Section 35.15. Lack of financial viability and going concern determinations.

 

(1)   Indicators. Any of the following shall be indicators that a school does not have the ability to continue as a going concern or that the school does not meet the financial viability requirements under s. 119.23 (7) (am) 2m. b. or (d) 2. , Stats.:

(a) The budget and statement of cash flows required under s. PI 35.13 (2) or 35.14 show the school has inadequate revenues and other financial resources to fund current operations, has negative cash flows, has a negative net asset balance, or has a net operating loss.

(b) The audit opinion statement included in the financial audit contains a qualification as to the school's ability to continue as a going concern.

(c) The school failed to make payments as required under s. PI 35.13 (3) or (4) .

(d) The school failed to be current with filings, payments, or withholdings payments required under s. PI 35.13 (6) .

(e) The audit reports required under s. PI 35.13 (6) (f) contain questioned costs or compliance findings that may affect the school's ability to continue.

(f) The school has a negative net asset balance in its financial audit.

(g) The school has a negative net current obligation in its financial audit. The net current obligation shall be calculated as the current assets less the current liabilities.

(h) The school has a net loss in its financial audit.

(2)   Information to be submitted. A school shall submit to the department any information the department requires to determine the ability of the school to continue financially, including an audit of the school's legal operating organization prepared in accordance with generally accepted accounting principles. The school shall provide the department authority to speak directly to the U.S. internal revenue service, the Wisconsin department of revenue, or the Wisconsin department of workforce development to determine the school's compliance with the requirements under s. PI 35.13 (6) .

(3)   Notification of financial impairments. The school shall promptly notify the department in writing of impairments in the school's ability to finance its operations.

(4)   Notification of ceasing operations. A school participating in the choice program shall notify the department immediately of a decision to cease educational program operations.

(5)   Training. Upon the request of the department, a school that has one or more of the indicators in sub. (1) shall attend a fiscal management training approved by the department.

(6)   Financial viability review and surety bond requirement.

(a) The state superintendent shall review information submitted under s. 119.23 , Stats., and this chapter and determine whether a school is financially viable.

(b) I f the state superintendent determines that a school is not financially viable, the state superintendent may require a school to immediately obtain a surety bond. The surety bond shall be made payable to the state of Wisconsin. The purpose of the bond shall be to protect the department and the taxpayers of Wisconsin against loss in the event of any of the following:

1. The school fails to timely file the reports required under s. PI 35.07 (1) or s. 119.23 (7) (am) 2m. a. , Stats.

2. The school fails to timely refund any amount certified due from the school under s. PI 35.07 (4) .

3. The school fails to timely repay the reserve balance under s. PI 35.10 .

(c) The amount of the bond required under par. (b) shall be equal to 25% of the total current school year payment amount as determined under s. 119.23 (4) and (4m) , Stats.

(d) The bond shall remain in force until all of the following occur:

1. The school has a positive net asset balance for two consecutive school years, as indicated in the school's financial audit. The net asset balance used for this determination may only include pledge receivables or other receivables for which the school receives cash payments within one year of the date pledged or within one year of the date the amount is included as a receivable.

2. The school has a positive net current obligation for two consecutive school years, as shown by the school's financial audit. The net current obligation shall be calculated as the current assets less the current liabilities. The asset balance used for this determination may only include pledge receivables or other receivables for which the school received cash payments within one year of the date pledged or within one year of the date the amount is included as a receivable.

3. The school has net income for two consecutive school years, as indicated in the school's financial audit. The net income used for this determination may only include revenue for which the school receives cash payments within one year of the date pledged or within one year of the date the school includes the amount as revenue.

4. The school pays all amounts owed to the U.S. internal revenue service, Wisconsin department of revenue, and Wisconsin department of workforce development on a timely basis for two consecutive years, including full payment of any wage claims and past due amounts, interest, and penalties. The school shall submit to the department a letter from each of these entities indicating compliance with this requirement and provide the department the authority necessary to speak directly to these agencies to confirm compliance.

5. The school has paid all vendors and employees as required by s. PI 35.13 (3) and (4) for two consecutive years.

6. The school's financial audit does not contain a qualified audit opinion or an expression of the auditor's doubt as to the school's ability to continue as a going concern for two consecutive years.

7. If the school's financial audit does not include all revenues, expenditures, assets, and liabilities of the legal operating organization of the school, the school shall submit to the department financial statements for the school's legal operating organization prepared in accordance with generally accepted accounting principles that meet all of the following requirements:

a. The financial statements do not contain a qualified audit opinion or an expression of the auditor's doubt as to the organization's ability to continue as a going concern.

b. The financial statements are two-year comparative financial statements that include the audit of the full-year financial information for the school years in which the requirements in subds. 1. to 6. are satisfied.

c. The financial statements show that the legal operating organization of the school also meets the requirements under subds. 1. to 5.

(e) If the school is unable to complete the requirements in par. (d) within 5 years from the date the department initially requires a surety bond or if the school's financial position worsens, the department may terminate the school from the program.

(f) Upon the request of the department, a school that is required to provide a surety bond under par. (b) shall do all of the following:

1. Attend fiscal management trainings.

2. Submit to the department budget and cash flow reports and turnaround plans as prescribed by the department.

CR 16-004 : cr. Register July 2016 No. 727 , eff. 8-1-16; correction in (1) (intro.), (a), (2) made under s. 35.17 , Stats., Register July 2016 No. 727 .