Department of Education
Financial Responsibility Regulation
Financial Responsibility Regulation
Technical Overview of Ratio Methodology
The ratio methodology combines elements from the audited financial statement into a single blended composite score. The regulatory result depends on the composite score, as illustrated in the following table.
Understanding Composite Scores
Score Range |
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School is financially healthy enough to participate without additional monitoring | ||
"In the zone," additional monitoring needed to participate | ||
School is not financially healthy enough to be considered financially responsible |
The composite score is calculated in four steps.
Step 1: Calculate Three Financial Ratios from Financial Statements
Step 2: Convert Ratio Results to Strength Factor Scores
gth Factor Score |
pretation of Score |
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prie- tary |
prie- tary |
prie- tary |
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Liabilities exceed resources | |||||||
No demon- strable net resources |
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Minimal resources, but not enough for clear financial health | |||||||
Minimal level of resources to indicate financial health | |||||||
Clearly financially healthy on that resource |
Step 3: Multiply the Strength Factor Scores by a Weighting Factor
Postsecondary Educational Sector | |||
Private Non-profit | |||
Proprietary |
Step 4: Add the Weighted Strength Factor Scores to Obtain the Composite Score
See "Understanding Composite Scores" table above.
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Last Modified: 09/06/2004