When Your Chart of Accounts Gets Out of Hand

Recently I have seen firsthand what happens when a chart of accounts evolves over time without a clearly predefined structure. What you end up with is essentially a weed garden. Apparently each accountant responsible for the chart of accounts had a different (and undocumented) concept. Remnants of each concept remained. Reminiscent of an archaeological dig, we see traces of the Judith era, the Alex era and the turbulent “age of successive substitutes”.


State accounting manuals serve their their own reporting requirements and don’t usually fully accommodate local reporting needs. Adding local fields on top of state requirements is frequently necessary.

At one district it was especially challenging, since the accounting supervisor (who pretty much was the only one who understood their byzantine system) had resigned. I could not get an answer to the following question posed to school principals and department heads: “What budgets are you responsible for, and how do you pull reports?”  Those who have been given the privilege of spending public funds have a high level of responsibility. They cannot exercise that responsibility if they don’t know what they can (an cannot) spend.

So here’s my list of questions to ask yourself when designing or cleaning up a chart of accounts.

  • Can I run a report for the entire district that breaks by “Budget Responsibility”?  If there is no piece of the account string that is called “Budget Control”, “Responsibility” or “Manager” how can I use existing account fields to create this?  There is usually a “Location” or “School” field that might be used.  However, there are plenty of situations where  a school principal does not control the budget for all activities at his or her site (think construction or maintenance). Not only does the principal need to be able to easily pull a report that shows what she can spent, there also has to be a way to ask “what does this site cost?” These are usually not the same thing. Thus the location field generally cannot reliably be used as the Budget Control field.
  • If there is a part of the account string called “Manager” or “Budget Control”, is this field being used exclusively for that purpose? If not, why not, and how can these these other purposes be coded elsewhere?
  • What do taxpayers, board members and management want to know about our spending? Their questions cannot always be predicted in advance, but some of the the usual suspects are outside consultants, food for meetings, and legal fees. These are generally locally-defined subsets of a state-defined category (such as “Object”). Then again, are we breaking out expenditures into categories that no-one ever asks about?  In such cases, coding becomes inconsistent because no-one really cares.  Get a good idea of the sorts of items that need to be broken out and enforce consistency. Which leads to the question…..
  • Are local account codes properly defined? Without a clear description, you’ll generate inconsistencies. A while back we were audited by the State as a result of a citizen’s complaint regarding lack of transparency in bond accounting. While we came out of that audit pretty much unscathed, we were written up for “inconsistent coding”.
  • How can I account for projects?  If the school district has a new initiative at three sites, paid from multiple funding sources, how can we budget the project separately and then compare the cost to, say, improvement in test scores?  Project accounting is especially important and generally necessary for school construction and facility modernization.

Basically you need to be able to show responsibility, location (site) and project.  If you don’t have three extra fields to work with, then you’re going to have to design a system that squeezes these requirements into fewer fields. That will be a challenge.  If your current system doesn’t work for you, try to implement changes that affect schools as little as possible. Don’t rush into changes without clearly understanding your customers’ needs.  And know that implementing your plan is going to be more challenging and take much longer than you might imagine.

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