RubinBrown Colleges & Universities Stat Book | NOT-FOR-PROFIT INSTITUTIONS

Financial Responsibility Composite Scores The Department of Education has established score thresholds to evaluate not-for-profit and for- profit institutions based on an institution’s Financial Responsibility Composite Scores. Institutions with scores greater than or equal to 1.5 are considered financially responsible. Institutions with a score of less than 1.5 but greater than or equal to 1.0 require additional monitoring. The Department of Education determines what additional monitoring is required for each institution, but generally requires the institution to utilize heightened cash monitoring and may require the institutions to operate under a provisional certification of the program participation agreement. If an institution with a score of less than 1.5 posts a letter of credit of 50% or more of the Title IV aid it received, it is deemed financially responsible and additional monitoring would not be required. · Follow heightened cash monitoring requirements · Post a letter of credit that is equal to a minimum of 10% of the Federal Title IV student financial aid an institution received in its most recent fiscal year Given that the HLC uses the same score established by the Department of Education for financial evaluation, many institutions feel significant pressure to be at or above either 1.0 or 1.5. Depending on the institution’s financial condition, a score above 1.0 or 1.5 could avoid additional oversight or negative ramifications of posting a letter of credit. Although the Department of Education’s Financial Responsibility Composite Score measures financially responsiblilty of an institution during a given year, it may not be the best tool to compare its financial condition to other institutions due to the scores limited range and emphasis on current year results. For example, in fiscal year ending 2017, Institution A, with a Department of Education score of 2.3, had a CFI score of 0.3, while Institution B had an ED score of 2.2 with a CFI score of 6.4. Institutions with a score less than 1.0 must: · Continue to participate in Federal Title IV student financial aid programs under provisional certification

This was the result of a greater emphasis by the Department of Education’s score on current operations compared to the CFI score, which weights the institution’s ability to continue into the future on current expendable net assets. In this example Institution B’s expendable net assets exceeded Institution A’s expendable net assets by approximately $250 million. When comparing these two institutions, they are both considered to have nearly the same level of financial responsibility in the current year; however, Institution B is better poised to continue into the future. CFI Score Factors The CFI score is generated through weighting four different ratios in order to evaluate the overall financial health of an institution. Those factors include: The primary reserve ratio and viability ratio are both inputs for the CFI score that measure the ability of an institution to utilize its expendable net assets to fund operating expenses (primary reserve) and existing plant-related debt (viability). The net operating revenue ratio and return on net assets ratio are more focused on the current year increase/decrease to the unrestricted (net operating revenue) and overall (return on net assets) bottom line. CFI & Department of Education (ED) Scores RubinBrown reviewed the financial statements of 53 not-for-profit colleges and universities and calculated the CFI scores for 2016, 2017 and 2018. The mean CFI was 2.5 in FY16 and 3.1 in FY17 and FY18. In FY18, signs of improvement and financial difficulties were again observed among the various institutions. For FY16, the average ED score for the institutions reviewed was 2.3 with a range from 0.5 to 3.0. The average for FY17 was 2.4 with a range of 0.8 to 3.0. For institutions with net assets over $100 million (equaling 36% of the population reviewed), the average CFI score in FY18 was 5.3 and the average CFI score for · Primary reserve ratio · Viability ratio · Net operating revenue ratio · Return on net assets ratio

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Not-For-Profit Institution Scores