The District Financial Transparency Dashboard page provides “at-a-glance” access to a variety of different metrics that can be used to see how a district is performing financially. Each metric focuses on a particular financial aspect. When the metrics are viewed together, a broader financial picture is developed. Metrics for the current year and four previous years are displayed followed by a spark line that shows the five year trend graphically.
Unless otherwise noted, metrics are calculated using the district’s General Fund. This is significant because the General Fund is used by districts for all financial activities that are not assigned a specific purpose. An example of a specific purpose would be a district’s food services program that is supported by the School Lunch Fund. Since most of a district’s financial activities involve the General Fund, it is the best indicator of if the district is in good fiscal health.
The indicators are described below:
CURRENT RATIO: The current ratio indicator displays current assets divided by liabilities as a ratio. This ratio assesses a district’s ability to pay back its current liabilities using its current assets. The higher the ratio, the better position a district is in to pay back debt.
OPERATING MARGIN: The operating margin ratio answers the question, what portion of a district’s income is left over after paying for its expenses such as wages and supplies. The ratio is calculated by subtracting the district’s general fund expenditures from its revenues and then dividing that result by the revenue. If the result is greater than zero, the district’s income exceeded costs for the year. The greater the result is from zero, the greater the margin. If the result is less than zero, then the district’s costs exceeded its income for the year, indicating a fiscal risk.
DEBT SERVICE COVERAGE RATIO: The debt service coverage ratio answers the question, how susceptible is a district to not having the ability to pay off their debt. Debt service is the amount of principal and interest that a district must pay each year on long-term debt plus the interest it must pay on direct short-term debt. As debt service increases, it adds to a district’s obligations and reduces its expenditure flexibility. This metric is calculated by dividing the reported debt service by the district’s revenue for the General, Special Revenue and Debt Service Funds. A high debt service coverage ratio may indicate a district that has taken on too much debt. It may also indicate that the district has taken an aggressive approach to debt repayment and is paying down their debt quickly. Similarly, a low debt service coverage ratio could indicate a district is strong financially and can finance most capital projects through their operating budget. It may also indicate that a district is financially weaker and has deferred capital projects and allowed important infrastructure to deteriorate.
DAYS CASH ON HAND: The cash on hand indicator answers the question, how many days can the district operate if no additional funds were received before requiring borrowed funds. The indicator is calculated by dividing cash and investments by cash expenses per day. The greater the result is from zero, the greater the district’s ability to withstand unplanned costs.
FUND BALANCE AS PERCENT OF REVENUE: A fund balance is created or increased when fund assets are greater than its liabilities for the school year. A positive fund balance represents the financial resources available to support future district operations. Maintaining an adequate fund balance allows a district to meet day-to-day obligations and also allows a district to adjust for sudden decreases in revenue or unexpected costs. Fund balance, as percent of revenue answers the question, how much is a district saving as a portion of what they are earning. The ratio is calculated by dividing fund balance (assets – liabilities) by general fund revenues. The greater the result is from zero, the greater the district has in reserve to cover costs.
FUND BALANCE AS PERCENT OF EXPENDITURES: Fund balance as a percent of expenditures answers the question how much in reserve does the district maintain to cover the costs of running the district. The ratio is calculated by dividing fund balance (assets – liabilities) by general fund expenditures. The greater the result is from zero, the greater the district has in reserve to cover costs.
REVENUE/EXPENDITURE RATIO: The revenue/expenditure ratio shows if a district’s spending was more than its income. The ratio is calculated by taking total revenue and dividing it by total expenditures. Generally, the higher the value, the more that income exceeded spending. This indicator is shown as a three-year average of the ratio.
ENROLLMENT TREND: The enrollment trend displays whether total student enrollment has increased or decreased over time. This is important because district revenue is based upon total student enrollment. The more students a district has, the greater its revenue base. This metric is based upon pupil FTE, not head count.
COMPENSATION COSTS PER STAFF FTE: By percent, this indicator displays compensation per staff person. Compensation is determined by adding salaries and benefits. It shows if staff compensation per person is trending up or down over the last five years.
QUARTILE CALCULATIONS: The Quartile View on the District Financial Transparency Dashboard report provides a longitudinal view of which quartile a district was placed by financial indicator for each year. The quartiles represent how districts compare statewide with other districts by percentage. A district in the top 50 percent of all schools statewide for a particular metric is in the Top Two Quartiles on the dashboard. A district’s metric that falls within the middle 25% of districts is represented by the Middle Quartile. Districts that fall in the bottom 25% of districts are in the Bottom Quartile. For display purposes, Top Two Quartiles are represented by the color green on the dashboard. The Middle Quartile is represented by the color yellow on the dashboard, and the Bottom Quartile is pink on the dashboard.
The District Financial Transparency Dashboard displays common financial analysis tools used by the industry and other states to provide information on the financial health of school districts in Michigan. It is important to note that low quartile values, or weak indicator scores do not always signify that a problem exists. There are circumstances that may explain the situation. A district may have planned capital expenditures, e.g., facilities improvements, purchases of new buses, etc., or deliberate spending of reserves. However, the potential for risk increases with the number of weak indicator values and/or low quartiles and how they trend over time.
Financial statements of school districts in Michigan are prepared in conformity with U.S. Generally Accepted Accounting Principles (GAAP) for government units. These standards, which are accounting rules used to prepare, present, and report financial statements, are established by the Governmental Accounting Standards Board (GASB).
The Michigan Public School Accounting Manual serves as the guide to uniform classification and recording of accounting transactions for public school districts. For a better understanding of the classifications, categories and definitions used by districts and found in this report, refer to the manual at the Department of Education's website. It’s Appendix - Definition of Account Codes is a useful reference.
Location/Entity: You can select and compare data at different entity levels: statewide, by intermediate school district (ISD), or by school district. A public school academy, or charter school, is considered a school district.
Revenue: The total amount of General Fund revenue for the selected district.
Expenditure: The total amount of General Fund expenditures for the selected district.
Fund Balance: The total amount of General Fund fund balance for the selected district.
Years in Deficit: Indicates how many consecutive years a district has maintained a negative fund balance.
Pupil FTE Count: An FTE is the proportion of a student's instruction supported by the school district. A student who attends a district full-time has an FTE value of 1, whereas a student who splits time between two districts would have a 0.5 FTE, for example.
Resident Pupils Leaving: By FTE, the number of students that reside within the school district's boundaries, but attend a different school district.
Non-Resident Pupils Coming: By FTE, the number of students from outside of the school district's boundaries that attend the school district.
Last updated 11/2016
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