Common use of Financial Performance Framework Clause in Contracts

Financial Performance Framework. The purpose of the CMSD Financial Performance Framework is to measure and evaluate the financial health of all CMSD sponsored charter schools. The framework is an accountability tool that will be used on a monthly basis, as required by law, to guide discussions between CMSD and CMSD sponsored charter schools. The monthly meetings regarding the framework are not summative, but rather provide the basis for discussions. School ratings on the financial framework will be published annually and submitted to the school’s governing authority, parents, and the Ohio Department of Education, pursuant to section 0000-000-00 of the Ohio Administrative Code. CMSD will provide monthly written reports with feedback and proactive recommendations, as appropriate, that help the schools achieve greater efficiencies, or that result in timely interventions, if needed. Collecting this data is paramount to ensuring that each sponsored school maintains the public trust and its fiduciary responsibility by maintaining a quality school that spends public funds appropriately and adheres to the laws, rules, and charter requirements as governed by their respective boards. The measures in this framework are designed to be complementary; no single measure provides a full picture of the financial health of a school. Together, however, the measures provide a comprehensive assessment of the school’s financial health and viability based on a school’s historic trends, near-term financial situation, and future viability. It is important to note that if a school receives a “below standard” rating, it may or may not be in financial distress. The Financial Performance Framework is meant to flag any areas for further investigation. In the event an area is flagged, the Sponsor may request additional documentation from a school. The rating may be adjusted if sufficient evidence is provided. An example of additional information taken into consideration for rating purposes could be a long-term strategic partnership that acts as an additional funding source for the school. The Sponsor will provide schools with a preliminary report before ratings are published so as to give schools time to respond. Monthly Review Process To ensure execution of the aforementioned framework and compliance with Ohio Revised Code 33314.023, sponsored schools must agree to participate in a monthly review process to measure and review the financial and enrollment records. CMSD will work to encourage a culture of learning and sharing of best practices to help ensure that all sponsored schools are supported to meet the financial goals outlined in the framework. Framework Structure

Financial Performance Framework. The purpose of the CMSD Financial Performance Framework is to measure and evaluate the financial health of all CMSD CMSD-sponsored charter schools. The framework is an accountability tool that will be used on a monthly basis, as required by law, to guide discussions between CMSD and CMSD sponsored charter schools. The monthly meetings regarding the framework are not summative, but rather provide the basis for discussions. School ratings on the financial framework will be published annually and submitted to the school’s governing authority, parents, and the Ohio Department of Education, pursuant to section 0000-000-00 of the Ohio Administrative Code. CMSD will provide monthly written reports with feedback and proactive recommendations, as appropriate, that help the schools achieve greater efficiencies, efficiencies or that result in timely interventions, if needed. Collecting this data is paramount to ensuring that each sponsored school maintains the public trust and its fiduciary responsibility by maintaining a quality school that spends public funds appropriately and adheres to the laws, rules, and charter requirements as governed by their respective boards. The measures in this framework are designed to be complementary; no single measure provides a full picture of the financial health of a school. Together, however, the measures provide a comprehensive assessment of the school’s financial health and viability based on a school’s historic trends, near-term financial situation, and future viability. It is important to note that if a school receives a “concern” or “below standard” rating, it may or may not be in financial distress. The Financial Performance Framework is meant to flag any areas for further investigation. In the event an area is flagged, the Sponsor CMSD may request additional documentation from a school. The rating may be adjusted if sufficient evidence is provided. An example of additional information taken into consideration for rating purposes could be a long-term strategic partnership that acts as an additional funding source for the school. The Sponsor CMSD will provide schools with a preliminary report before ratings are published so as to give schools time to respond. Monthly Review Process To ensure execution of the aforementioned framework and compliance with Ohio Revised Code 33314.023, sponsored schools must agree to participate in a monthly review process to measure and review the financial and enrollment records. CMSD will work to encourage a culture of learning and sharing of best practices to help ensure that all sponsored schools are supported to meet the financial goals outlined in the framework. Framework StructureCMSD will conduct monthly, quarterly and annual reviews to assess different components of a school’s financial wellbeing as detailed below. Should there be any areas of concern, CMSD may request additional information from the schools to demonstrate both short and long-term financial viability. For a school to be considered for contract renewal, any areas of concern at the time of review must be addressed with sufficient documentation, as determined by CMSD, demonstrating short- and long- term viability. Monthly Goal Review how schools are managing their resources to ensure sufficient liquidity. Documents to review • Balance Sheet • Statement of Activities • Enrollment Review focuses on three metrics • Days cash on hand • Current ratio • Actual enrollment as compared to budgeted enrollment Monthly reports The monthly reports will not be scored. They will consist of topics discussed and high level findings. However, should there be a concern related to these metrics or other aspects of the school’s financial management, we will note this in the monthly report and may ask for additional information. Monthly Measures Measure Metric Area of Concern Days Cash on Hand Total cash divided by (total budgeted expenditures - depreciation)/365 Less than 20 days Current Ratio Current assets divided by current liabilities Less than 1.0 Enrollment Actual FTEs divided by budgeted FTEs Below 90% Quarterly Goal Review how schools are progressing during the school year against their budget and financial goals and provide schools with targeted feedback. Documents to review • All monthly documents • Quarterly surplus/(deficit) • Quarterly budget to actual Review focuses on the monthly metrics as well as the following • Change in net assets • Budgeted revenue and expenses as compared to actual revenues and expenses Quarterly report The quarterly report will be more comprehensive than the monthly report. It will note areas of financial strength and weakness and will highlight any areas of concern. These reports will include calculations for the metrics and will discuss their implications however, they will not include a score. As with the monthly report, if there are areas of financial concern raised by the quarterly review, we will note this in the report and may ask for additional information. Quarterly Measures Measure Metric Area of Concern Days Cash on Hand Total cash divided by (total budgeted expenditures - depreciation)/365 Less than 20 days Current Ratio Current assets divided by current liabilities Less than 1.0 Enrollment Actual FTEs divided by budgeted FTEs Below 90% Surplus/(Deficit) Change in net assets Unplanned decrease in net assets Budget Variance Budgeted revenues and expenses compared to actual revenues and expenses More than 10% negative variance on major budget lines Annually Goal • Provide a comprehensive review of the prior year’s financial management to provide schools with useful feedback as they progress through the current school year. • Ohio sponsors are required by law to monitor and evaluate the academic and fiscal performance, along with the organizational, operational and legal compliance, of each school they sponsor and submit a written report of the evaluation results to the parents of students enrolled in the community school and the Ohio Department of Education by Nov. 30 each year. CMSD presents the reports to each governing board at a governing board meeting, requires schools to post the report on their websites, and also posts the report on the CMSD website. Documents to review The year-end review will be scored and will analyze the monthly and quarterly materials and will require the following additional documents: • Financial statements (balance sheet and income statement) for the entire prior school year as they will be presented to the auditor including all year-end accrual entries • Final budget to actual reports with explanations for any major variances • Any written documents that schools wish us to consider The annual review will focus on the following measures • Days cash on hand • Current ratio • Average annual enrollment as compared to the budgeted enrollment • Annual surplus/(deficit) • Annual change in cash position • Assessment of net assets (excluding the entries made for government pensions) • Annual budget variance • Written statement from the school that either states that the school has no debt or that the school has debt. If the school has debt the written statements should identify whether or not the school has made all loan payments on time, whether or not the school has met all required covenants associated with the debt, and whether or not the debt is in default. Annual year-end report The annual report will be in the form of a scorecard and will note any explanations and/or materials provided by the school. There will also be a brief narrative which explains the scoring and describes the school’s financial position at year-end. Annual Measures Measure Metric Meets Standard Area of Concern Below Standard Days Cash on Hand Total cash divided by (total budgeted expenditures - depreciation)/365 30 days 20-30 days Below 20 days Current Ratio Current assets divided by current liabilities 1.1 or higher 1.0 to 1.1 Below 1.0 Enrollment Actual FTEs divided by budgeted FTEs 95% or higher 90% to 95% 90% or lower Surplus/(Deficit) Change in net assets Increase in net assets Planned decrease in net assets (per budget) Unplanned decrease in net assets Budget Variance Budgeted revenues and expenses compared to actual revenues and expenses No more than 10% negative variance on major budget lines More than 10% negative variance on major budget lines Increase/(Decrease) in Cash Change in cash position as compared to prior year Positive cash flow Planned decrease in cash (per budget) Unplanned decrease in cash position Debt to Assets Ratio Total liabilities divided by total revenue 0.90 or lower 0.90 to 0.99 1.00 or higher Debt Covenants Met covenants Met covenants Did not meet covenants Debt Payments Timeliness of debt payments No late debt payments Late debt payments Debt Default Loan default No default Loan in default Additional Reviews In addition to the monthly, quarterly and annual reports, CMSD will review and report on the following: • Annual audit which will utilize the same metrics as the year-end annual reviews • Annual five-year forecasts submitted in May for the upcoming years. We will focus on whether or not the school used realistic assumptions and will assess the school’s projected year-end financial positions for each year • Annual budgets submitted in October for the current year which will focus on whether or not the school used realistic assumptions and will assess the school’s projected year-end financial positions. These additional reviews will be incorporated into the monthly or quarterly reports.