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“Returning Dollars to Education by managing Indirect Expenditures”

Robford E. Hill


In an increasingly more volatile marketplace and an economy that seems closer to recession with each passing day, the importance of saving is paramount. We can do better; indeed we must do better in finding ways to reduce the costs associated with education. By lowering indirect expenditure costs, schools can use the surplus to supplement funding sources and create new programs for their students. In many school systems across the United States, we hear the cry of parents and young people for better material and instruction in liberal arts, history and even music. Organizations that are focused on managing resources and finding real savings have the greatest opportunity for sharing those savings across their school system.


The capture of indirect expenditures has become the renewed focus of numerous businesses, and most importantly, in our nation’s educational system.  No longer are urban centers the only focus for economic decline, no longer can suburban school systems consider themselves to be recession-proof. Increasingly, school systems face the pressures of rising fuel costs, inflation and a changing tax base which threaten home values and education funding sources. School officials, policy experts and education leaders recognize the severity of this issue and fortunately they are not alone. Executives like Tom Vander Ark, of the education arm of the Bill & Melinda Gates Foundation states, “We need to do much better with the money in the system and one must reach the conclusion that if we more effectively allocated and spent the money we have, we could do better job.” Current market conditions provide the savvy school system, an opportunity to lower costs, while creating a roadmap to yield future savings.


Schools across the United States are faced with new and recurring issues such as additional funding, operational costs and changing cost drivers. School administrators must start the process of thinking outside the box, while boxing in the expenses of their organization for cost-containment. Cost containment is not a new idea; historically, economies have expanded and receded with relative regularity. When compared to previous economic downtrends, today organizations have the ability to plan for growth more accurately as well as stave off recession with more effective measures.


The current economic climate underscores the opportunities for decision-makers to increase funding performance and reduce waste. On average, indirect expenditures account for up to 32% of total annual expenses for school systems and businesses alike. Additionally, according tothe National Assessment of Educational Progress (NAEP), the total expenditures (Per Student) in 2006 were $10,400 and Instructional expenditures totaled $5,554.This means that less than $0.50 cent per dollar per student actually reaches the desk of students for academic purposes alone. In order for our schools to retain quality educators and access to the most innovative and thought-provoking curriculum, schools must find the balance between cost-saving initiatives and program management without impacting the prospects of our nation’s future- our children.


The first step in re-capturing indirect expenditures is recognizing that indirect expenditures are expenses that occur outside of the core focus of a school system. Secondly, schools must identify where the greatest amount of their annual income is spent. Most schools find much of their expenses outside of instruction are spent on operations/office supply, building maintenance, telecommunications and information technology solutions. School savings can be best achieved by accurately assessing the true nature of needs and setting clear objectives for cost management. While skilled Procurement Managers continue to show great value to their organization through managing the day to day needs of the school system, today’s changing economic climate may require the help of consultants specializing in cash optimization and cost reduction for indirect expenditures. Listed below are some key factors one should look for in a consulting firm:


  1. Consultants that utilize variable savings as opposed to projected savings for pay performance standards.
  2. Consultants encompassing a clear understanding of process improvements, vendor management and product rationalization
  3. Firms that utilize proven technology platforms for ease of use
  4. Consultants that deliver long-term strategies, not short-term fixes.
  5. Firms that have reporting capabilities that allows access to savings information and departmental data.


In the long-term, school systems will benefit from successful expenditure planning and saving upwards of 23 percent. While the economy ebbs and flow, due to external market pressures, the safest strategy to ensure continued educational success is to lessen costs on a continual basis. By creating a platform of cost savings with continued revision of annual income expenditures, schools can indeed get back to the basics.


Robford E. Hillis theChief Executive Officer of REACH Consulting Group, an Atlanta based minority-owned boutique consulting firm that specializes in helping mid-large size organizations increase profitability by lowering the costs of their

indirect expenditures. www.reachconsultinggroup.com


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