Governance and Fiscal Accountability: The Untold Story Behind Contingent Labor
Across the country, school districts are increasingly turning to contingent labor—contracted staff, substitute pools, and outsourced services—to fill critical workforce gaps driven by persistent shortages, enrollment volatility, and the expiration of federal relief funds. National surveys of K–12 leaders confirm that substitute teachers, special education staff, and related service providers remain among the hardest roles to fill, even as overall budgets tighten.
While contingent labor serves an integral part of comprehensive workforce plan, research and audit findings show that poor visibility into these arrangements often undermines fiscal stewardship and governance obligations. For boards and executive leaders responsible for public funds, understanding the full cost structure of contingent labor is no longer optional—it is essential for transparency, compliance, and audit readiness.
Vendor Markups and Administrative Fees
Independent workforce and procurement analyses consistently find that traditional staffing vendors apply markups ranging from 20% to over 40%, depending on role, geography, and urgency. These markups bundle overhead, insurance, administrative services, and profit—often without itemized visibility for districts.
Documented example (composite, based on public procurement cases): In a large urban district, finance leaders initially reported approximately $10 million in contracted staffing costs. A deeper reconciliation of invoices against bill rates revealed layered markups and overtime premiums that increased total spend to nearly $14 million—a variance that had not surfaced in board-level summary reports.
Procurement research shows that without standardized rate cards or not-to-exceed pricing, districts have limited leverage to contain these inflationary effects.
Fragmented Contracts and Compliance RisksMid-size and large districts often manage dozens of vendor contracts across departments, including HR, Special Education, Transportation, and Student Services. When these agreements are decentralized, audit guidance warns of increased risks related to unauthorized rates, missing documentation, and noncompliance with state procurement rules.
Public audit example: State auditor management reports from multiple districts document findings where vendor invoices could not be reconciled to contract terms, triggering corrective action plans, repayment requirements, or financial penalties. In one Midwest district (identified in state audit summaries), post-audit remediation costs and penalties exceeded $250,000 after multi-year discrepancies were identified in contracted service billing.
Budget Volatility and Forecasting ChallengesNational expenditure data from the U.S. Department of Education show that contracted services represent one of the fastest-growing and least consistently categorized spending areas in district budgets, often spread across multiple fund codes.
Regional example (composite, based on fiscal reviews): During a routine financial analysis, a Southeastern district discovered that contingent labor accounted for roughly 12% of its total operating budget, nearly double the amount originally projected. Unmonitored overtime, emergency placements, and inconsistent coding of contracted services masked the true exposure until year-end reconciliation.
Governance experts warn that this volatility undermines long-term planning and forces boards into reactive budget decisions mid-cycle.
Why Visibility Matters for School Boards
Boards are legally and ethically charged with ensuring fiscal accountability and operational transparency. Without centralized visibility into contingent labor, districts face heightened risk of:
- Budget overruns that crowd out instructional priorities
- Audit findings and management letter citations that erode public trust
- Governance gaps that draw increased scrutiny from state oversight agencies
External audit guidance explicitly highlights vendor oversight, invoice verification, and procurement compliance as recurring risk areas in district audits.
How HWL Helps Districts Take Control
At HWL, we partner with districts to bring structure, transparency, and accountability to contingent labor management—aligned with best practices identified in workforce and procurement research.
Our Approach Delivers:
Centralized Vendor Oversight: A single platform to manage all contracts, rate cards, credentials, and compliance documentation, supporting audit expectations for centralized control.
Real-Time Spend Analytics: Live visibility into contingent labor spend by role, department, and funding source—enabling accurate forecasting and proactive governance decisions.
Comprehensive Reporting: Automated documentation aligned to state and federal audit standards, reducing preparation time and compliance risk.
The Bottom Line
Contingent labor is here to stay—but the financial and governance risks associated with poor visibility are not. Research, audit guidance, and real district outcomes all point to the same conclusion: boards that demand transparency and centralized oversight are better positioned to protect public dollars and sustain trust.
HWL stands ready to help districts strengthen governance, improve fiscal accountability, and regain control of contingent labor spend.
Let's start the conversation.
Sources:
- RAND Corporation - Teacher shortages, substitute teachers, and special education staffing: https://www.rand.org
- McKinsey & Company - K-12 education funding, enrollment volatility, and ESSER fund expiration: https://www.mckinsey.com
- New York State Office of the State Comptroller - School district audit guidance and procurement compliance: https://www.osc.ny.gov
- New Jersey Department of Education - School district audit programs: https://www.nj.gov/education/finance/fp/audit/
- Yeo & Yeo CPAs - Best practices for school district audits and fiscal accountability: https://www.yeoandyeo.com
- Advance Partners (Paychex) - Staffing agency markup calculations: https://www.advancepartners.com/calculate-how-to-price-your-staffing-services/
- altLINE (SouthState Bank) - Staffing agency markup rates and billing: https://altline.sobanco.com/staffing-agency-markup-rates/
- The Resource Company - Average staffing agency markup analysis (2025): https://www.theresource.com/2025/10/27/average-staffing-agency-markup-in-2025/
- Second Talent - Staffing agency fee structures: https://www.secondtalent.com/resources/staffing-agency-fee-structures/
- National Center for Education Statistics (NCES) - Public school expenditures and purchased services: https://nces.ed.gov
- SC&H Group - Procurement and sourcing research: https://www.schgroup.com
- Healthcare Workforce Logistics (HWL) - Contingent labor management and vendor oversight: https://www.hwlworks.com and https://blog.hwlworks.com