Composite Scoring System for Financial Review
The U.S. Department of Education in collaboration with KPMG Peat Marwick, LLP (Dec. 1997) has developed a composite scoring system for schools seeking participation in Title IV student assistance programs. This scoring system consists of three ratios that assess five elements of financial health; viability, profitability, liquidity ability to borrow and capital resources. Each private occupational school must meet the passing financial ratio score as required by 34 CFR 668 (subject to amendments).
- The Primary Reserve Ratio evaluates viability and liquidity.
- The Equity Ratio assesses ability to borrow and capital resources.
- The Net Income Ratio measures profitability.
A weighted average is calculated based on these three ratios to determine the score, for each school.
Documentation needed for submitting statements
Every year it is required to submit a copy of the schools audited and reviewed annual financial statements to the Executive Director of the Office of Higher Education. Schools must maintain records that follow generally accepted accounting principles. The schools management prepares a financial statement that outlines the schools financial situation. This statement is then.
Audited by a licensed certified public accountant or licensed public accountant following the standards set by the American Institute of Certified Public Accountants. The school must file a copy of this statement with the Executive Director by the last day of the fourth month after the end of its fiscal year except for nationally accredited schools recognized by the U.S. Department of Education.
In cases these schools have until the last day of the sixth month following their fiscal year end to submit their financial statements. However only audited financial statements are accepted from accredited schools. Non accredited schools may request an extension for filing their statements for up to sixty days if they provide reason, for needing one. No extensions are granted to accredited schools.
Documents Required for Submission;
- You will need to provide the balance sheet, income statement, statement of change in equity or fund balance, statement of cash flows and any footnotes or notes to the statements.
- Additionally a cover letter should be prepared by a licensed certified accountant or licensed public accountant. This letter should state the scope of the review or audit any opinions given and the standards and principles followed.
For schools the application fee is $2,000 while for new branches it is $200. Additionally there is a fee of $200 per school and per branch. When it comes to renewing authorization the fee remains the same at $200 per school and per branch. However if there is a change of location no fee will be charged.
Regarding payments into the Student Protection Account you will need to contribute 0.004% of your quarterly tuition revenue on a quarterly basis.
If there is a change of ownership an application fee of $2,000 will apply along with a $200 fee for each branch. Lastly there is an out of state school representative fee amounting, to $500.