ABC Academy Example. ABC Academy’s notes to the audited financial statements indicate that the school is not making payments on its debt, or it is out of compliance with other requirements in its debt covenants. Falls Far Below Standard What is the metric used to determine school status? Near Term Measure ‐ Debt Default Notes to the audited financial statements.
ABC Academy Example. Revenue Year One = $700,000, Year Two = $750,000, Year Three = $775,000 Expenditures Year One = $704,000, Year Two = $746,000, Year Three = $770,000 Formula used to determine the total Three‐Year Net Surplus (Deficit) Year 1: $700,000 ‐ $704,000 = ‐4,000 (‐.57%) Year 2: $750,000 ‐ $746,000 = 4,000 (.53%) Year 3: $775,000 ‐ $770,000 = 5,000 (.65%) ‐$4,000 + $4,000 + $5,000 = $5,000 Aggregated Three Year Net Surplus 2 For purposes of this rating, adjusting net surplus for expenses related to an increase in Net Pension Liability is appropriate. Formula used to determine the total Three Year Revenue $700,000 + $750,000 + $775,000 = $2,225,000 Three Year Revenue Formula used to determine the Aggregated Total Margin $5,000 = . % $2,225,000 Most recent Total Margin is positive and, where calculable, the aggregated three‐year Total Margin is positive. Meets Standard What is the metric used to determine school status? Sustainability Measure ‐ Total Margin Current Year Total Margin: Current Year Net Surplus / Current Year Total Revenue Aggregated Total Margin: Total Three‐Year Net Surplus / Total Three‐Year Revenues Meets Standard: The most recent year Total Margin is positive. The Aggregated Three‐Year Total Margin, when calculable, is also positive. Does Not Meet Standard: Aggregated Three‐Year Total Margin, when calculable, is negative or the most recent year Total Margin is negative. Falls Far Below Standard: Aggregated Three‐Year Total Margin is negative and most recent year Total Margin is negative. Note: For schools in their first or second year of operation, substitute the “Aggregated Three‐ year Total Margin” with the “Total Margin.” Purpose ‐ The Debt to Asset Ratio measures the amount of debt a school owes compared to the assets they own; it measures the extent to which the school relies on borrowed funds to finance operations. A Debt to Asset Ratio greater than 1.0 indicates a school has more debt than it has assets to pay off said debt. It is a generally accepted indicator of potential long‐term financial issues, as the organization owes more than it owns, reflecting a risky financial position. A ratio less than 0.9 indicates a financially healthy balance sheet, both in the assets and liabilities, and with the balance in the Net Position, or equity, account. What is the formula?
ABC Academy Example. 𝐴𝑐𝑡𝑢𝑎𝑙 𝐸𝑛𝑟𝑜𝑙𝑙𝑚𝑒𝑛𝑡 = 225 = 𝟏𝟎𝟕% 𝑬𝒏𝒓𝒐𝒍𝒍𝒎𝒆𝒏𝒕 𝑽𝒂��𝒊𝒂𝒏𝒄𝒆 𝑃𝑟𝑜��𝑒𝑐𝑡𝑒𝑑 𝐸𝑛𝑟𝑜𝑙𝑙𝑚𝑒𝑛𝑡 210 Enrollment variance equals or exceeds 95% in the most recent year. Charter schools with enrollment Variance less than 95% or greater than or equal to 110% of Projected Enrollment must check with the authority as they may be required to submit a Request For Amendment of their Charter Contract for changes of this magnitude. ☒ Meets Standard What is the metric used to determine school status? Near Term Measure ‐ Enrollment Variance Actual Enrollment / Projected Enrollment Meets Standard: 🞏 Enrollment variance is greater than or equal to (>=) 95% in the most recent completed year. 🞏 For schools in their original contract term, not operating with a deficit, variance equals or exceeds: 🞏 o Year 1: 90.0%; 🞏 o Year 2: 92.5%; 🞏 o Year 3+: 95%. 🞏 For schools operating at a deficit, enrollment variance equals or exceeds: �� o 95% accuracy in the most recent year Does Not Meet Standard: 🞏 Enrollment variance is greater than or equal to (>=) 85% but less than (<) 95% in the most recent year.
