assessing charter school performance: tools for predicting and monitoring the academic and financial...
TRANSCRIPT
Assessing Charter School Performance: Tools for Predicting and Monitoring the
Academic and Financial Risk of Charter Schools
Who is Self-Help?• Non-profit CDFI
founded in 1980• Mission: Creating and
protecting ownership and economic opportunity for people of color, women, rural residents and low-wealth families
• Over $100 million in financing charter schools nationwide since 1997
Purposes & Uses of Rating Matrix
• Standardize risk assessment of loans to compare relative risk
• Differentiate monitoring efforts based on risk
• Potential loan evaluation
• Underwriting feedback mechanism
• Assess portfolio risk as a whole to manage grant funds
• Determine loan loss reserve
• Training tool for new loan officers
Customized for Commercial Real Estate, Charter School, and Other Lending
SH Charter School Risk Rating Process
Loan Package
Loan Closing
Credit Committee
Approval
Monitoring
Y
Rating MatrixProbability of
Default- Interest
Rate
Risk Rating Categories
Academic Rating
Academic Appraisal
Risk Rating Matrix
• Criteria: Based on 5 Cs of Credit
– Capacity to Repay
– Character/Management
– Conditions
– Capital
– Collateral
• Each criterion is assigned different weights based on importance
Collateral/ Exposure
Criteria Weightvalue score
sub- total STRONG AVERAGE WEAKscore 1 2 3 4 5
Collateral 30% 3.0 1 Collateral gap/loan % (current) 10% 3 <0% 0-5% 5 - 10% 10-15% >=15%2 Collateral gap $ (current) 10% 3 <0K $0-50K $50K-100K $100-150K >$150K3 LTV (current) 5% 3 <65% 65-70% 71-75% 76-80% >80%4
Guarantees (exclude CSCEG) 5%
3Cash AND >= 80% of
gap
a) Cash: < 80% of gap b) Non-cash Institution
(ex: USDA) AND >= 80% of gap
a)Person> 50% of loanb)Institution 50%-80%
of gap
a)Person< 50% of loanb)Institution <50% of
gap none
Probability of Default/Incidence
Criteria Weightvalue score
sub- total STRONG AVERAGE WEAKscore 1 2 3 4 5
Capacity to repay 40% 3.0 1 Liquidity 18%
Cash Flow (DSCR) 12% 3 >1.30 1.26-1.30 1.16-1.25 1.00-1.15 <1.00Occupancy/Revenue 3% 3 <10% 10-12% 13-15% 16-20% >20%
Cash or savings at year end 3%3
> annual debt service 6-12 months of DS 4-5 months of DS 2-3 months of DS <1 month of DS
2 Revenue factors 12%
years since school started 5% 3 >6 years 4 - 5 yrs 3 yrs 1-2 yrs start-up# of students 4% 3 >300 201-300 151-200 100-150 <100
wait list/current students % 2% 3 >10% 6-10% 3-5% 1-2% 0%remaining years to current charter 1% 3 >6 years 5-6 yrs 3-4 yrs 1-2 yrs <1 year
3 Academic Performance 6%
3Rating of 1 from
Public ImpactRating of 2 from
Public ImpactRating of 3 from
Public ImpactRating of 4 from
Public ImpactRating of 5 from
Public Impact
4Payment performance with SH (ex: includes all SH borrower schools' data for KIPP)
4%
3all on-time
payments > 3 yrsall on-time
payments < 3 yrssome delays, no
late charges late charges >=1has been delinquent
Character /Management 12% 3.0
1Education and experience of Principal or board with charter school management
6%
3
>10 years experience and
high quality education
5-10 years experience and high
quality education
2-4 years experience and
relevant education
<2 years experience and
relevant education
< 2 years experience and no relevant education
2 Business and finance expertise 6%
3non-profit CMO
(ex: KIPP) for-profit EMO
outsource accounting (ex.
Acadia) or strong in-house expertise
in-house weak financial/business
management
no outsourcing and no in-house
expertise
Conditions 10% 3.0 1
Geography/political/economic risk (based on Center for Education reform grades or our experience. Consider State budget cuts)
6%
3A Grade (DC, AZ,
MI, MN)
B Grade (CA, NY, NJ, FL, TX, CO, IN,
MO, OH, PA)
*C Grade (GA, SC, TN)
*NC (based on our experience) D Grade F Grade
2 Loan Characteristics 4%
Loan type 1%3 perm
bridge loan with takeout plan construction working capital leasehold improv.
Var/fixed 1% 3 fixed for entire term fixed for > = 6 years fixed for 1-5 years variable-quarterly variable-monthly
Remaining term (mo.s) 1% 3 <12 12 to 36 37 to 60 61 to 84 >84
If balloon: sources of repayment 1%
3no balloon
strong likelihood repayment (ex
USDA take out)average likelihood
repaymentlow likelihood of
repayment
very low/no likelihood of repayment
Capital 8% 3.0 1 Equity/Project Cost % 5% 3 >20% 16-20% 11-15% 5-10% <5%2 Borrower's cash/Project Cost % 3% 3 >15% 13-15% 9-12% 5-8% <5%
Rating-Default 3.00
Rating- Overall(includes collatera l) 3.00
Charter School Rating Matrix
Scoring GuideInput
Academic Performance MonitoringAcademic elements assessed using two instruments:
•Initial School Evaluation
– Qualitative & quantitative information
– Helps make initial loan decision
•Academic Monitoring Tool
– Quantitative
– Used for performance monitoring
Initial School Evaluation
• Tool used to gather background information on prospective borrowers
• Collects qualitative and quantitative school data
• Helps assess how closely borrower meets our mission: serving at-risk student populations to close the achievement gap
• Information used to help loan officer make an initial lending decision
Initial School Evaluation
• Gathers school information in four domains:– Student / Community Population– Academic Performance– School Curriculum– Non-Academic Indicators
• Designed to compliment site visits and interviews with school leadership and other relevant third parties (e.g., authorizer, resource centers)
Academic Monitoring Tool
• Public Impact developed academic assessment tool for charter portfolio
• Used to assess risk of school closure due to academic performance
• Helps us monitor current loans and predict the academic success of future loans
Academic Monitoring Tool
• Converts achievement data into a single performance score, used in the risk matrix – Assigns school scores from 1 (no risk of closure) to 5
(high risk of closure)
– Scores based on AYP data, student proficiency, performance history over 3 years, comparisons to state and district data
• Monitoring tool tracks progress over time, and compares schools
Example of School Data Collection
Measure #4 Percentage of
Students Proficient
Measure #5 Comparison to State
Measure #6 Comparison to District
Students proficient on all tests?
Difference in Math
Difference in English
Difference in Math
Difference in English
39% -8% -27% 4% -13%
Measure #7 Change in Performance Over 3 Years Measure #8 Student GrowthAverage growth per year
(Math)?Average growth per year
(English)?What Value-Added Growth score
did the school receive?2% -14% Average Growth
Measure #1 AYP History Measure #2 AYP Subgroups Measure #3 Percentage of Students
Proficient Over 3 years how often has school made AYP?
What percent subgroups made AYP in current year? Math? English?
33% 100% 72% 41%
Example of School Scoring
Measure #1 AYP History Measure #2 AYP Subgroups Measure #3 Percentage of Students Proficient
In last 3 years how often has school made AYP?
What percent subgroups made AYP in current year?
Students proficient in Math?
Students proficient in English?
33% 100% 72% 41%
Measure #1 AYP History Measure #2 AYP Subgroups Measure #3 Percentage of Students Proficient
In last 3 years how often has school made AYP?
What percent subgroups made AYP in current year?
Students proficient in Math?
Students proficient in English?
3 1 2 5
For each measure school receives score of 1 (highest) to 5 (lowest) based on predetermined thresholds:
How We Weigh the Data
• To find total score, calculate weighted average
• From highest to lowest
1) Growth percentage
2) Change in performance over time
3) Comparison to state and district averages
4) Percent proficiency on state tests
5) AYP subgroup performance
6) AYP history
Improvement Areas in Process
• Reevaluating performance thresholds
• Consideration for schools with high percentage of special needs populations
• Tracking more intangible qualities of a school
• Input of charter school closure rate & other authorizer variables
Contact Us
Jane EllisDirector, Charter School Lending
[email protected]/800.476.7428
Self-Help Services Corp301 West Main StreetDurham, NC 27701
www.self-help.org/charterschools