NAICU Washington Update

Financial Responsibility Scores Published

March 10, 2017

According to the Department of Education’s recently released financial responsibility composite scores for the 2014-15 academic year, 112 private, nonprofit colleges and universities were considered to be either “not financially responsible” or “financially responsible, but require additional oversight,” commonly referred to as “in the zone.”  The total for the private, nonprofit sector represents the lowest since 2006-07, when data first become publically available.  

It should be noted that 57 of the 112 private, nonprofit colleges listed are “in the zone” and have a financial responsibility score that falls between 1.0 and 1.4.  This designation means they are considered “financially responsible” but are also required to take additional action and are subject to cash monitoring.  

NAICU has raised concerns with the Department and Congress for many years about some of the accounting methods used in calculating the financial responsibility composite scores that result in failing scores.  Of particular concern is considering a decline in an institution’s endowment value or extent of its long-term pension liability as annual expenses. The problem was brought into sharp focus when, during the economic downturn of 2008-09, 300 nonprofits received scores below the passing threshold. 

NAICU’s concerns extend to the new financial responsibility provisions in the borrower defense regulations, in addition to concerns that the composite scores determine eligibility to continue to participate in the State Authorization Reciprocity Agreement (SARA).

Tim Power

Maureen Budett

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