Fiscal Check-Up Part 1: When a Budget Isn’t Actually a Budget

A woman wearing glasses and a suit is smiling in front of a flag.

Sim Loh is a family partnership coordinator at Children’s Village, a nationally-accredited Keystone 4 STARS early learning and school-age enrichment program in Philadelphia, Pennsylvania, serving about 350 children. She supports children and families, including non-English speaking families of immigrant status, by ensuring equitable access to education, health, employment, and legal information and resources on a day-to-day basis. She is a member of the Children First Racial Equity Early Childhood Education Provider Council, a community member representative of Philadelphia School District Multilingual Advisory Council, and a board member of Historic Philadelphia.

Sim explains, “I ensure families know their rights and educate them on ways to speak up for themselves and request for interpretation/translation services. I share families’ stories and experiences with legislators and decision-makers so that their needs are understood. Attending Leadership Connections will help me strengthen and grow my skills in all domains by interacting with and hearing from experienced leaders in different positions. With newly acquired skills, I seek to learn about the systems level while paying close attention to the accessibility and barriers of different systems and resources and their impacts on young children and their families.”

Warning: we are about to shine a spotlight on money, a topic that many of us do not like to think, much less talk about. But as a business owner, it’s imperative that you have a solid understanding of the financial health of your business. If you don’t, you run the risk of actually paying to run your business rather than making money on it.

The 2018 reliability and validity study of the Business Administration Scale for Family Child Care (BAS) found that 44% of family child care providers do not have a budget (Talan and Bloom, 2018). This number is shocking, and is also reflective of what I have seen in the field when conducting formal BAS assessments as well as when informally conversing with family child care providers. I think one of the reasons this number is so low is confusion related to terminology. What I often see is that providers mistake their actuals for their budget. Let’s take a moment to clarify the two terms:

Money Talk

The BAS defines a budget as is a projection, or a plan for the amount of money that will be made (revenue) by the child care business and the amount of money that will be spent (expenditures) to operate the child care business during the fiscal year (Talan and Bloom, 2018). It is important to note two key words: plan and projection. A budget is a document for the future, it captures what you plan to earn and what you plan to spend, it does not reflect the money you have actually spent or earned. It is also not an accurate reflection of the money in your bank account or pocket at any given time. Rather, it captures your financial goals and aspirations.

Actuals reflect how much money (income) has actually been received and how much money (expenses) has been paid out at a given point in time during a fiscal year (Talan and Bloom, 2018). Your actuals reflect how much money you actually earned and how much you actually spent, but they do not tell you how much you will earn next month or how much you will spend over the course of the year. These are sometimes referred to as “income and expense statements.” According to the BAS reliability study, 64% of providers keep track of income they receive and 60% keep track of business expenses (Talan and Bloom, 2018).

When I am talking with providers, they often say they have a budget. However, when I begin to ask more about it, or when we look at their documentation, what commonly happens is that we discover what they thought was a budget is really their actuals. They have records that have tracked their income and expenses so that they can see money coming in and going out, but they haven’t made the leap yet to crafting a budget which serves as a guide or plan for the future.

Making the Leap

So how does one make the leap to a budget? One option is to start by looking at the past. Closely tracking all your income and expenses for a month or more (ideally more) allows you to predict what your financial habits might look like in the future. The following steps can be used to develop a budget:

Track all your income and expenses by collecting receipts and referring to paid bills.
Categorize all business-related income and expenses by type (e.g., rent/mortgage, food, supplies, insurance, utilities, parent payment, Food Program reimbursement). I find it easiest to do this in an Excel document making each row a line-item and each column a month. There are also numerous resources available to help you create a budget ranging from computer software to books—find whatever way works best for you.
Summarize the totals for each category so that you can clearly see how much you spent and earned in each area. Each category is called a line item.
Use those totals to predict how much you will spend and earn in each of the twelve months of the year. At this point you should also take a moment to think about any other money that you might earn or spend related to your business that may not have been captured in the month(s) you tracked. Examples might include business liability insurance payments or tax payments, or extra money spent during holidays. Add any of these additional items into the totals or create new line items for anything that was missing. You should have an estimated total for each line-item or type of expense of income you have. Do this for each month in the upcoming year.
After you have made your line-item estimates for each month, summarize the totals for the end of the year. This is your budget! It clearly communicates how much you plan to earn and how much you plan to spend for the year.
One last thing: is your total projected revenue higher than your total projected expenditures? If so, this means you are planning to make a profit! If not, are there places you can make adjustments, like reducing your expenses or generating additional revenue? The beauty of having a budget is that you can plan in advance to make sure that you are operating your business in a way to make money.

Benefits of Both

The beneficial relationship between actuals and a budget is bi-directional, having one helps you navigate the other and vice versa. Having both is your first step to financial peace of mind. Tracking your actual income and expenses helps you keep tabs on your current fiscal status and helps you predict your budget for the future. Your budget then helps you plan long-term as well as make better spending decisions in the moment. Both documents are critical to sound financial health and having one without the other leaves you with only half the picture. You might be a family child care provider because you love children, but you need to make sure you are operating your business so you are not losing money by doing what you love!

Looking for more information on financial operations? Part 2: Tips for Tracking Actuals and Budgeting is forthcoming.

If you are interested in receiving training on the BAS, the McCormick Center for Early Childhood Leadership offers several opportunities including an upcoming BAS Reliability Training, March 24-27, 2020. More information is available here: https://mccormickcenter.nl.edu/events/business-administration-scale-bas-reliability-training-032419/.

Interested in learning more about financial operations for center-based child care administrators? Attend the PAS Reliability Training March 9-13, 2020 at the McCormick Center! More information is available here: https://mccormickcenter.nl.edu/event-type/reliability-training/.

References

Talan, T.T. & Bloom, P.J. (2018). Business Administration Scale for Family Child Care (2^nd ed.). New York: NY: Teachers College Press.

Robyn Kelton, M.A., is a Quality Training Specialist for the McCormick Center for Early Childhood Leadership at National Louis University (NLU). Robyn conducts training and research on the Business Administration Scale for Family Child Care (BAS) and the Program Administration Scale (PAS) and serves as a national reliability anchor for both tools. In addition, Robyn reviews BAS and PAS assessments for the assessor certification system. Robyn holds a Bachelor of Arts degree in Psychology from the University of Kansas and a Master of Arts degree in Psychology with an advanced certificate of study in Organizational Psychology from NLU. Robyn is currently a doctoral student in the brain, behavior, and quantitative science psychology program at the University of Kansas. Prior to joining the McCormick Center, Robyn spent three years as a lead teacher in a kindergarten classroom for an after-school program. Robyn’s research interests include leadership in early care and education, family child care, child development, and autobiographical memory.

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Measuring Organizational Conditions for Improving Quality

By McCormick Center • May 13, 2025

Leaders, policymakers, and systems developers seek to improve early childhood programs through data-driven decision-making. Data can be useful for informing continuous quality improvement efforts at the classroom and program level and for creating support for workforce development at the system level. Early childhood program leaders use assessments to help them understand their programs’ strengths and to draw attention to where supports are needed. Assessment data is particularly useful in understanding the complexity of organizational climate and the organizational conditions that lead to successful outcomes for children and families. Several tools are available for program leaders to assess organizational structures, processes, and workplace conditions, including: Preschool Program Quality Assessment (PQA) 1 Program Administration Scale (PAS) 2 Child Care Worker Job Stress Inventory (ECWJSI) 3 Early Childhood Job Satisfaction Survey (ECJSS) 4 Early Childhood Work Environment Survey (ECWES) 5 Supportive Environmental Quality Underlying Adult Learning (SEQUAL) 6 The Early Education Essentials is a recently developed tool to examine program conditions that affect early childhood education instructional and emotional quality. It is patterned after the Five Essentials Framework, 7 which is widely used to measure instructional supports in K-12 schools. The Early Education Essentials measures six dimensions of quality in early childhood programs: Effective instructional leaders Collaborative teachers Supportive environment Ambitious instruction Involved families Parent voice A recently published validation study for the Early Education Essentials 8 demonstrates that it is a valid and reliable instrument that can be used to assess early childhood programs to improve teaching and learning outcomes. METHODOLOGY For this validation study, two sets of surveys were administered in one Midwestern city; one for teachers/staff in early childhood settings and one for parents/guardians of preschool-aged children. A stratified random sampling method was used to select sites with an oversampling for the percentage of children who spoke Spanish. The teacher surveys included 164 items within 26 scales and were made available online for a three-month period in the public schools. In community-based sites, data collectors administered the surveys to staff. Data collectors also administered the parent surveys in all sites. The parent survey was shorter, with 54 items within nine scales. Rasch analyses was used to combine items into scales. In addition to the surveys, administrative data were analyzed regarding school attendance. Classroom observational assessments were performed to measure teacher-child interactions. The Classroom Assessment Scoring System TM (CLASS) 9 was used to assess the interactions. Early Education Essentials surveys were analyzed from 81 early childhood program sites (41 school-based programs and 40 community-based programs), serving 3- and 4-year old children. Only publicly funded programs (e.g., state-funded preschool and/or Head Start) were included in the study. The average enrollment for the programs was 109 (sd = 64); 91% of the children were from minority backgrounds; and 38% came from non-English speaking homes. Of the 746 teacher surveys collected, 451 (61%) were from school-based sites and 294 (39%) were from community-based sites. There were 2,464 parent surveys collected (59% school; 41% community). About one-third of the parent surveys were conducted in Spanish. Data were analyzed to determine reliability, internal validity, group differences, and sensitivity across sites. Child outcome results were used to examine if positive scores on the surveys were related to desirable outcomes for children (attendance and teacher-child interactions). Hierarchical linear modeling (HLM) was used to compute average site-level CLASS scores to account for the shared variance among classrooms within the same school. Exploratory factor analysis was performed to group the scales. RESULTS The surveys performed well in the measurement characteristics of scale reliability, internal validity, differential item functioning, and sensitivity across sites . Reliability was measured for 25 scales with Rasch Person Reliability scores ranging from .73 to .92; with only two scales falling below the preferred .80 threshold. The Rasch analysis also provided assessment of internal validity showing that 97% of the items fell in an acceptable range of >0.7 to <1.3 (infit mean squares). The Teacher/Staff survey could detect differences across sites, however the Parent Survey was less effective in detecting differences across sites. Differential item functioning (DIF) was used to compare if individual responses differed for school- versus community-based settings and primary language (English versus Spanish speakers). Results showed that 18 scales had no or only one large DIF on the Teacher/Staff Survey related to setting. There were no large DIFs found related to setting on the Parent Survey and only one scale that had more than one large DIF related to primary language. The authors decided to leave the large DIF items in the scale because the number of large DIFs were minimal and they fit well with the various groups. The factor analysis aligned closely with the five essentials in the K-12 model . However, researchers also identified a sixth factor—parent voice—which factored differently from involved families on the Parent Survey. Therefore, the Early Education Essentials have an additional dimension in contrast to the K-12 Five Essentials Framework. Outcomes related to CLASS scores were found for two of the six essential supports . Positive associations were found for Effective Instructional Leaders and Collaborative Teachers and all three of the CLASS domains (Emotional Support, Classroom Organization, and Instructional Support). Significant associations with CLASS scores were not found for the Supportive Environment, Involved Families, or Parent Voice essentials. Ambitious Instruction was not associated with any of the three domains of the CLASS scores. Table 1. HLM Coefficients Relating Essential Scores to CLASS Scores (Model 1) shows the results of the analysis showing these associations. Outcomes related to student attendance were found for four of the six essential supports . Effective Instructional Leaders, Collaborative Teachers, Supportive Environment, and Involved Families were positively associated with student attendance. Ambitious Instruction and Parent Voice were not found to be associated with student attendance. The authors are continuing to examine and improve the tool to better measure developmentally appropriate instruction and to adapt the Parent Survey so that it will perform across sites. There are a few limitations to this study that should be considered. Since the research is based on correlations, the direction of the relationship between factors and organizational conditions is not evident. It is unknown whether the Early Education Essentials survey is detecting factors that affect outcomes (e.g., engaged families or positive teacher-child interactions) or whether the organizational conditions predict these outcomes. This study was limited to one large city and a specific set of early childhood education settings. It has not been tested with early childhood centers that do not receive Head Start or state pre-K funding. DISCUSSION The Early Education Essentials survey expands the capacity of early childhood program leaders, policymakers, systems developers, and researchers to assess organizational conditions that specifically affect instructional quality. It is likely to be a useful tool for administrators seeking to evaluate the effects of their pedagogical leadership—one of the three domains of whole leadership. 10 When used with additional measures to assess whole leadership—administrative leadership, leadership essentials, as well as pedagogical leadership—stakeholders will be able to understand the organizational conditions and supports that positively impact child and family outcomes. Many quality initiatives focus on assessment at the classroom level, but examining quality with a wider lens at the site level expands the opportunity for sustainable change and improvement. The availability of valid and reliable instruments to assess the organizational structures, processes, and conditions within early childhood programs is necessary for data-driven improvement of programs as well as systems development and applied research. Findings from this validation study confirm that strong instructional leadership and teacher collaboration are good predictors of effective teaching and learning practices, evidenced in supportive teacher-child interactions and student attendance. 11 This evidence is an important contribution to the growing body of knowledge to inform embedded continuous quality improvement efforts. It also suggests that leadership to support teacher collaboration like professional learning communities (PLCs) and communities of practice (CoPs) may have an effect on outcomes for children. This study raises questions for future research. The addition of the “parent voice” essential support should be further explored. If parent voice is an essential support why was it not related to CLASS scores or student attendance? With the introduction of the Early Education Essentials survey to the existing battery of program assessment tools (PQA, PAS, ECWJSI, ECWES, ECJSS and SEQUAL), a concurrent validity study is needed to determine how these tools are related and how they can best be used to examine early childhood leadership from a whole leadership perspective. ENDNOTES 1 High/Scope Educational Research Foundation, 2003 2 Talan & Bloom, 2011 3 Curbow, Spratt, Ungaretti, McDonnell, & Breckler, 2000 4 Bloom, 2016 5 Bloom, 2016 6 Whitebook & Ryan, 2012 7 Bryk, Sebring, Allensworth, Luppescu, & Easton, 2010 8 Ehrlich, Pacchiano, Stein, Wagner, Park, Frank, et al., 2018 9 Pianta, La Paro, & Hamre, 2008 10 Abel, Talan, & Masterson, 2017 11 Bloom, 2016; Lower & Cassidy, 2007 REFERENCES Abel, M. B., Talan, T. N., & Masterson, M. (2017, Jan/Feb). Whole leadership: A framework for early childhood programs. Exchange(19460406), 39(233), 22-25. Bloom, P. J. (2016). Measuring work attitudes in early childhood settings: Technical manual for the Early Childhood Job Satisfaction Survey (ECJSS) and the Early Childhood Work Environment Survey (ECWES), (3rd ed.). Lake Forest, IL: New Horizons. Bryk, A. S., Sebring, P. B., Allensworth, E., Luppescu, S., & Easton, J. Q. (2010). Organizing schools for improvement: Lessons from Chicago. Chicago, IL: The University of Chicago Press. Curbow, B., Spratt, K., Ungaretti, A., McDonnell, K., & Breckler, S. (2000). Development of the Child Care Worker Job Stress Inventory. Early Childhood Research Quarterly, 15, 515-536. DOI: 10.1016/S0885-2006(01)00068-0 Ehrlich, S. B., Pacchiano, D., Stein, A. G., Wagner, M. R., Park, S., Frank, E., et al., (in press). Early Education Essentials: Validation of a new survey tool of early education organizational conditions. Early Education and Development. High/Scope Educational Research Foundation (2003). Preschool Program Quality Assessment, 2nd Edition (PQA) administration manual. Ypsilanti, MI: High/Scope Press. Lower, J. K. & Cassidy, D. J. (2007). Child care work environments: The relationship with learning environments. Journal of Research in Childhood Education, 22(2), 189-204. DOI: 10.1080/02568540709594621 Pianta, R. C., La Paro, K. M., & Hamre, B. K. (2008). Classroom Assessment Scoring System (CLASS). Baltimore, MD: Paul H. Brookes Publishing Co. Talan, T. N., & Bloom, P. J. (2011). Program Administration Scale: Measuring early childhood leadership and management (2 nd ed.). New York, NY: Teachers College Press. Whitebook, M., & Ryan, S. (2012). Supportive Environmental Quality Underlying Adult Learning (SEQUAL). Berkeley, CA: Center for the Study of Child Care Employment, University of California.