Budgeting and Financial Management Case Analysis
Budgeting and financial management are critical processes in public administration efforts as they play an important role in governance. Organizations in both the public and private sectors carry out budgeting and financial management to allocate resources to different functional departments and ensure effective utilization of these resources. According to National Center for Education Statistics (2004), budgeting primarily entails allocating finite resources to an organizations prioritized needs. In the field of public administration, budgeting and financial management provide the legal premise to spend money. Budgeting and financial management are invaluable tools for planning and evaluation in the educational environment. Through this, educational objectives and programs are translated into financial resources plans and courses of action. This paper provides a critical analysis of budgeting and financial management at The Bedford Falls Academy Charter School. The analysis seeks to demonstrate important aspects of budgeting and financial management in an educational environment.
Overview of the Case
The Bedford Falls Academy Charter School was in a serious financial situation in early July 2009 (Snow, 2017). At this time, renovations inside the 80,000 square foot former monastery at The Bedford Falls were at a standstill because funds were required to address the serious fire code breaches. While the school expected 140 new middle and high school students to join in less than two months, the area fire chief stated that there would be no occupancy authorization unless corrective action is undertaken. The renovations had continued smoothly over the summer months until the first floor ceilings were opened by the contractor to install new electrical wiring and cable. A violation of the states fire code was detected as the opening showed the lack of a functional firewall between the first and second floors. The required corrective action to resolve the problem was priced at $400,000.
As a result, Susan Lundberg, the schools executive director, notified the Board of Trustees chair and treasurer, Kenneth Jones and Pat Richards respectively regarding the fire code infringements. The chairperson, Kenneth Jones, convened an emergency board meeting the following day. During the meeting, Lundberg explained the issue and proposed alternative courses of action though none of them seemed attractive. The Board of Trustees was disappointed by the unexpected costs and the failure to project a sufficient contingency fund. The school was in a tight spot since no cash reserve was available as all tuition and state monies were being used in the upcoming school year. In essence, the institutions budget was already maximized while its loans were expected to increase in the upcoming school year in addition to a new mortgage payment. At the same time, The Bedford Falls Academy Charter School needed to meet the terms of its 10-year loan from Millennium Bank to avoid defaulting and losing its land.
Analysis of the Case
As evident in the case, The Bedford Falls Academy Charter School (BFA) was in a financial crisis occasioned by the unforeseen costs of violations of the states fire code. Prior to the fire code violations that were detected during renovations, the school was already in a difficult spot financially as all its tuition and state money was being used in the upcoming school year (Snow, 2017). The construction emergency forced the school to take on an emergency loan worth $400,000 to help correct the fire code violations and obtain authorization for occupancy. The emergency loan was deemed necessary since the school was expecting to admit 140 new middle and high school students. Consequently, BFA administrators and stakeholders needed to make a critical decision on the way forward.
The schools executive director, Susan Lundberg, proposed a five-year plan...
…impediment to any major developments, especially building projects. BFAs Board of Trustees should consider selling the excess land if the proceeds are used to pay off debt and create an endowment. Some of the proceeds of the sale could be used to refinance the schools existing mortgage. While the school had plans for the excess land, any developments or building projects would worsen its financial position and increase its debt load. Therefore, selling the excess land and paying off debts would be ideal for BFA.Role as Board Member and Treasurer
As a board member and treasurer in Richards position, the following weeks would entail advising Lundberg regarding the schools financial position and the impact of undertaking her ambitious plans. This would involve explaining the pros and cons of undertaking the proposed plans as well as failing to do so. This role would also entail critically evaluating the five-year plan to determine the suitability of selling excess land as part of the financing. In essence, I would provide objective and balanced advice on the proposed plans in relation to BFAs financial position. As Lundberg, my role would involve explaining the five-year plan to Richard and the bigger picture for the future. I would also examine his proposals or explanations critically to help determine an amicable course of action.
In conclusion, BFA is facing a strenuous financial period that has been exacerbated by the emergency loan. This case is an example of budgetary and financial management issues facing schools. As evident in the scenario, the problem facing the school could be attributable to poor budgeting and financial management practices on the part of the schools administration. Therefore, the schools Board and other administrative stakeholders need to make critical decisins that would help promote effective budgeting and financial management in the future to prevent such problems…
References
National Center for Education Statistics. (2004). Financial accounting for local and state school systems. Retrieved from U.S. Department of Education website: https://nces.ed.gov/pubs2004/h2r2/ch_3.asp
Sears, J.B. (2010). Some problems in public school finance. Journal of Educational Research, 10(4), 257-270.
Snow, D. (2017). The Bedford Falls Academy Charter School. Retrieved from the University of Washington, Evans School of Public Policy & Governance website: http://dx.doi.org/10.4135/9781526479662
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