Financial Viability-After Three Consecutive Years in Zone Alternative

Number: 
56-1010
Date Issued: 
10/10/2024

The following Policy Guideline is designed to further define Policy Guideline 3-1104 Financial Viability.

Summary of Section 126.8(c)(1) Zone Alternative:

126.8(c)(1)(iii) A school may qualify for this alternative for no more than three consecutive years.

After 3 years in the Zone Alternative (ZA), BPSS will use the school’s subsequent annual financial reports to calculate a composite score using the methodology outlined in 126.8(a)(1)(i).  Once calculated: 

If the school’s resulting composite score is greater than or equal to 1.5, the school is considered financially healthy and is removed from the Zone Alternative.  Any future Zone Alternative placements would re-start the ZA process, placing the school in zone year 1.

A Consecutive Zone Average (CZA) will be calculated, if the school’s composite score is less than 1.5.  A CZA is the average of the composite scores from the current fiscal reporting year and the two previous consecutive fiscal years.

If the resulting CZA is between 1.0 and 1.49,

  • the school will be placed on Heightened Monitoring (HM).
    • There is no maximum number of years for Heightened Monitoring (HM).

 

If the CZA is lower than 1.0,

  • the school will be placed on Probation. The school may only be on probation for one year.
  • While on probation:
    • If the financial statement submitted during the school’s probationary period yields a composite score greater than or equal to 1.5, the school will move to Heightened Monitoring.
    • If the school’s probationary composite score is below 1.5, the school’s license will be recommended for suspension or revocation.

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Heightened Monitoring and Probation Statuses as Defined Below:

 

Heightened Monitoring (HM)

  • While on Heightened Monitoring, the bureau will continue to use the CZA score to determine the school’s status.
  • The school may stay in this status so long as it maintains a CZA score between 1.0 - 1.49 and provides the following:
    • HM Action Plan- a new plan must be provided to SED for each year the school is in HM status.
      • Using the three composite score ratios (equity, primary reserve and net income), the HM Action Plan will require schools to identify the areas of deficiency.
      • The plan will also require justification and/or actions to remedy the identified areas of deficiencies.
      • Schools must use the BPSS HM Action Plan template.
      • Schools MUST work with the CPA associated with the most recently submitted financials to develop this plan.
      • SED is prohibited from providing financial advice to schools.
      • Fiscal Snapshot Reports-these reports must include the current fiscal year-to-date financials including:
        • Balance Sheet
        • Income Statement
        • Cashflow Report
        • a projection for the remainder of the fiscal year.
        • schools will be required to utilize the BPSS template.

Financial Probation

  • The school may only be on probation for one year.
  • During the probationary period, a school placed on probation must:
    • 126.8(c)(2)(i): submit reports on its financial condition as directed by the commissioner. Such report shall be on a form and shall include content prescribed by the commissioner and shall be reviewed by the commissioner to determine the school’s financial viability. The commissioner may require that this report be completed by an independent auditor.
    • 126.8(c)(2)(ii) During the probationary period, the school and the department shall make efforts to resolve the problems at the school, through the school’s demonstration of alternative methods of financial viability acceptable to the commissioner.

Alternative methods of demonstrating financial viability may include:

  • 126.8(c)(2)(ii)(a) the school securing a performance bond payable to the department, in a form and manner determined by the commissioner, and in an amount appropriate to eliminate any liability to the tuition reimbursement account should the school cease operation;
  • 126.8(c)(2)(ii)(b) the school limiting its collection of tuition funds until each student completes their program of study;
  • 126.8(c)(2)(ii)(c) establishing a trust account for the sole and exclusive benefit of students, pursuant to section 5008 of the Education Law; or,
  • 126.8(c)(2)(ii)(d) any other means acceptable to the commissioner.
  • 126.8(c)(2)(iii) By the conclusion of the probationary period, the school must satisfactorily demonstrate to the commissioner that it is financially viable by meeting one or more alternative methods of demonstrating financial viability set forth in this subdivision, or the general standards set forth in subdivision (a) of this section. If the school cannot demonstrate to the commissioner that it is financially viable by one or more methods set forth in this subparagraph, and if the commissioner determines that the school’s financial condition continues to threaten its ability to educate students and/or jeopardize student tuition funds, the commissioner shall schedule a hearing pursuant to subdivisions (2) and (3) of section 5003 of the Education law, to consider suspension or revocation the school’s license.

 

  • In addition to the above requirements, the probationary period may also require include additional monitoring, inspections, limitations on enrollment, teaching out some or all of a school’s present students, or temporary cessation of instruction.

Trainings:

Trainings will be offered regarding this policy: Financial Viability-After three consecutive years in zone alternative.

Questions and Concerns: 

Any questions or concerns regarding financial viability requirements may be directed to: bpssschoolreviews@nysed.gov

Authority:

Education Law § 5001(4), 5001(5)c, 5001(6)

Commissioner’s Regulations set forth at 8 NYCRR Part 126.8