A detailed matrix of the differences among the sectors and reporting models has been provided in Appendix A. Current Financial Responsibility Oversight HEA 1992 requires ED to measure financial responsibility on the basis of relevant measures evaluating operating losses, net worth, assets to liabilities and operating fund deficits using the annually filed financial statements. The current regulations measure and establish minimum acceptable standards for liquidity, net worth and profitability. Each is measured separately and the results are considered without regard to the others. Consider the standards for a for-profit institution. If an institution is rated at or above the second highest rating level of credit quality given by a nationally recognized statistical rating organization, they will otherwise meet the prescribed standards.
Current regulations provide, in part, for different tests for the various business segments.
For example, public institutions may uniquely satisfy the standards by demonstrating, among other things, that they are backed by the full faith and credit of their respective state. Therefore, calculation of the acid test cannot be accurately performed without additional information. ED's Current Experience ED's experience has shown that application of the current ratios and tests among proprietary schools, private colleges and universities and hospitals does not always yield consistently reliable information about an institution's financial health. In these circumstances, additional analysis must be performed to determine financial responsibility. Furthermore, ED's experience indicates that performing a detailed review of additional information in the event an institution does not meet one of the minimum standards can be time consuming and an inefficient use of its resources.