximately 1,097,880." X. "288,600." Y. "Approximately 79,380." Z. "570,597." Question XIV What is your candid opinion of program budgeting? Responses of California School Districts A. "Highly recommended program budgeting. Can develop 209 coding for program budgeting for subject areas." B. "Way to go, meaningful in terms of output for money spent. Subject area's difficult due to wide dif ferences in salaries." C. "All for it." D. "Not needed for school districts and not applic able." E. "O.K. within due and reasonable bounds." F. "Tends to improve internal communication, which leads to better understanding of the interrelation of the various program areas and respective costs. Meets need to provide citizens with requested information." G. "It is an important community public relations instrument for the board, district, and school administrative staffs." Responses of Out-of-State School Districts W. "Has been used effectively by the National Defense Department. Arranges elements of the budget in terms of defined programs which makes it more understandable." X. "Ideal and beneficial. Will take two or three years to more fully benefit from the system. Don't have to be restricted on a line-item basis, but can make changes within the program appropria tion. More effective over-all control by area directors." Y. "Value is in accordance with how it is used by a local administration." Z. "Recommended until something better comes along." Major Findings from Team Interviews The responses of the eleven school district repre sentatives who were interviewed may be summarized as follows. Item and response Number of districts Major purposes of program budgeting: To make the budget more understandable 9 Allocation of resources in terms of total needs and priorities 8 Assistance in cost control and analysis 8 Evaluation of present programs 4 Evaluation of program proposals in terms of objectives 4 Appraisal of program performance 3 Sources of impetus for program budgeting: Own initiative 7 211 Number of Item and response districts State and/or federal laws or regulations 7 Management reporting 5 Administrative or executive decision 4 Citizen committee request 4 Tax rate or bond election 3 Improve budgeting 1 Probably will be mandated in California 1 Criteria for deciding on a budget program: Program meets a major objective of the organization 8 Directly related to sources of funds, and facilitates viable interorganizational 8 fiscal relations Program activities are related to each other Has administrative relevance and provides for administrative effectiveness ^ Directly related to different levels of A the ultimate objective Provides for some quantitative informa tion concerning output or results 4 Provides for the decentralization of decision making 4 Permits comparison of alternative methods of pursuing policy objectives 4 212 Item and response Number of districts Different grade level by school and by subject area 2 Legislation 1 Program budgets included in total budget: California School District A Administrative services Board of education Office of superintendent Personnel services Planning and research Business services Instructional programs and services Administration instruction services Curriculum development and material services Staff training services Special services Special programs Elementary schools Junior high schools Senior high schools Schools for adults Continuation high school Summer schools Summer demonstration schools Special projects Supporting services Transportation Maintenance and operations Fixed charges Food services Community services General capital improvements 213 California School District B Instructional program budgets Regular School resource volunteer Regular adult Other community service Special P.E. Bookmobile Summer school Fire marshall Asphasic Blind P.H. remedial P.H. home instruction Educable mentally retarded Trainable mentally retarded Educational handicapped High potential Various regular Saturday science Driver training Pre-school Remedial reading Study center Science comp. Work experience Intergroup education Elementary foreign language Federally funded Meals for needy children California School District C Federal/state programs— limited duration Distributive education Adult basic education Elementary and Secondary Education Act-I Elementary and Secondary Education Act-II National Defense Education Act Neighborhood Youth Corps Project Head Start Teacher Employment Program Vocational Education Act 214 Other programs Regular day school Adult education Driver training Educable mentally retarded Educationally handicapped Home teaching Mentally gifted Remedial physical education Speech and hearing Summer school Trainable mentally retarded Visually handicapped and blind Orthopedically handicapped California School District D Federally funded programs only California School District E Program budgets City College Senior high schools Special schools Trade and industrial— day Trade and industrial--evening Adult schools Junior high schools Elementary schools (includes kindergarten) Federally funded programs California School District F Program budgets on a program cost accounting basis by each school within the district and by various subject areas California School District G Program budgets for each school or attendance center. Developing program budgets by school 215 and by subject areas Out-of-State School District W Program budgets Board of education Superintendent of schools Personnel and teacher training Curriculum research and evaluation Instruction Design, construction, and physical plant Business and administration Federal elementary and secondary education Medical, dental, and health services (Department of Health) Light, heat, and power (Department of Water Supply, Gas, and Electricity) Debt service (Office of Comptroller) Out-of-State School District X Program budgets (separate appropriations approved for each program) Early childhood education Elementary education Junior high school education Senior and technical high school education Special education Community education and services Health services Transportation and attendance Plant operation and maintenance Administration, planning, and staff development Fringe benefits Debt service Contingencies Out-of-State School District Y Program budgets Elementary education--regular Elementary education--special 216 Secondary education--regular Secondary education— regular, elementary 7th and 8th grades Secondary education— special Secondary education— driver education Secondary education— vocational schools Summer schools— elementary schools Summer schools— secondary schools Adult education programs— elementary schools Adult education programs— secondary schools Home-bound instruction Extension recreation— elementary Extension recreation— secondary Out-of-State School District Z Program budgets by grade level by each school within the district and by subjects Number of districts Major advantages of program budgeting: Mpre understandable budgeting 10 Facilitates decision-making 8 More intelligent allocation of financial resources 8 Better budgetary control 8 Aids in the evaluation of program alterna tives in terms of objectives and costs 5 Facilitates making long-range projections 3 Evaluation of programs 1 Reduces the length and volume of the budget 1 217 Number of Item and response districts Shortcomings and weaknesses of program budgeting: Increased length and volume of budget documents 8 Difficulty of assigning costs to pro grams 6 Problem of deciding what is a meaning ful program 5 Requires better trained personnel 4 Excessive division of programs 3 Requires additional personnel 3 Expectations too high; it does not make decisions 1 Arbitrary decisions are necessary 1 Problems encountered in converting to program budgeting: More need for electronic data processing equipment 8 Increased costs 5 Needed more and better trained personnel 4 Reorganization for more decentralization 4 Staff resistance 2 Difficulty in designing meaningful pro- grams 218 Number of Item and response districts Compatibility of program budgeting with good accounting practices: Yes 10 No 1 Inclusion of direct costs in program budgets: All programs? indirect costs are used only for claims on funded programs 10 None; use a combination of direct and indirect costs on all programs 1 Direct and indirect costs in program budgets; None; only used indirect costs for claim purposes on funded programs 10 All programs 1 Cost elements included in program budget: Funded programs; all reimbursable costs 11 Salaries, materials, and supplies; direct maintenance and transportation costs, and others if direct costs 7 Salaries, materials, and supplies, and equipment 2 Salaries, supplies, or expenses 1 All current expense cost elements 1 Item and response Proration of indirect costs, and method used: On funded programs for claims only; time time-floor area, hour consumption, numbe of pupils, and quantity consumed, as needed No particular one Mostly number of pupils Total enrollment on 1966 October report: California districts A. Approximately 52,000 B. Approximately 15,200 C. Approximately 38,000 D. Approximately 66,492 E. Approximately 127 ,000 F. Approximately 16,727 G. Approximately 150,000 ■of-■state districts W. Approximately 1,097,8: X. Approx imately 288,600 Y. Approx imately 79,380 Z. Approximately 570,597 Opinions of program budgeting: Highly recommend Recommend within due and reasonable bounds Against; not needed or applicable for school districts CHAPTER V SUMMARY, FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS The Problem Statement of the Problem There was a need to identify those public school districts in California with enrollments of more than 7,500, other United States school districts with enroll ments over 50,000, selected California city governments with a population of 50,000 or more, California county governments, state governments, departments within the fed eral government, and also selected large businesses in the United States which were using some or most of the proce dures, techniques, and formats of program budgeting. In addition to ascertaining this information, major objectives of this study were, 1) to determine the purposes, proce dures, techniques, and formats of program budgeting, its strengths and weaknesses, as compared with traditional public school district budget procedures, techniques, and 220 221 formats, and 2) to develop appropriate recommendations with respect thereto. More specifically, the study sought answers to the following questions: 1. What are the major purposes of program budgeting? 2. What are the major sources of the impetus for adopting program budgeting procedures, techniques, and formats? 3. Has the adoption of program budgeting procedures, techniques, and formats improved budgetary proce dures? 4. Has the use of program budgeting procedures, tech niques, and formats increased the length and volume of budget documents? 5. Does the use of program budgeting procedures, tech niques , and formats violate any of the commonly accepted standards for budgeting and accounting? 6. What are the advantages of program budgeting? 7. What are the shortcomings or weaknesses of program budgeting? 8. Has the conversion from traditional budgeting pro cedures to program budgeting procedures and techniques caused any internal problems? 9. Is more electronic data processing equipment needed 222 or being utilized to do program budgeting? 10. What program budgets include only direct costs? 11. Are both direct and indirect costs assigned to a program budget? 12. If indirect costs are prorated to a program budget, what method is used to prorate indirect costs? 13. Are indirect costs eliminated if the program is eliminated? 14. What cost elements are included in each program budget? 15. What criteria are used to design a program budget? 16. What program budgets are included in the total budget format? The Procedure The study consisted basically of a review of the literature for background information, a questionnaire survey concerning the use of program budgeting in public school districts and other organizations in the United States, and team interviews with knowledgeable individuals in eleven large school districts throughout California and the United States for more in-depth information and opinions. Steps taken in developing the study were: 223 1. A search of the literature 2. Identification of the problem 3. Identification and selection of the respondents 4. Planning and developing the questionnaire 5. Planning and developing the team-interview guide based on responses to the questionnaire 6. Obtaining the endorsements of the California Association of Public School Business Officials, International Association of School Business Offi cials, and the endorsement and sponsorship of the Los Angeles County Trustees Association 7. Distribution of the questionnaire 8. Tabulation of the questionnaire returns 9. Summary of the team interviews 10. Analysis of materials Usual procedures were used for searching the liter ature: the checking of card catalogues, educational digests, bibliographies, correspondence and interviews with authorities in the field, as well as materials used by the organizations studied and reports from The Rand Corpora tion, Santa Monica, California. The problem was identified by the California Asso ciation of Public School Business Officials, the 1965 224 California Senate Fact-Finding Committee on Revenue and Taxation, and was included in a 1966 final report of the California Advisory Committee on School Budgeting and Accounting to the Subcommittee on School Efficiency and Economy of the Assembly Interim Committee on Education. Respondents were selected from those organizations using some program budgeting. Included were city adminis trators of municipalities which were using either program or performance budgeting* The California Association of Public School Business Officials, Southern Section, and state budget research committees were used extensively in all phases of the study. Other groups selected were pro fessors of educational administration, chief school busi ness officials, county auditors, state finance officers, Los Angeles County Trustees Association Project Committee, and accountants for large business corporations. Distribution of the Questionnaire Altogether, 164 questionnaires were sent: 42 to California school districts, 23 to school districts in other parts of the nation, and 99 to county, city, state, and federal government offices and large businesses. Of these, 90 were returned: 35 from California school 225 districts, 13 from school districts in other parts of the nation, and 42 from city, county, state, and federal gov ernments and large businesses. Summary of Findings Previously listed in this chapter are sixteen ques tions, the answers to which were sought in this study. The findings pertaining to these questions, as they were derived from the related literature, the questionnaire survey, and the team-interview survey, were as follows. Major Purposes of Program Budgeting Findings from the literature. The following pur poses of program budgeting were emphasized in the related literature. 1. To assist in the pursuit of objectives 2. To assist in the allocation of resources among the programs 3. To assist in making decisions based on large over all issues concerning programs 4. To provide for a more systematic analysis of alternate courses of action for a comparison of the benefits and costs of alternate choices 5. To provide top management with more concrete and 226 specific data on which to base decisions 6. To make the budget more understandable 7. To assist in the projection of government activi ties over an adequate time horizon Findings from the questionnaire survey. In rank order of frequency of mention, the following purposes of program budgeting were rated very important by the ques tionnaire respondents. 1. Allocation of financial resources in terms of total needs and priorities 2. Evaluation of present programs 3. Evaluation of program proposals in terms of objectives 4. Assistance in cost control and analysis These purposes were rated important by 66 per cent or more of the respondents: appraisal of program perform ance ; to make the budget more understandable. Findings from the team interview survey. Ranked in order of frequency of mention, these purposes were found to be considered very important by those with whom interviews were held: 1. To make the budget more understandable 2. Allocation of resources in terms of total needs 227 and priorities; and assistance in cost control and analysis 3. Evaluation of present programs; and evaluation of program proposals in terms of objectives 4. Appraisal of program performance Major Sources of Impetus for Adopting Program Budgeting Procedures, Techniques, and Formats Findings from the literature. The following sources of impetus for adopting program budgeting proce dures, techniques, and formats were brought out in the literature. 1. The success of the planning-programming-budgeting system in the National Defense Department 2. Authorities in program budgeting recommend the adoption of program budgeting in education 3. In California the adoption of program budgeting for school districts has been recommended by an advis ory group to an Assembly Interim Committee on Education to be implemented on a state-wide basis for education. 4. Program budgeting has been adopted by a relatively small number of city, county, and state govern ments, departments with the federal government, and school districts within the United States. Findings from the questionnaire survey. In rank order of frequency of mention, the following sources of impetus were rated very important by the questionnaire respondents: 1. Administrative or executive decision 2. Management reporting These sources of impetus were rated important: 1. Own initiative 2. Management reporting 3. State and/or federal laws or regulations Findings from the team interview survey. in rank order of frequency of mention, these sources of impetus were found to be considered important by the interviewees 1. Own initiative; state and/or federal laws or regu lations 2. Management reporting 3. Administrative or executive decision; citizen com mittee request 4. Tax rate or bond election 5. Improve budgeting; probably will be mandated in 229 Improvement of Budgetary Procedures as a Result of the Adoption of Program Budgeting Proce dures, Techniques, and Formats Findings from the literature. The literature re vealed that the adoption of program budgeting procedures, techniques, and formats has improved budgetary procedures in the United States Department of Defense and other fed eral departments. Findings from the questionnaire survey. A majority of the questionnaire respondents stated that the adoption of program budgeting procedures, techniques, and formats had improved budgetary procedures in their organizations. This statement was made by 74 per cent of the respondents in group I, 62 per cent of those in group II, and 81 per cent in group III. Findings from the team-interview survey. Ten of the eleven interviewees stated that the adoption of program budgeting procedures, techniques, and formats had improved budgetary procedures in their school districts. Length and Volume of Budget Documents Findings from the literature. The literature re vealed nothing meaningful on the subject of whether the use of program budgeting procedures, techniques, and formats 230 had increased the length and volume of budget documents. Findings from the questionnaire survey. That the use of program budgeting procedures, techniques, and for mats had increased the length and volume of their budget documents was reported by 8 9 per cent of the respondents in group I, 39 per cent of those in group II, and 60 per cent in group III. Findings from the team interview survey. Seven of the eleven interviewees stated that the adoption of program budget procedures, techniques, and formats had improved their budgetary procedures. Violation of Commonly Accepted Standards for Budgeting and Accounting Findings from the literature. The literature re vealed nothing meaningful on the subject of whether the use of program budgeting procedures, techniques, and formats violated any of the commonly accepted standards for budget ing and accounting. Findings from the questionnaire survey. That the use of program budgeting procedures, techniques, and for mats did not violate any of the commonly accepted standards for budgeting and accounting was reported by a strong majority of the respondents— 97 per cent in group I, 100 231 per cent in group II, and 93 per cent in group III. Findings from the team interview survey. Ten of the eleven interviewees stated that the use of program budgeting procedures, techniques, and formats did not violate any of the commonly accepted standards for budget ing and accounting. Advantages of Program Budgeting Findings from the literature. A clear-cut distinc tion between the purposes and advantages of program budgeting did not appear in the literature. Findings from the questionnaire survey. 1. Over 90 per cent of the questionnaire respondents in each of the three groups identified "facilitates decision-making" as an advantage of program budget ing . 2. More than 90 per cent of the respondents in groups II and III identified "more intelligent allocation of financial resources" as an advantage of program budgeting. 3. Over 69 per cent of the respondents in each group identified "more understandable budgeting," "better budgetary control," "aids in the evaluation of 232 program alternatives in terms of objectives and costs," and "facilitates making long-range projec tions" as advantages of program budgeting. Findings from the team interview survey. In rank order of frequency of mention, the following advantages of program budgeting were identified by the interviewees: 1. More understandable budgeting 2. Facilitates decision-making; more intelligent allocation of financial resources; better budgetary control 3. Aids in the evaluation of program alternatives in terms of objectives and cost 4. Facilitates making long-range projections 5. Evaluation of programs; reduces the length and volume of the budget document Shortcomings and Weaknesses of Program Budgeting Findings from the literature. The literature men tioned the following shortcomings and weaknesses of program budgeting: 1. Difficult to decide what is a program 2. Excessive division of programs 3. Requires more and better trained personnel Increased cost Requires the acquisition of expensive equipment Difficulty in measuring output or performance Unit cost factors tell nothing of the quality levels of service Factors other than monetary measurement enter into the comparison of unit costs— e.g., quality of service, character of population, prevailing wage and salary levels Findings from the questionnaire survey. More than 50 per cent of the respondents in each group identified "increased length and volume of budget documents" as a weakness of program budget ing (83 per cent in group I, 62 per cent in group II, and 57 per cent in group III). Over 62 per cent of the respondents in group I identified "difficulty in assigning costs to pro grams" as a weakness of program budgeting; 54 per cent identified "requires additional personnel" as a weakness. More than 54 per cent of each group identified "requires better trained personnel" as a weakness of program budgeting (60 per cent in group I, 54 234 per cent in group II, and 55 per cent in group III) . Findings from the team interview survey. Ranked in order of frequency of mention, the following weaknesses of program budgeting were identified by the interviewees: 1. Increased length and volume of budget documents 2. Difficulty in assigning costs to a program 3. Problem of deciding what is a meaningful program 4. Requires better trained personnel 5. Excessive division of programs; requires additional personnel 6. Expectations too high— it does not make decisions; arbitrary decisions are necessary Conversion Problems Findings from the literature. Problems mentioned in the literature as sometimes arising during conversion from traditional budgeting procedures to program budgeting procedures, techniques, and formats were: 1. Increased cost 2. Requires more and better trained personnel Findings from the questionnaire survey. At least 50 per cent of the questionnaire respondents reported the 235 following types of conversion problems in switching from traditional to program budgeting procedures, techniques, and formats: 1. Over 52 per cent of the respondents in all three groups experienced the need for more electronic data processing equipment and more and better trained personnel. 2. More than 71 per cent of the respondents in group I experienced increased costs. 3. In group II, 54 per cent found it necessary to reorganize for more decentralization in administra tion . Findings from the team interview survey. Ranked in order of frequency of mention, these conversion problems were reported by the interviewees: 1. More need for electronic data processing equipment 2. Increased costs 3. Need for more and better trained personnel; reor ganization for more administrative decentralization 4. Staff resistance and difficulty in designing mean ingful programs 236 Need for More Electronic Data Processing Equipment Findings from the literature. The literature dis closed that program budgeting requires the acquisition of expensive electronic data processing equipment. Findings from the questionnaire survey. Over 4 0 per cent of group I were utilizing electronic data process ing equipment; 77 per cent in group II, and 60 per cent in group III were doing the same. Findings from the interview survey. All of the eleven respondents were using electronic data processing equipment in varying degrees. Direct Costs in Program Budgets Findings from the literature. The literature re vealed nothing meaningful on the allocation of costs. Findings from the questionnaire survey. Direct costs only were included in the program budgets of 63 per cent of the respondents in group I, 54 per cent of those in group II, and 40 per cent in group III. Findings from the team interview survey. 1. Ten of the eleven interviewees reported the inclu sion of direct costs only in their program budgets. 2. One interviewee reported that his district assigned 237 both direct and prorated indirect costs to all program budgets. Both Direct and Indirect Costs Findings from the literature. Cost analysis and cost benefit studies only were discussed in the literature. Findings from the questionnaire survey. That a combination of direct costs and indirect costs was included in their program budgets was reported by 40 per cent of the respondents in group I, 39 per cent of those in group II, and 52 per cent in group III. Findings from the team interview survey. 1. Ten of the eleven interviewees reported their dis tricts used prorated indirect costs only for claim purposes on funded programs, and not for any other programs. 2. One of the eleven interviewees reported the inclu sion of a combination of direct costs and prorated indirect costs in all programs. Method of Prorating Indirect Costs Findings from the literature. The literature re vealed nothing meaningful regarding methods used to prorate indirect costs in program budgets. 238 Findings from the questionnaire survey. 1. Fewer than 50 per cent of the respondents in groups I, IX, and III reported the prorating of indirect costs in program budgets. This was reported by 4 9 per cent of the respondents in group I, 31 per cent of those in group II, and 45 per cent in group III. 2. Methods used in prorating indirect costs were time, time-floor area, hour consumption, number of pupils, and quantity consumed, as needed. Findings from the team interview survey. 1. Nine of the eleven interviewees reported the use of the following methods for claims only: time, time- floor area, hour consumption, number of pupils, and quantity consumed, as needed. 2. One interviewee indicated no particular method of prorating indirect costs in program budgets. 3. One interviewee reported the use, primarily, of number of pupils. Elimination of Indirect Costs When Program is Eliminated Findings from the literature. The literature re vealed nothing meaningful on the subject of whether in direct costs are eliminated if the program is eliminated. 239 Findings from the questionnaire survey. All of the respondents who reported the use of prorated indirect costs in their program budgets indicated that the prorated indirect costs would not be eliminated if a program were eliminated. Findings from the team interview survey. Ten of the eleven interviewees who reported the use of prorated indirect costs for claim purposes only indicated that the prorated indirect costs would not be eliminated if either a program or claim on a funded program were eliminated. Cost Elements Used in Program Budget Findings from the literature. The literature referred to cost analysis systems only. Findings from the questionnaire survey. This item was not included in the questionnaire. Findings from the team interview survey. 1. All of the eleven interviewees included all reim bursable costs in funded program claims. 2. Seven of the eleven interviewees included salaries, materials, and supplies; direct maintenance and transportation costs, and others if direct costs. 3. Two respondents included salaries, materials, and 240 supplies and equipment. 4. One interviewee included salaries, supplies on expenses 5. One interviewee included all current expense cost elements. Criteria Used to Design a Program Budget Findings from the literature. The literature men tioned the following criteria for designing a program budget: 1. Permits comparison of alternative methods of achieving policy objectives. 2. Directly relates to objectives of the organization. 3. Has administrative relevance and provides for administrative effectiveness. 4. Lends itself to a meaningful breakdown into program elements that can readily be related to each other. 5. Directly relates to source of funds and facilitates viable intergovernmental fiscal relations. 6. Is end-product oriented. 7. Provides for decentralization of decision-making. Findings from the questionnaire survey. 1. Two of the selected criteria were considered very important by over 50 per cent of the respondents in groups I and II, and over 50 per cent of these two groups ranked all the selected criteria as either important or very important. A majority of the respondents in group III ranked three of the selected criteria as important and identified all but one ("provides for the decen tralization of decision-making") as important or very important. These criteria were as follows: (a) Program meets a major objective of the organi zation. (b) Program activities that are related to each other. (c) Has administrative relevance and provides for administrative effectiveness. (d) Directly related to sources of funds, and facili tates viable interorganizational fiscal relations, (e) Directly related to different levels of the ultimate objective. (f) Provides for some quanti tative information concerning output or results. (g) Permits comparison of alternative methods of pursuing policy objectives. Findings from the team interview survey. Eight of the eleven interviewees indicated the following criteria for designing a program budget: 242 (a) Program meets a major objective of the organi zation. (b) Directly related to sources of funds, (c) Facilitates viable interorganizational fiscal relations. 2. Seven of the eleven interviewees reported these criteria: (a) Program activities are related to each other. (b) Has administrative relevance and provides for administrative effectiveness. 3. Four of the eleven interviewees gave the following criteria: (a) Directly related to different levels of the ultimate objective. (b) Provides some quantitative information concerning output or results. (c) Provides for the decentralization of decision-making. (d) Permits comparison of alter native methods of pursuing policy objectives. 4. Two of the eleven interviewees reported these criteria: (a) Different grade level by school, and by subject area. 5. One of the interviewees indicated legislation as a criterion. Program Budgets Included in Total Budget Format Findings from the literature. The literature 243 revealed that programs may be developed by grade level, by organization (e.g., administration, food services, account ing), by instructional area (e.g., English, science, busi ness), and by special programs (e.g., physically handi capped, driver training). Findings from the questionnaire survey. This item was not included in the questionnaire. Findings from the team interview survey. California school districts : 1. One school district has employed three major pro gram budget areas with subprograms under each: (1) administrative services, (2) instructional programs and services, and (3) supporting services. 2. One school district has designed and is using twenty-seven different instructional program budgets. 3. A school district has developed twenty-three dif ferent instructional program budgets. 4. Another school district has designed and is using nine instructional program budgets for different grade level schools. 5. One school district has used program budgets on a program cost accounting basis by each school within 244 the district, and by various subject areas. 6. A large city school district has used program budgets for each school or "attendance center," and is developing program budgets by school and by subject areas. Out-of-State School Districts: 1. One of the largest city school districts has developed and is using eleven program budgets. 2. A large city school district was using thirteen program budgets, and separate appropriations were approved for each program. 3. A city school district was using fourteen different program budgets, primarily on’ a grade-level basis. 4. Another large city school district was using pro gram budgets by grade level by each school within the district and by subjects. Candid Comments 1. All of the 90 questionnaire respondents but one recommended the use of program budgeting proce dures, techniques, and formats. 2. One respondent thought that program budgeting was not needed for school districts and was not applicable. 245 Review of the Hypotheses There is, at present, insufficient experience or information concerning program budgeting in the public schools to justify either rejection or acceptance of the hypotheses posed at the outset of this study. The findings relating to the various hypotheses are set forth below. 1. Adoption of some of the program budget procedures and techniques will improve public school district budgeting. A majority of the responses to the questionnaire item regarding whether the adoption of program budget ing procedures, techniques, and formats had improved budgetary procedures were in the affirmative (74 per cent of those in group I, 62 per cent in group II, and 81 per cent in group III). Ten of the eleven inter viewees also indicated that in their opinion budgetary procedures had been improved by the adoption of program budgeting. 2. Program budgeting procedures and techniques will increase the length and volume of public school district budget documents. That the use of program budgeting procedures, tech niques , and formats will increase the length and volume of public school district budget documents was the 246 expressed opinion of 89 per cent of the questionnaire respondents in group I, 39 per cent of those in group II, and 60 per cent in group III. Seven of the eleven interviewees expressed this opinion also. 3. The use of program budgeting will not violate any of the commonly accepted standards for school district budgeting. That the use of program budgeting will not violate any of the commonly accepted standards for school dis trict budgeting was indicated by a vast majority of the questionnaire respondents (97 per cent of those in group I, 100 per cent in group II, and 93 per cent in group III). Ten of the eleven interviewees also made this statement. Conclusions The conclusions which follow were drawn from a study of the related literature, the questionnaire survey results, team interview findings, and an analysis of open- end comments made by the respondents and the interviewees. 1. There is definite interest in the adoption and implementation of a uniform system of program budgeting procedures, techniques, and formats in public school dis tricts, nationwide. 247 2. Though there are disadvantages to program budgeting, it is generally considered to be an improvement over traditional school district budgeting procedures, techniques, and formats. 3. The implementation of program budgeting proce dures , techniques, and formats in local school districts will require more as well as highly trained personnel and an increased need for electronic data processing equipment. 4. There is evidence that in order more intelli gently to evaluate the allocation of resources and to provide effective flexibility to expand, contract, or eliminate a program, only direct costs need be assigned to a program for the official budget document purposes. This does not preclude the proration of indirect costs to pro grams in the working budget for claim purposes, or for cost analysis of any program. 5. Program budgeting procedures, techniques, and formats generally bring about a reduction in the length and volume of the official formal budget document but result in an increase in the length and volume of the other budget documents in the working budget and supportive details. 6. A problem exists regarding the advisability or 248 feasibility of measuring student achievement or output; at the same time, there is an increasing awareness of the apparent need to do so if an evaluation of the output is to be made in terms of the required input. 7. Program budgeting procedures, techniques, and formats may be developed with or without the measurement of output or performance. 8. There is general concern that if a uniform system of program budgeting were adopted and implemented at all levels of education (local, state, and national), it might lead to federal control of education. 9. A genuine possibility exists that the work being done by experts in accounting, data processing, and system analysis may lead to the development of a program budgeting system for public education, including educa tional program structure and measurements of program effectiveness, without the leadership and active participa tion of outstanding leaders in the educational profession. Recommendations General Recommendations After careful consideration of the findings from the related literature, the answers to the questions in 249 both the questionnaire and personal interviews, and from volunteered responses, the following general recommenda tions are made. 1. A uniform system of program budgeting for use in the local public school districts in California should be cooperatively developed and implemented under the lead ership of outstanding active professional educators. 2. The official California public school budget document should be revised to provide for program budgeting based on meaningful and necessary broad major programs, and a minimum of subprograms with broad summary costs. 3. In the process of developing and implementing program budgeting caution should be exercised not to pro ceed too rapidly, recognizing that it is essential to anticipate an extended period of evolutionary modification, refinement, and improvement of program budgeting proce dures, techniques, and formats. Specific Recommendations After an exhaustive national study of program budgeting as a new concept and approach to budgeting in public education, it was considered appropriate to make the following specific recommendations concerning a program 250 budgeting system and its implementation in public school districts. 1. A distinction needs to be made between, 1) the official state program budget document, with a description of the objectives and the major programs, and related sum mary costs; 2) "presentation" budget with subprograms, as needed; 3) the working budget with more program details; and 4) supportive data and cost analysis information to be used for reporting the proration of indirect costs , and making claims for both direct and indirect costs in funded programs. 2. Budget programs should be proposed, defended, and approved on the basis of the merits of the program and not merely because of financial support implications of the particular program. It is recognized that there is a need for showing a program's income for cost accounting, report ing, and claim purposes. 3. The financial plan should develop from the educational program plan, not dictate it. 4. What is to be an educational program should be decided by experienced and active educators. 5. System analysis or cost effectiveness studies should not be used as a substitute for sound and experi- 251 enced educational judgment, but rather as a method to place before the decision-makers the relevant data, organ ized in a way most useful to them. 6. There is frequently a need for intuitive decision-making in designing program budgets, particularly when human beings are involved. The real need is not in the form of the budget but in the substance of the program budget. 7. Programs in the budget should reflect a bal anced effort to continue progress toward educational goals set by professional educators. 8. Educational accounting should be expanded to take in all the elements of management— not just dollars, but pupils, staff, property, and programs. 9- The budget should present the educational pro gram by related functions and activities, in accordance with objectives or "outputs," and relate the objectives to the cost of "inputs" needed to produce the "outputs." 10. Program budgeting requires the support of management at all levels of activity. 11. Costs should be projected over the life cycle of "limited duration" programs. 12. It should be recognized that educational policy 252 cannot be made by simple budget or accounting procedural changes. 13. The proration of indirect costs to subject area programs budgets is meaningless— e.g., the proration of transportation to English. Proration of district over head costs to a school, or "attendance" area, is considered meaningful and appropriate for cost analysis purposes. 14. Emphasis should be placed on narrative explan ations of program budgets so as to focus attention on major policy questions which a school board and adminis trators need to face in reaching budget decisions, as opposed to the concept of a line item budget which tends to divert the board's and administrators' attention from major issues to minutiae. 15. The "programming" process should be used to provide management with the opportunity for a full year or more of in—depth analytical support data as a basis for making future program choices. 16. The relative advantages of alternative pro grams should be considered in terms of their effectiveness in reaching or assisting in the attainment of educational goals. Each course of action should be analyzed in terms of both its relative costs and relative output or benefits. 253 17. Program statements should be carefully devel oped with specific consideration given to eliminating or subordinating excessive details that are not required to supply adequate justification of the program. Included in the statement should be a meaningful description of the program's specific objectives to be accomplished (output), and a general description of activities to be performed, the allocation of resources (input), salaries, operating expenses, and other direct costs. 18. The program structure should include an out line of the programs and subprograms of an organizational unit, or related activities, as needed. 19. Whenever feasible, program output data should reflect meaningful qualitative and quantitative measures or indicators to evaluate results or educational achievement (output). 20. The workload or personal service plan should explain the specific level of work involved in producing the results listed under program output data. It should answer the question, "Why do we need this level or type of work to produce that amount of results?" 21. Resource input data should enumerate the per sonnel expense and funding requirements to support 254 continuing programs and new or expanded programs. 22. Program objective statements should: (1) Be stated in terms of expected results to be accomplished (2) Make results tangible and recognizable upon achievement (this is necessary to evaluate per formance, schedules, and accomplishments) (3) Make results specific, not general (4) State expected results for this year and ensuing years, if applicable (5) Always define and state objectives before develop ing a program 23. During a conversion period, the appropriations in program budgets must be related to the present appropri ation structure. A coded conversion table should be used. 24. The management decision process should be improved through program budgeting because scarce resources and complex educational programs require the best possible decisions for effective and efficient educational programs. Limited revenue and greater demands for more educational programs to accommodate the rapidly increasing body of knowledge and population require a decision-making process which presents to school boards and administrators 255 educational programs with broad summary costs in order to focus their attention on making the best possible policy decisions. 25. Numeric coding of budget or other public school district information should avoid, as if it were a "plague," coding that denotes any political identification — e.g., assembly, congressional, or senatorial district areas. Suggestions for Further Study During the course of this study it became increas ingly clear that to make more intelligent decisions regarding the allocation of resources to educational pro grams it is important to develop some indicators or practical measurements of the effectiveness of different programs in a broad educational sense. Unless this is done there may be fewer sound economic or educational guidelines for the allocation of resources within public education. What constitutes a meaningful program in education is a problem that should be resolved by highly professional active educators. This is not a simple task but the results will have a major influence upon the decisions made at the policy-making level. 256 Because of the importance of the two problems stated above it is recommended that: 1. A study be made under the leadership of a group of active top-level professional educators concerning what constitutes meaningful budget programs in public education. 2. A study be made by a group of active outstand ing professional educators that would lead to the identi fication of indicators or practical measuring instruments of the effectiveness of educational programs. BIB LI OGRAPHY 257 BIBLIOGRAPHY 1. 2. 3. 4 . 5 . 6. 7. 8 . 9. 10. 11. Books Benson, Charles S. The Economics of Public Educa tion . 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"McNamara's Management Revolu tion," Fortune, July, 1965, pp. 117-19. Steiner, George A. "Program Budgeting— Business Contribution to Government Management," Business Horizons, VIII (Spring, 1965), 43-52. U. S. Department of Health, Education, and Welfare. "Educational Administration in the Decade Ahead," School Life, January, 1961. Doctoral Studies Hamilton, John Jennings. "An Analysis of Budgetary Control Procedures in High Schools of Califor nia." Unpublished doctoral dissertation. University of Southern California, 1962. Lovik, Hugh Douglas. "A Study of Budget Procedures in California Unified School Districts." Unpub lished doctoral dissertation. University of Southern California, 1961. Wright, Frank N. "Selected Policies and Procedures in the Administration of California School Dis trict Budgets." Unpublished doctoral 265 Letters 74. Letter from Arthur O. Bachelor, Director of Business Services, Berkeley Unified School District, Berkeley, California, September 6, 1966. 75. Letter from Paul L. Brown, Executive Budget Director, State of Wisconsin, Madison, Wisconsin, January 5, 1966. 76. Letter from M. A. Hesse, Business Manager, Glendale Unified School District, Glendale, California, August 9, 1966. 77. Letter from Frederick W. Hill, Deputy Superintendent of Schools, City of New York, Brooklyn, New York, January 17, 1967. 78. Letter from H. F. Koenig, Business Manager, Palo Alto Unified School District, Palo Alto, Cali fornia, September 26, 1966. 79. Letter from Albert D. Riley, Personnel Assistant, Covina-Valley Unified School District, Covina, California, June 28, 1966. 80. Letter from Erie V. Simon, Assistant Superintendent, Business Services, Pomona Unified School Dis trict, Pomona, California, November 21, 1966. Budget Documents Business 81. Mack Trucks, Inc., Allentown, Pennsylvania. Customer Order Project Report, November, 1966. California Cities 82. El Monte, Fiscal year 1966-67. 83. Glendale, Fiscal year 1966-67. 84. Inglewood, Fiscal year 1966-67. 266 85. Los Angeles, Fiscal Year 1966-67. • 00 Pasadena, Fiscal Year 1966-67. 87. Salinas, Fiscal Year 1966-67. * 00 00 San Diego , Fiscal Year 1966-67. 89. San Jose, Fiscal Year 1966-67. 90. Torrance, Fiscal Year 1966-67. California Counties 91. El Dorado, Fiscal Year 1966-67. 92. Los Angeles, Fiscal Year 1966. 93. San Diego, Fiscal Year 1966-67. 94. San Luis Obispo, Fiscal Year 1966-67. California School Districts 95. Alhambra City and High School District; Fiscal Year 1966-67. 96. Baldwin Park Unified School District; Fiscal Year 1966-67. 97. Bellflower Unified School District; Fiscal Year 1966-67. 98. Berkeley Unified School District; Fiscal Year 1966- 67. 99. Cupertino Union School District; Fiscal Year 1966-67. 100. Folsom Cordova School District; Fiscal Year 1966-67. 101. Fresno City Unified School District; Fiscal Year 1966-67. 102. Glendora Unified School District; Fiscal Year 1966-67. 103. Lawndale School District; Fiscal Year 1966-67. 104. Los Angeles Unified School District; Fiscal Year 1966-67. 105. Montebello Unified School District; Fiscal Year 1966-67. 106. Orange Unified School District; Fiscal Year 1966-67. 107. Oxnard School District; Fiscal Year 1966-67. 108. Palo Alto Unified School District; Fiscal Year 1966-67. 109. Pomona Unified School District; Fiscal Year 1966-67. 110. Redlands Unified School District; Fiscal Year 1966-67. 111. Sacramento City Unified School District; Fiscal Year 1966-67, 1967-68. 112. San Bernardino City Unified School District; Fiscal Year 1966-67. 113. San Diego Unified School District; Fiscal Year 1965-66, 1966-67. 114. San Francisco Unified School District; Fiscal Year 1966-67. 115. San Juan Unified School District; Fiscal Year 1966. 116. Santa Ana Unified and Junior College School District Fiscal Year 1966-67. 117. Simi Valley Unified School District; Fiscal Year 1967-68. Federal Government Departments Within U. S. Government 118. Department of Defense, Washington, D.C.; Fiscal Year 1966. 119. Department of Health, Education, and Welfare, Wash ington, D.C.; Fiscal Year 1961-74. 120. U. S. Bureau of Budget, Washington, D.C.; Fiscal Year 1967. Out-of-State School Districts 121. Akron Public Schools, Akron, Ohio; Fiscal Year 196 122. Board of Education of Baltimore County, Towson, Maryland; Fiscal Year 1966-67. 123. Chicago Public Schools, Chicago, Illinois; Fiscal Year 1967. 124. Clark County School District, Las Vegas, Nevada; Fiscal Year 1966-67. 12 5. Dayton Public Schools, Dayton, Ohio; Fiscal Year 1966. 126. Hawaii (State) Schools, Honolulu, Hawaii; Fiscal Year 1967-68. 127. Kansas City Public Schools, Missouri; Fiscal Year 1966-67. 128. Montgomery County Public Schools, Maryland; Fiscal Year 1968. 129. New York City Schools, New York; Fiscal Year 1966- 130- School District of Philadelphia, Pennsylvania; Fiscal Year 1966-67. State Governments 131. California (Sacramento), Fiscal Year 1965-66. 132. Connecticut (Hartford), Fiscal Year 1965-67. 133. Michigan (Lansing), Fiscal Year 1966-67. 134. Rhode Island (Providence), Fiscal Year 1967. 269 135. South Dakota (Pierre), Fiscal Year 1968-69. 136. Vermont (Montpelier), Fiscal Year 1965-67. 137. Wisconsin (Madison), Biennium 1967-69. AP P E N D I C E S 270 APPENDIX A DOUBLE POSTCARD USED FOR PRELIMINARY SURVEY 271 272 ICZL6 diujo*i|D3 ' 04UOW | 3 anueAV *uolu**d3 ££$£ 49U4SIQ 1001455 1 4 B 1 H uoiun o*uow 13 tw u itn g J04 4uopu94UiJ9cln5 jtm jsissv niH i avw vi Date T he C alifornia A ssociation of P ublic School B u sin ess O fficials (C A P S B O ) is doing a study on “program ” budgeting. “P rogram ” budgets are designed and placed in the budget form at w ith a brief description of the various program services and ob jectives together w ith the total direct a n d /o r related costs. M anagem ent uses "program ” budgets for decis'on- m aking after com paring program proposals, relating them to current pro gram s, and evalu atin g them against the total needs and priorities of the organization. A lthough program cost accounting or reporting is a n eces sary part of the total process, this stud y is concerned prim arily w ith “pro gram ” b udgeting procedures, tech n iq u es and form at. B u d get program e x am ples: A du lt Edu., Sum . School, H ealth S ervices, P olice P ro tect;on, etc. W e n eed you r help to identify organizations u sing program budgeting. P lease an sw er the question on the attached card. Thank you! L a M a r L. H il l F r a n k L. M a t t o x A sst. Supt., Business Asst. Supt., Business El M onte U H S D istrict Torrance Unif. Sch. District A pproved by: Dr. M. A. H esse, C A P SB O Side One 273 Date Is you organization using sumo “program” budgeting n ques and format. ( ves) (no) . Please check your 01 ganization: Bus ness City Govt County Govt. State Govt. Remarks _ ______________ Name of your organization Address................ Telephone............... N a m e .................. Title procedures, tech- School District Federal Govt Side TWO APPENDIX B LETTERS OF ENDORSEMENT 274 C a lifo r n ia A s s o c ia t io n o f P u b lic S c h o o l B u s in e s s O ffic ia ls November 17, 1966 FKE5IDEM? ROBERT A. WEBBER Fxaano City Unified School Dxiiict PRESIDENT ELECT A J C H U R C H M A N Son Di«go Uiufi*d School Diitrict VICE ?(ESIDD.l ROBERT C. BARNES Los An^aloi Unifiod School Diiincl SE C IE **S V RICHARD B. EATON Modesto City School s TKEASUEEB R. PAUL. REYNOLDS Lamon Gtov« School District DIRECTORS H MARSHALL HANSEN Hayward Unified School District E D O N E PEARCE Mt. San Artlonio Collage ROBERT L MIC HELL San Juan. Unified School District JACK R. SADLER, Past Prasidant Los Angelas Uniliad School District Dear School Business Official: With the increasing interest of Boards of Education and Citizens in the activities and projects that represent a school program, our offices have spent much time to search out, isolate, and then con solidate and report the expenses which go into a specific school activity. An example is the study and work necessary to isolate or prorate direct and indirect costs related to summer school which is split over a fiscal year. PROGRAM BUDGETING is becoming the key expression used to indicate budgeting changes designed to expedite segregation of special program costs. A study to explore the extent Program Budgeting is now in use, and to assess the strengths and short comings of this procedure is being initiated at the University of Southern Cali fornia through two doctoral candidates under Dr. D. Lloyd Nelson. The candidates are LaMar L. Hill, Assistant Superintendent for Business in the El Monte Union High School District, and Frank L. Mattox, Assistant Superintendent for Business in the Torrance Unified School District, both of California. Actually, few School Districts have had much experience with PROGRAM BUDGETING. It is, therefore, quite important that any experience be honestly and completely shared to benefit those still searching for ways to isolate program costs. To assist School Business Officials and Accounting Personnel, it is urged that you participate to the level of your experience and desire to adventure in program budgeting. M. A. Hesse, Chairman University Contacts Committee All East Wilson Avenue Glendale, California 91206 M A H :lh 1 966 67 D R .C H A R L ES O ZA N 'I.\X Prevtdeiit 10332 E. A rte s ia B lvd. B e llflo w e r, C a lifo rn ia MR. JO H N R. A T W A T E R l'ic«*Pr«Bident 545 ,Sou:h H r lb e r ta R e d o n d o B e a c h C a lifo rn ia M RS. M Y LET S. C O BURN Secret a ricTrei’«urir 401 Blast E lm S tr e e t C o m p to n , C a lifo rn ia E x ecu tive Board MR. A D R IA N ADAM S N ew h a ll MR. M ORRIS EW IN G iV illo w b rch k MR. JO H N G U N N W est C ovina U n ifie d MRS. LO U ISE H IL LE N B R A N D L a P u e n te U n io n H igh MRS. LO IS M U LLET P a lm d a le DR . R A L P H R ICH A RD SO N Los A n g e le s U n ifie d MR. EA STO N RO BERTS E. W h ittie r C ity MR. FR ED ST U A R T L a n c a ste r MR. DON M. W E A V E R C e n tin e ia V alley U n io n H igh MR. G EO RG E ZU C K E R B e v e rly H ills U n ifie d D ire c lo r-a t-L a rg e , CSBA E x-O fficio M embers MR. RO SS AM SPOKF.R A n te lo p e V alley J o in t J r. C ollege P r e s id e n t. 1962-1964 CSBA F ir s t V ic e -P re sid e n t M RS. M A R G A R ET CORDES S a n ta M onica U n ifie d J u n io r P a st P re s id e n t D ire c to r, R egion Z. CSBA DR. RICH ARD H U G H ES M o n teb e llo U n ifie d President, ! 952-5-1 County Representatives DR. C. C. C A R PE N T E R C h ie r Dep-J ty C o u n ty 6 u p e ri n te n d e n t MR. T E R R Y C. SM ITH D e p u ty C o u n ty C o u n sel Los Angeles Conntq School Trustees Association R O O M 9 1 1 , 1 5 5 WEST W A SH IN G T O N BOULEVARD LOS ANGELES, CALIFORNIA 9 0 0 1 5 December 1, 1966 Adi*. LalVlar L . Hill, A ssistan t Supt. -B u sin ess El Monte Union High School D istrict 3 53 7 IN T . E astm ont Avenue El Monte, California 91731 D ear Mr. Hill: I am p leased to inform you that at the regular m eeting of the Los A ngeles County T ru stees Executive Board held N ovem ber 17 they unanim ously approved the sponsoring of your project and voted to set aside $500 for assistin g you in its com pletion. The following action was taken: It w as m oved by Ivlr„ C eorge Zucker, seconded by Ivlr. Don W eaver and unanim ously carried that the A ssociation sponsor the doctoral study for Ivlr. LaM ar Hill and Ivlr. Frank Ivlattox and offer financial a ssista n ce fro m $250 to $500. It was the con sensu s that you would w ork with Ivlr. George Zucker as you p rocede with the d issertation. Your d is s e r ta tion should be m ost helpful to school board m em b ers, adm in istrators and b u sin ess m anagers throughout the state. C ordially yours, EOS ANGELES COUNT Y TRUSTEES ASSOC. Dr. C. H. Ozanian, P resid en t M rs. Ivlylet Coburn, S a c r eta r y-T r e a s ur e r By C . C . Car psnter Chief Deputy Saperin^endent CCCtdh letter to Mr. Frank Ma"-tox cc Dr. Ozanian St Mr. Zucker APPENDIX C LETTER ACCOMPANYING QUESTIONNAIRE 277 December 7, 1966 D e e r S i r : The California Association of Public School Business Officials has endorsed, and the Los Angeles County Trustees Association has endorsed and is sponsoring, the study of "Program Budgeting” in U. S. public school districts, Cali fornia city and county governments, state governments, U. S. government, and selected large businesses. We particularly need your help since we understand that you are now using program budgeting. The purpose of our study is to ascertain the purpose, procedures and techniques of program budgeting, its strengths and weaknesses, and to develop some appropriate recommen dations . In recent years, CAPSBO has found increasing evidence of the desire and need for a comprehensive study of public school district budget procedures and techniques in Cali fornia, A report (March 1965) by the California Senate Fact Finding Committee on Revenue and Taxation included pro gram budgeting as one of their thirteen proposals. The report suggested that the State Department of Education in vestigate the feasibility of establishing a uniform system of school accounts under which the concept of program budget ing can be applied, The rationale for the Senate Committee proposal is that program budgeting makes it possible for any interested person to make detailed comparisons of the allocation of educational resources, and that such information should be useful in making choices regarding which educational programs should be expanded and which ones clouId be contracted. In the final report (October 1966) of a California Advisory Committee on School Budgeting and Accounting to the Subcommittee on School Efficiency and Economy of the Assembly Interim Committee on Education, it was recommend ed "that a State Commission on School District Budgeting and Accounting be appointed to advise the State Board of Education relative to ways and means of implementing pro gram budgeting for California school districts . . . . " The State of California has taken the first steps toward the ultimate goal of program and performance budget ing. Their program budgets are designed to describe the objectives and the program services of the State, together with the related costs, rather than just list the details of the proposed salaries and materials by organizational structure. The purpose is to give the Legislature the opportunity to evaluate various activities individually against the total needs and priorities of the State. Departments within the Federal Government, many large cities, a few public school districts in California and the tj . S., and some large businesses are now using program budgeting. -u oo We shall appreciate your completing the enclosed questionnaire on or before December 31, 1966 and return ing it to us in the enclosed stamped self-addressed envelope. Other phases of this research cannot be carried ' out until we complete the analysis of the answers to our questionnaire. Thanh you very kindly for your professional cooperation. S incerely, LaMar L. Hill Assistant Superintendent for Business Frank L. Mattox Assistant Superintendent for Business Enclosures: 3 Quest ionnai re C.A.P.S.B.C. letter L.A.C.T.A. letter APPENDIX D THE QUESTIONNAIRE 279 PROGRAM BUDGETING QUESTIONNAIRE Please give us your professional assistance by indicating the importance of the following aspects of program budgeting as they apply in your situation. I. PURPOSES III. 1. Evaluation of present programs Evaluation of program proposals in terms of objectives ................................. 3, Allocation of financial resources in terms of total needs and priorities ...... 4. Assistance in cost control and analysis 5. Appraisal of program performance ....... 6. Make the budget more understandable .... 7. Other (please specify)_____________________ II . SOURCE OF IMPETUS FOR ADOPTING PROGRAM BUDGETING 1. Own initiative .......................... 2 . Management reporting ........ . 3. Administrative or executive decision .... 4. Citizen committee request ............... 5. Tax rate or bond election ................ 6. State and/or federal laws or regulations 7. Other (please specify)______________________ CRITERIA FOR DESIGNING A PROGRAM BUDGET 1. Program meets a major objective of the organization .......................... Program activities that are related to each other Has administrative relevance and provides for administrative effectiveness ....... 4. Directly related to sources of funds, and facilitates viable inter-organizational fiscal relations ................ .................. . 5. Directly related to different levels of the ultimate objective .......................... C i d p u o P Q , 0 1 E > -H P G i d P p o c t E p G i d p p o p a S E 5 5 -a 6. Provides for some quantitative information concerning output or results ............. 7. Provides for the decentralization of decis making ................................... 8. Permits comparison of alternative methods pursuing policy objectives ............... 9. Other (please specify)________________________ please indicate the presence or absence of the following aspects of program budgeting as they apply in your situation. IV. ADVANTAGES Ves No 1. More understandable budgeting ............. ....... ..... 2. Facilitates decision making ....... ....... ..... 3. More intelligent allocation of financial resources _______ _____ 4. Better budgetary control ....................... ....... ..... 5. Aids in the evaluation of program alternatives in terms of objectives and costs ....................__________ _____ 6. Facilitates making long range projections ........ ....... ..... 7. Other (please s p e c i f y ) _____________________________ _______ _____ V. SHORTCOMINGS OR WEAKNESSES 1. Increased length and volume of budget documents 2. Difficulty in assigning costs to a program ...... 3. Problem of deciding what is a meaningful program . 4. Excessive division of programs ........ . 5. Requires additional personnel ....................... 6. Requires better trained personnel ................ 7. Other (please specify)_________________________________ VI. CONVERSION PROBLEMS 1. Financial - increase cost .................. 2. Personnel - need more and/or better trained pe r s onne 1 ........ . Very important Important Not important VII. VIII . IX. X. XI . XII . XIII . Yes No 3. Administrative reorganization-decentralization vs. centralization ................................... 4. More need for electronic data processing equipment 5. Other (please speci fy) __ Has the adoption of program budgeting procedures and techniques improved your budgetary procedures? ..... If yes, please specify in what way(s):_________________ Has the use of program Budgeting procedures and techniques increased the length and volume of your budget documents ? .............................. Does the use of program budgeting procedures and techniques violate any of the commonly accepted standards for budgeting or accounting? ......... If yes, please specify how they are incompatible Are you utilizing data processing equipment to do your program budgeting? ................................... If not, what equipment are you using?_____________________ Do you include direct costs only in your program budget ing? {Direct costs are those that are eliminated if a program is eliminated or added if a program is added) Are you using a combination of direct costs and indirect costs in program budgeting? (Indirect costs are those costs that are not eliminated if a program is eliminat ed, nor added because a program is added) Is the program cost procedure indicated in either of the preceding two questions used for all of your programs? .............................................. If not, please list exceptions or send samples of same. XIV. Are you prorating indirect program budget costs? If yes, please explain your proration method Yes No Will you please send us appropriate samples of your program materials? Please indicate whether you are sending it under ______ separate cover. (Examples of materials: copy of budget document, budget policy handbook, report forms, request forms, worksheets, chart of accounts, coding for data processing, etc.) Do you desire a summary of the survey findings? ..............________________ COMMENTS: (Please indicate whether you desire anonymity) .... _______ _ We shall appreciate your candid remarks regarding the overall strengths and weaknesses of program budgeting as used in your organization. Remarks about any areas which have not been covered in the above questions are also im portant. Use an extra sheet of paper for your comments, if necessary, and enclose same. Name of your organization Signature Address Title Telephone number Date APPENDIX E FOLLOW-UP LETTER 281 January 9, 1967 Dear ________________, Please forgive us for contacting you again, especially if you have already answered and returned our program budgeting questionnaire. We urgently need your answers to complete this important study, which has been asked for and is needed by many members of our profession. Enclosed is another copy of the questionnaire for your convenience in checking off your responses— yesterday please! Since our first letter to you, the National Asso ciation of School Business Officials' endorsement has been- added to the endorsements by CAPSBO (California Associa tion of Public School Business Officials) and the Los Angeles County Trustees Association. Thank you for your valuable professional coopera tion . Sincerely yours, LaMar L. Hill, Chairman Budget Research Committee CAPSBO, Southern Section LLH/b Enc: (2) Envelope Questionnaire APPENDIX F TEAM INTERVIEW GUIDE 283 TEAM INTERVIEW GUIDE FOR IN-DEPTH STUDY OF PROGRAM BUDGETING Purpose The purpose of this study is to ascertain the purposes, procedures, and techniques of program budgeting, its strengths and weaknesses; and to develop some appropriate recommendations with respect thereto. Program Budgeting Budgets are designed to embody related services or activi ties, as meaningful program areas, and are placed in the budget format prior to adoption with a brief description of the program services and objectives together with estimated direct related costs. Budget decisions are made by the governing authority, chief executives, legislative bodies, or department heads after comparing and evaluating present programs with proposed programs before allocating to the various programs' resources necessary to achieve the organization's objectives. The major stress is on programs rather than on objects of expenditures. Do you desire anonymity? I. What are your major purposes for program budgeting? (Evaluation of programs, allocation of funds, cost control, communications, appraisal) II. What caused you to go into program budgeting? (Own initiative, community pressure, board, federal aid, financial elections) III. What factors do you use in deciding on a budget program? (Objectives, related services or activities, sources of funds, administrative relevance, per formance evaluation) 284 285 IV. What program budgets are you now including in your total budget? (Regular instructional program, grade level, instructional department, subjects, special funded state programs, federal funded programs, community services) V. What do you consider are the major advantages of your program budgeting? (More understandable, decision-making, intelligent allocation, better control, long-range projections) VI. What are some of the shortcomings and weaknesses of your program budgeting? (Length and volume, assigning costs,I meaningful programs, personnel) VII. What problems did you encounter in converting to program budgeting? (Financial, reorganization, equipment requirements, personnel) VIII. Is your program budgeting always compatible with good accounting practices? IX. What program budgets include only direct costs? X. What program budgets show both direct and indirect costs? XI. What cost elements do you include in each program budget? XII. If you are prorating indirect costs, what methods are you using? XIII. What was your total enrollment on your 1966 October report? XIV. What is your candid opinion of program budgeting?

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