Eight KPIs Every School Business Official Should Track
School business is complex, with intricacies that affect revenue, compliance, and ultimately, student learning. As schools navigate all kinds of uncertainty (COVID! Inflation! Property values! Changing demographics! Government regulation!), it’s critically important to gauge where your district has been, and where it’s going in the future.
While there may be scores of key performance indicators (KPIs) that should inform a school district’s financial strategy, there are eight that are worth special attention, according to Derick Sibley. Derick is the Director of Finance and Accounting at Pleasant Grove ISD in Texarkana, TX. He has spent 19 years in public education, and 14 of those years in school business.
“If you don’t know where you’ve been, you don’t know where you’re going, and KPIs really paint that picture for you, to help you understand your district and how your district is performing. Are you heading in the right direction? Are you trending toward any kind of financial risk?”
Pleasant Grove ISD at a Glance:
Facilities: 4 campuses
KPIs to Track
Derick highlights the importance of monitoring trends in these KPIs — not just one-time snapshots. “If you don’t know your data, if you don’t know your trends, how are you going to know when you start to fall away from those?”
He says doing so is a good way to benchmark how you perform against peer districts. Because the data is public, and many states use them as part of their accountability standards or ratings, they may provide an opportunity to reach out to a neighboring district that is performing better on a certain KPI to ask what they’re doing to achieve certain results.
Here are the eight KPIs that Derick suggests are especially worth your attention.
8 KPIs to Track
- Student Enrollment
- Student-to-Teacher Ratio
- Administrative Cost Ratio
- Fund Balance to Expenditure/Revenue Ratio
- Days of Cash on Hand
- Expenditure-to-Revenue Ratio
- Surplus/Deficit-to-Revenue/Expense Ratio
- Debt Burden Ratio
Because student enrollment is tied to state funding and has a financial impact, it’s one of the simplest and most important numbers to watch. Understanding past as well as current enrollment can help you put together a 3–5-year financial forecast. Derick said, “When I start doing my five-year forecast, the first thing I look at is, ‘What is our enrollment? What is the average change in enrollment? What is the trend that I’m seeing?”
Derick suggests not just looking at overall enrollment, but also special student populations such as special education, career and technical education, and the portion of your student body that is economically disadvantaged. Since the beginning of the pandemic, enrollment has fluctuated for many districts, and subpopulations shifted as well. Tracking these numbers can help you determine program funding levels and staffing.
Student-to-teacher ratio is simply the number of enrolled students divided by teacher full-time employees (FTEs).
You should also track the percentage change in student enrollment as it relates to the percentage change in employed teacher FTEs.
It’s often helpful to choose a base year (5 or 10 years prior, for example), and monitor what is the percentage change student enrollment since that year, as well as the percentage change in certified staff since that year. Is there a difference between these two percentages? This can help you start to identify trends.
Ideally, you’ll see a steady and consistent trend. If you notice that the percentage change in teacher FTEs is increasing faster than your percentage change in student enrollment, that’s a warning sign (sometimes called “hitting the wall”) and could indicate that you’re headed toward financial trouble.
The ideal student-to-teacher ratio depends on district size. Large districts can often leverage economies of scale more than small districts, and a district with 20,000 students can likely be more efficient with administrative costs than a smaller district can.
One helpful way to tell how you’re doing is to compare your results to those of like districts across your state. Derick uses Frontline’s Comparative Analytics to see the average student-to-teacher ratio across his state, as well as across districts of different sizes, and in his local economy. This helps the district make decisions about class sizes and how competitive they should be with teacher salaries as they compete for talent with other local districts.
Listen to the Podcast!
Hear Derick Sibley and Frontline Senior Analytics Advisor Travis Zander discuss these KPIs on the Field Trip Podcast.
Administrative Cost Ratio
How much your district spends on administrative costs (principals, assistant principals, central administration, superintendents, assistant superintendents, the academic office, the business office, etc.) versus instructional costs (teachers, counselors, nurses, librarians, etc.) is another important KPI. Derick said it’s important not only to monitor this number, but also to use it to thoughtfully communicate with your community.
Because community members feel strongly that district funds should be used efficiently to impact instruction, showing that the cost ratio is consistent over time can be helpful. Also be sure to communicate how you monitor administrative costs, and the reasons for those expenditures. Those offices are all important, and many people may not be aware of everything the district does to operate, such as monitoring grant compliance, running payroll, and keeping the lights on.
Fund Balance to Expenditure/Revenue Ratio
This figure shows you how financially healthy your district is. The calculation is simple: take your end-of-year fund balance and divide it by your expenditures or revenue — what is the percentage?
* Targets established by school district policy
Generally, aim to have at least 25% of your operating expenses on hand. “That helps me know on any given year that if the money flow stopped completely, I would have at least 25% of my expenditures covered in my fund balance,” said Derick.
Failing to monitor this ratio can lead to financial trouble as well. But be sure to look at your local governance and understand any local policies, as some may impact the amount of fund balance you are allowed to keep on hand.
Days of Cash on Hand
How long could you continue to operate if no additional revenue was received?
Would you have enough liquidity to make payroll until funds once again come into the district? This is especially important since funds don’t always flow into the district in equal increments throughout the year. Derick said his district doesn’t bring in much money between December and April, so he must plan ahead to ensure they can cover operating expenses during those months. “I look at it every day, cash on hand. How much do we have for operational purposes? How much do we have that are investments? Do we need to move things around? It’s monitored on a daily basis.”
This KPI is like that question every young adult setting up their first budget has to grapple with: “Are we living below our means?” For every dollar received, how much is spent?
The calculation is simple: divide operating expenses by revenues — then be sure to track the trend over time.
Did your district have a surplus of funds last year, or did you run a deficit? This KPI looks at it as a percentage of revenue or of expenditures.
This is often more useful than looking at the dollar amounts, especially if your district is growing or declining in enrollment, as you track it over time. Are you consistently adding 2% of revenue to the fund balance, for example?
Tracking this number can help you set and monitor long-term goals. Is this ratio consistent year over year? If not, it could be a sign that you need to revise some of your budgeting practices. Are you being consistent with your long-range financial planning?
Debt Burden Ratio
Similar to expenditure-to-revenue ratio, this KPI looks at how much is spent in debt service for every dollar received. Derick said this is helpful for communicating in a clear, simple way how much of the district’s revenue is spent on servicing debt.
How to Track Data Over Time
As Derick said, it’s critical to track these KPIs over time — not just look at them once. He looks at most of these KPIs on a monthly basis, and some on a daily basis. But while this is publicly available data, it’s not always easy to unearth, and it can be especially tedious to present the data visually in ways that bring it to life. In the past, this was time-consuming — digging up the data, going to multiple sources to find the figures he needed, and compiling it.
Now Derick uses Frontline Business Analytics, a system designed from the ground up to help school districts look at their financial data, create long-range financial plans, manage budgets, and compare data to other districts, either nearby or across the state, or with similar demographics.
“One of the best tools I believe is out there is the financial forecast I get out of Frontline Analytics. That is the basis of the conversation that I have with my superintendent every month. We look at the forecast that is put together in those financial reports, and so that gives us some idea when we start trying to make decisions about anything. ‘What does it look like? What does that forecast look like?’ … It takes your historical information, allows you to take a look at it, gives you a forecast based on what has actually happened in the past. What does that data allow us to do? It helps us to make better decisions.”
Those forecasts are helpful when answering tricky questions: If we add staff, what happens to our finances in the long term? If we pay a one-time stipend, how does that impact our end-of-year financials? How do our KPIs compare to other districts? Are we going in the right direction?
“What gives me comfort,” Derick said, “is knowing that the data, the decisions we’re making, are all based on realistic numbers.”
When he presents his forecasts and plans to the board, Derick works very hard to be simple, transparent, and thorough. He wants it to be simple enough that even someone with no experience in school finance could understand what he’s saying. So he shows information in multiple ways — not just in charts and graphs, but also with a narrative. “We talk all the time about how in the classroom, there are different learning styles and students learn in different ways….It’s the same for our school board, and it’s the same for our community.”
Derick uses Frontline Business Analytics not just to analyze the data, but also to create board communications. He frequently uses the monthly financial reports in the system and prints them out to include in his board packet. “I tell people all the time, it makes me look really smart. It’s pretty hefty, it’s a lot of information. And it looks like I put a lot of time into it.”
He tries to anticipate the questions the board will ask and includes information that will answer those questions. “I take that information and put together my narrative that I want to give the board. And then on top of that, I summarize it all. I have a summary sheet that I show the board, and then back behind the summary sheet is all the detailed information that if they want to take a look at, they can.”
Advice for Tracking KPIs
We asked Derick what his single biggest piece of advice for other school business officials would be as they work to get their arms around their data.
“Prior to having Frontline Analytics, I spent lots of time putting data together, looking through state and local reports and everything else I could possibly get my hands on to find a trend or find out where we’ve been. And when Frontline Analytics came along, and I have that data in my hand, I can tell that story, I can get that information in an instant. And so I would recommend looking at the data and finding out where your district has been. Frontline Analytics is an amazing tool that’s available to school districts and it will help you tremendously, help you get off the ground in understanding where you’re at.”
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