Financial Framework - Utah Charter Access Point

CSAF FINANCIAL FRAMEWORK

PRELIMINARY AND FINAL REPORTS

Introduction

Only an approved authorizer who promotes, annually reviews, and regularly evaluates school performance may authorize charter schools. Authorizers hold charter schools accountable for their performance following statutes, administrative rules, and each school’s unique charter agreement. The Utah State Charter School Board (SCSB) upholds stringent standards of authorization and oversight to ensure that charter schools use public funds as intended. By maintaining high standards, SCSB ensures the long-term viability of schools and mitigates potential underperformance using the Charter School Accountability Framework (CSAF).

As part of the CSAF, the Financial Framework is one of the three key indicators, alongside academics and governance, that form the foundation of SCSB's oversight process.

The business rules included for each Metric is based upon industry standards but further conversation is needed. Each Metric should be looked at through the following Financial Framework Values lens:

~School autonomy - compassion, authenticity, excellence

~Inform authorizer support

~Basis for an assessment that leads to conversation before consequences

~Objectivity

~Minimize administrative burden

~Performance over compliance

~Keep it simple

FINANCIAL FRAMEWORK REPORTS

Displays the overall financial performance of Charter LEAs authorized by the SCSB.

Select the fiscal year, LEA and type of report. If you are not seeing the LEA, its data has not been saved for that school year and report type.

SCHOOL YEAR

REPORT TYPE

SELECT AN LEA

NEW LEA (<= 2 YEARS)

MEETS EXPECTATIONS

REVIEW

ACTIVE ENGAGEMENT

Based on the results, LEAs are classified into tiers to help SCSB identify those that may need additional support or oversight. The tiers are as follows:

New LEA

LEAs in their first or second year of operation

Meets Expectations

LEAs that meets all but one measure

Review

LEAs that meet all but two measures

Active Engagement

LEAs that do not meet three measures or are labeled as Review LEA and, based upon further review, are moved to Active Engagement

Sorry - the LEA does not have financial data saved for this report.

FINAL REPORT (FEB)

*Debt Default and Material Audit Findings are not assessed during the preliminary review.

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LEA:

Created On:

Report Results:

The short term metrics are intended to depict the school's financial position and viability in the upcoming year. Schools meeting these standards demonstrate a low risk of financial distress in the coming year.

Meets Standard

UDCOH is >= 60 days OR

UDCOH is between 30 and 60 days with a positive increase from previous year

New schools: This will not be used in the assessment of schools in their first two years of operations.

Metric

Does the school have the cash available to pay bills?

Formula

(Cash + Cash Equivalent - Total Funds in Restricted Programs) x 365 / (Total Operating Expenses - Annual Depreciation Expense)

Source

AFS or public financial reporting download in October, General Fund

Meets Standard

Revenues minus expenses is > $0

Metric

Is the school living within its available resources?

Formula

Current year revenues - current year expenses

Source

AFS or public financial reporting download in October, General Fund

Meets Standard

The school has managed the salaries and benefits of school personnel to be equal or less than 60% of their total revenues.

Metric

How has the school managed their salaries and benefits as compared to their total revenue?

Formula

Salaries and Benefits Ratio = (Total Salaries + Total Benefits) / Total Revenues

Source

Summary - All Funds

Meets Standard

The school has not defaulted on loan covenant(s) or is not delinquent with debt service payments?

Metric

Has the school defaulted on loan covenants or is it delinquent with debt service payments?

Formula

Not Applicable - NOT PASSED = LEA has defaulted on loan covenants or was delinquent with debt service payments/PASSED = LEA has not defaulted on loan covenants and was not delinquent with debt service payments

Source

Not Applicable

The long term metrics are designed to depict a school’s financial position and viability over time. Schools meeting these standards demonstrate a low risk of financial distress in the future.

Meets Standard

Most recent year Total Margin is positive and aggregated 3 year Total Margin is positive OR

Aggregated 3-year is greater than -1.5% AND the previous year is positive AND most recent year is positive

Metric

Is the school living within its means?

Formula

Change in Net Position/ Total Revenues
Change in net position = Total revenue - total expenses
3 year aggregated : Sum of 3 years' change in net position/Sum of 3 years' total revenues
2 year aggregated: Sum of 2 years' change in net position/sum of 2 years' total revenues

Source

AFS or public financial reporting download in October

Meets Standard

Debt service coverage ratio is >= to 1.1

Metric

Is a school able to cover its debt obligations?

Formula

(Change in Net Position + Depreciation + Interest Expense) / (Annual Principal + Interest + Lease Payment)

Source

AFS or public financial reporting download in October

This measure sets expectations for the school’s management and oversight of its finances.

Audit Notes

Meets Standard

PASSED, in accordance with generally accepted accounting procedures, the audited financial statements should have an unqualified opinion, should not include material weakness and the auditor should have no concerns about the school’s on-going viability.

Metric

Is the schools audit satisfactory?

Formula

Not Applicable

Source

Not applicable

These are financial metrics not classified as short term or long term.

Meets Standard

Facility Ratio is less than or equal to 20%

Formula

Facility Ratio = (Operation and Maintenance of Facilities + Lease Payment + Debt Service) / Total Revenue
Debt Service = Annual Principal + Interest

Source

Statement of Revenue, Expenditures, and Changes in Fund Balance – Governmental Funds.
Notes Section of the Audited Financials.

LEA	Unrestricted Days Cash On Hand (ST)	Deficit/Surplus (ST)	Debt Default (ST)	Salaries and Benefits Ratio (ST)	Total Margin (LT)	Debt Service Coverage Ratio (LT)	Material Audit Findings (LT)	Facility Ratio

Target: ≤ %

Transfer Rate = Number of transfered students / Total students

Definition: The percentage of students who leave the school during the year to go to another private or public school in the state, to go to home school, or who dropped out. Excluded are non-residents, students whose school of record is another school, students who attended the school for less than 10 days, and students in kindergarten.

Data Source: Enrollment and exit data reported to UTREx.

Target: ≥ %

Retention Rate = Students enrolled at end of previous year and still enrolled on October 1st / Students enrolled at end of previous year

Definition: Percentage of students enrolled at year-end who returned to a school within the LEA by October 1st of the following school year.

Data Source: Enrollment and exit data reported to UTREx.

Target: ≥ % of prior year October 1st enrollment count

Enrollment Trends = Current year October 1st count / Prior year October 1st count

Definition: A trajectory of October 1st enrollment and Average Daily Membership (ADM) derived from enrollment data reported to UTREx.

Data Source: Enrollment data reported to UTREx.

Definition: A comparison of a school’s end of year ADM to that school year’s October 1 counts. A significantly lower ADM compared to October 1 enrollment may negatively affect funding and could signal problems for a school to retain enrollment levels.

Data Source: Enrollment data reported to UTREx.

Unrestricted Days Cash on Hand = (Cash + Cash Equivalent - Total Funds in Restricted Programs) x 365 / (Total Operating Expenses - Annual Depreciation Expense)

Target:

UDCOH ≥ 60 days

OR UDCOH is between 30 and 60 days with a positive increase from previous year

New LEAs: This will not be used in the Financial Framework Report for LEAs in their first two years of operations.

Does the school have the cash to pay bills?

Definition: How long, in days, the school could meet their operating expenses without receiving new income.

Data Source:
Cash and Cash Equivalents: statement of net position
Cash Equivalent: statement of net position
Total Operating Expenses: statement of activities
Annual Depreciation: notes to financial statements

Total Funds in Restricted Programs are restricted funds that are entered in to reflect the decrease in cash.

Facility Ratio = (Operation and Maintenance of Facilities + Lease Payment + Debt Service) / Total Revenue

Debt Service = Annual Principal + Interest

Target: ≤ 20%

Definition: Total operation and maintenance of facility.

Data Source:
Statement of Revenue, Expenditures, and Changes in Fund Balance – Governmental Funds.
Notes Section of the Audited Financials.

Salaries and Benefits Ratio = (Total Salaries + Total Benefits) / Total Revenue

Target: ≤ 60%

Definition: The total salaries and benefits to the total revenue.

Data Source:
Summary - All Funds

Debt Service Coverage Ratio = (Change in Net Position + Depreciation + Interest Expense) / (Annual Principal + Interest + Lease Payment)

Target: ≥ 1.1

Is an LEA able to cover its debt obligations?

Definition: The ratio indicates a school's ability to cover its debt obligations in a current year.

Data Source:
AFS of public financial reporting download in October, Government wide

Debt to Asset = Total Liabilities / Total Assets

Target: ≤ 0.9

To what extent does an LEA rely on borrowed funds to finance its operations?

Definition: The amount of liabilities a school owes versus the assets they own.

Data Source: AFS or public financial reporting download in October, Government wide

Current Ratio = Current Assets / Current Liabilities

Target: Current ratio ≥ 1

Does the school have enough assets to meet its financial obligations over the next year?

Definition: Measures the school's ability to pay its obligations over the next 12 months. It shows how quickly short-term assets can be converted into cash to pay short-term liabilities.

Data Source: Statement of net position

Cash Flow = Current year cash balance - last year cash balance

Target: Cash Flow > $0

Does the LEA have a positive cash flow year over year?

Definition: The LEA's cash generated over a period of time indicating long-term financial stability.

Data Source: AFS or public financial reporting download in October, General Fund

Total Margin = Change in Net Position/Total Revenue

Change in Net Position = Total Revenue - Total Expenses

3 year aggregated = Sum of 3 years' Change in Net Position/Sum of 3 years' Total Revenue

2 year aggregated = Sum of 2 years' Change in Net Position/Sum of 2 years' Total Revenue

Target:

most recent Total Margin > 0% and 3 year aggregated is positive

OR 3 year aggregated > -1.5% and the previous year is positive and most recent year is positive

Is the LEA living within its means?

Definition: Measures an LEA's deficit or surplus out of total revenues (Includes change in temporary restricted net assets)

Data Source: AFS or public financial reporting download in October.

Deficit/Surplus (i.e. Change In Net Position) = Revenue - Expenses

Target: Surplus/Revenue > $0

Is the school living within its available resources?

Definition: Measures an LEA's deficit or surplus out of total revenues (Does not include temporary restricted net assets)

Data Source: Statement of Activities.

Enrollment Variance = Current year enrollment/budgeted enrollment

Target: Enrollment variance >= 95%

Is the enrollment sufficient to cover expenses?

Definition: Measures an LEA's student enrollment to their budgeted (projected) enrollment.

Data Source: UCAP, OCT 1 student enrollment, projections

Target: The LEA has not defaulted on loan covenant(s) or is not delinquent with debt service payments

Has the LEA defaulted on loan covenant(s) or is it delinquent with debt service payments?

Definition: Checks the LEA's responisibility towards loan covenants and debt service payments.

Data Source: AFS unless schools self reported

Material Audit Findings: PASSED

Is the LEAs audit satisfactory?

Definition: Auditor finds the financial statements to be accurate and complete, without material weakness, significant deficiency, or other matters.

Data Source: AFS

PRELIMINARY AND FINAL REPORTS

Introduction

FINANCIAL FRAMEWORK REPORTS

Displays the overall financial performance of Charter LEAs authorized by the SCSB.

SHORT TERM

UNRESTRICTED DAYS CASH ON HAND

DEFICIT/SURPLUS

SALARIES AND BENEFITS RATIO

DEBT DEFAULT*

LONG TERM

TOTAL MARGIN

DEBT SERVICE COVERAGE RATIO

MATERIAL AUDIT FINDINGS*

OTHER

FACILITY RATIO