Common use of Annual Risk Assessment Process Clause in Contracts

Annual Risk Assessment Process. The annual risk assessment evaluates whether the financial viability of a school is at-risk based on the Commission’s review of financial information which will be drawn from the school’s annual audited financial statements or financial review. The inclusion of a “component unit” (an affiliated non-profit entity) may apply when a school’s annual audited financial statements include the presentation of reporting the audited component unit. The Commission’s assessment may also include other financial information and/or a more detailed examination of the school’s financial position and practices, as needed. The Commission may also consider the more current and more detailed information to determine whether the risk assessment result is still applicable throughout the assessment period and the degree to which it is, in fact, an indication of financial risk or distress or mitigation. The risk assessment will focus on six indicators, or measures based on the National Association of Charter School Authorizers (NACSA) standards. Each indicator will be assessed on a scale from 1 to 5, with 1 being the lowest risk and 5 the highest risk. All six indicators will collectively make up a school’s overall risk level. The annual risk assessment result for a school will be determined using a balanced weighted formula utilizing the individual scores calculated for each indicator as follows: (Current Ratio x 0.10) + (Unrestricted Days Cash x 0.35) + (Debt to Asset Ratio x 0.10) + (Cash Flow x 0.10) + (Total Margin x 0.25) + (Budget Variance x 0.10) Planning & Budgeting Indicator •Budget Variance (10%) Near-Term Indicators •Current Ratio (10%) •Unrestricted Days Cash (35%) Sustainability

Annual Risk Assessment Process. The annual risk assessment evaluates whether the financial viability of a school is at-at- risk based on the Commission’s review of financial information which will be drawn from the school’s annual audited financial statements or financial review. The inclusion of a “component unit” (an affiliated non-profit entity) may apply when a school’s annual audited financial statements include the presentation of reporting the audited component unit. The Commission’s assessment may also include other financial information and/or a more detailed examination of the school’s financial position and practices, as needed. The Commission may also consider the more current and more detailed information to determine whether the risk assessment result is still applicable throughout the assessment period and the degree to which it is, in fact, an indication of financial risk or distress or mitigation. The risk assessment will focus on six indicators, or measures based on the National Association of Charter School Authorizers (“NACSA”) standards. Each indicator will be assessed on a scale from 1 to 5, with 1 being the lowest risk and 5 the highest risk. All six indicators will collectively make up a school’s overall risk level. The annual risk assessment result for a school will be determined using a balanced weighted formula utilizing the individual scores calculated for each indicator as follows: (Current Ratio x 0.10) + (Unrestricted Days Cash x 0.35) + (Debt to Asset Ratio x 0.10) + Risk Assessment Results Financial Management & Oversight (Cash Flow x 0.10) + (Total Margin x 0.25) + (Budget Variance x 0.10) Planning & Budgeting Indicator •Budget Budget Variance (10%) Near-Term Indicators •Current Current Ratio (10%) •Unrestricted Unrestricted Days Cash (35%) SustainabilitySustainability Indicators Debt to Asset Ratio (10%) Cash Flow (10%) Total Margin (25%) The individual and final risk assessment results will be represented as one of five categories based on the school’s risk assessment calculations as color-coded below and will be rounded to the nearest whole number. Low Acceptable Moderate High Significant