A spreadsheet

Document Sample
A spreadsheet Powered By Docstoc
					        COMPARISON OF THE TITLE IV FINANCIAL RESPONSIBILITY
        STANDARDS AND THE COMPOSITE FINANCIAL INDEX (CFI) -
        OVERVIEW
        The CFI was developed by KPMG; Prager, Sealy & Co., LLC.; and BearingPoint, Inc. The Department of Education ratios and
        composite were developed by KPMG Peat Marwick. The Austen Group prepared this comparison tool. We thank Nick Wallace
        of Capin Crouse for his comments and suggestions.


                                                                                                TITLE IV FINANCIAL RESPONSIBILITY
           COMPOSITE FINANCIAL INDEX (CFI)                                                                  STANDARDS

                                            RATIOS IN COMPOSITE SCORE AND WEIGHTING


                   PRIMARY RESERVE RATIO (35%)                                                            PRIMARY RESERVE RATIO (40%)
                         available reserves                                                                     available reserves

                       VIABILITY RATIO (35%)
               debt in relationship to available reserves
                                                                                                                 EQUITY RATIO (40%)
                                                                                                              ability to borrow if necessary
               RETURN ON NET ASSETS RATIO (20%)
                     overall change in wealth

            NET OPERATING REVENUES RATIO (10%)                                                                NET INCOME RATIO (20%)
                  effectiveness of operations                                                                 effectiveness of operations




                                                         PURPOSE OF COMPOSITE SCORE

        DIAGNOSTIC AND STRATEGIC                                                              DIAGNOSTIC

        Institutional scores fall on a range of +10 to -x.                                    The financial stability of an institution is
        Financial strengths and weaknesses are exposed by                                     determined by a composite score that can range
        the ratios and strategy is suggested by the                                           from +3 to -1.
        composite score.
                                                                                              >=1.5 Financially responsible
           Range                             Strategy                                                    Title IV eligible
         7.5 to 10       Deploy resources to achieve robust
                         mission                                                              1.0-1.4 The zone alternative
        6.5 to 7.5       Allow experimentation with new                                                   Title IV eligible but must not be in
                         initiatives                                                                      zone three consecutive years
        4.5 to 6.5       Focus resources to compete in future
                         state                                                                <1.0 Not financially responsible
        2.5 to 4.5       Direct resources to allow transformation                                         A letter of credit is required

          1 to 2.5       Re-engineer the institution

            -1 to 1      Consider substantive programmatic
                         adjustments
           -2 to -1      Assess debt and Department of Education
                         compliance and remediation
           -3 to -2      Consider structured programs to conserve
                         cash
           -4 to -3      Consider whether financial exigency is
                         appropriate

        RESOURCES

        NACUBO ADVISORY 98-1: TITLE IV FINANCIAL RESPONSIBILITY STANDARDS REVISED

        NACUBO URGES REVIEW OF FINANCIAL RESPONSIBILITY STANDARDS



THE AUSTEN GROUP                                                                   CIC PI 2010
             COMPARISON OF THE TITLE IV FINANCIAL
             RESPONSIBILITY STANDARDS AND THE COMPOSITE
             FINANCIAL INDEX (CFI) - DATA AND CALCULATIONS
             The CFI was developed by KPMG; Prager, Sealy & Co., LLC.; and BearingPoint, Inc. The Department of Education ratios and
             composite were developed by KPMG Peat Marwick. The Austen Group prepared this comparison tool. We thank Nick
             Wallace of Capin Crouse for his comments and suggestions.



             The spreadsheet below can be used to calculate the CFI and the                                            color codes for cells
             DOE ratios and composite scores for your institution. Cells with
             calculations are locked; some cells require data entry; some cells
             have embedded comments with instructions. Data has been                                                                      automatic
                                                                                                            data entry
             entered into the columns below for illustration--but may be                                                                  calculation
             written over.



             COMPOSITE SCORE

                          SAMPLE COLLEGE                   SAMPLE COLLEGE
                               CFI                              DOE
                                    0.8                              2.2


             PRIMARY RESERVE RATIO

                          SAMPLE COLLEGE                   SAMPLE COLLEGE
                               CFI                              DOE                                               0                            0
                               $45,000,000                      $45,000,000                                                                              + unrestricted net assets EOY
                                 $5,000,000                       $5,000,000                                                                             + temporarily restricted net assets EOY
                                                                                                                                                         -- land, building, and equipment, net of
                                    $75,000,000                      $75,000,000                                                                         depreciation EOY
                                    $55,000,000                      $55,000,000                                                                         + long-term debt EOY
                                                                                                                                                         -- annuities, term endowments and life income
                                                                                  $0                                                                     funds that are temporarily restricted
                                                                                  $0                                                                     -- intangible assets
                                                                                  $0                                                                     + post-employment & retirement liabilities
                                    $50,000,000                      $50,000,000                                                                         total expenses


                                              0.60                            0.60                                                                       ratio
                                               4.5                            6.0                                 #VALUE!                      #VALUE!
                                                4.5                            3.0                                                                       strength factor

                                                1.6                             1.2                                                                      weighted value


             VIABILITY RATIO

                          SAMPLE COLLEGE
                               CFI                                                                                0
                               $45,000,000                                                                                                               + unrestricted net assets EOY
                                 $5,000,000                                                                                                              + temporarily restricted net assets EOY
                                                                                                                                                         -- land, building, and equipment, net of
                                    $75,000,000                                                                                                          depreciation EOY
                                    $55,000,000                                                                                                          + long-term debt EOY
                                    $55,000,000                                                                                                          long-term debt EOY


                                              0.55                                                                                                       ratio
                                             1.31                                                                 #VALUE!
                                               1.3                                                                                                       strength factor

                                                0.5                                                                                                      weighted value


             EQUITY RATIO

                                                           SAMPLE COLLEGE
                                                                DOE                                                                            0
                                                                $100,000,000                                                                             + net assets EOY
                                                                          $0                                                                             -- intangible assets
                                                                          $0                                                                             -- unsecured related-party receivables
                                                                $175,000,000                                                                             + total assets EOY
                                                                          $0                                                                             -- intangible assets
                                                                          $0                                                                             -- unsecured related-party receivables


                                                                               0.57                                                                      ratio
                                                                              3.43                                                             #VALUE!
                                                                                3.0                                                                      strength factor

                                                                                1.2                                                                      weighted value




THE AUSTEN GROUP                                                                                  CIC PI 1010
             COMPARISON OF THE TITLE IV FINANCIAL
             RESPONSIBILITY STANDARDS AND THE COMPOSITE
             FINANCIAL INDEX (CFI) - DATA AND CALCULATIONS

             RETURN ON NET ASSETS RATIO

                   SAMPLE COLLEGE
                         CFI                                         0
                        -$20,000,000                                                          change in net assets
                        $125,000,000                                                          total net assets BOY


                               -16.0                                                          ratio
                              (8.00)                                      #DIV/0!
                                -4.0                                                          strength factor

                                -0.8                                                          weighted value


             NET OPERATING REVENUES RATIO

                   SAMPLE COLLEGE      SAMPLE COLLEGE
                         CFI                DOE                      0              0
                        -$15,000,000        -$15,000,000                                      change in unrestricted net assets
                         $30,000,000         $30,000,000                                      total unrestricted revenue


                               -50.0              -0.500                                      ratio
                              (38.5)               (11.5)                 #DIV/0!   #VALUE!
                                -4.0                 -1.0                                     strength factor

                                -0.4                -0.2                                      weighted value




THE AUSTEN GROUP                                            CIC PI 1010

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:36
posted:8/9/2012
language:English
pages:3