FCMAT has developed the Fiscal Health Risk Analysis (FHRA) as a tool to help evaluate a local education agency’s (LEA’s) fiscal health and risk of insolvency in the current and two subsequent fiscal years. The FHRA includes up to 20 sections, each of which contains specific questions. Each section and specific question is included based on FCMAT's work since the inception of AB 1200; they are the common indicators of risk or potential insolvency for LEAs that have neared insolvency and needed assistance from outside agencies. Each section of this analysis is critical, and lack of attention to these areas will eventually lead to an LEA's failure.
The analysis focuses on essential functions and processes to determine the level of risk at the time of assessment. The greater the number of "no" answers to the questions in the analysis, the greater the potential risk of insolvency or fiscal issues for the LEA. Not all sections in the analysis and not all questions within each section carry equal weight; some areas carry higher risk and thus count more heavily in calculating an LEA's fiscal stability. A score of 40% or more is considered high risk; a score of 25%-39% is considered moderate risk; and a score of 24% or lower is considered low risk. The Budget and Fiscal Status and material weakness questions identify conditions that create a significant risk of fiscal insolvency. The existence of any condition from the “Budget and Fiscal Status” section and/or a material weakness supersedes all other scoring because it elevates the district's risk level.
Identifying issues early is the key to maintaining fiscal health. Diligent planning will enable an LEA to better understand its financial objectives and to develop strategies to sustain a high level of fiscal efficiency and overall solvency. LEAs should complete the FHRA periodically to assess their fiscal health risk and progress over time.
Completed analyses and other reports are available on the FCMAT reports page.