NAICU Washington Update

Financial Responsibility Scores Made Public

March 07, 2014

The Department of Education recently published the FY11-12 financial responsibility scores for private (nonprofit and for-profit) institutions. Scores can range from -1 to +3. Those below 1.0 are considered failing scores. Those from 1.0 through 1.4 are “in the zone” and can be considered financially responsible if they take certain remedial actions. Scores of 1.5 and above are passing scores. 

NAICU has raised questions about the accounting methods the Department uses in calculating the scores, particularly how it considers losses in endowments and certain long term liabilities, such as pensions. NAICU published a report detailing its concerns in 2012, but has received little positive indication from the Department that they feel the system inadequate.

According to the Department, 149 nonprofits were considered to be in the zone or failing. Overall, the number of nonprofit institutions that scored below 1.0 decreased slightly from FY10-11.

The scores are meant to gauge the fundamental elements of the financial health of an institution, not the educational quality of an institution, according to the Department.

MORE News from NAICU