No t e s t o F i n a n c i a l R e s p o n s i b i l i t y S u p p l eme n t a l S c h e d u l e Ye a r E n d e d J u n e 3 0 , 2 0 2 3 1. Basis of Presentation The U.S. Department of Education (DOE) issued regulations, effective July 1, 2020, regarding information deemed necessary to calculate ratios for determining sufficient financial responsibility under Federal Title IV regulations. The Financial Responsibility Supplemental Schedule (the Schedule) is presented in accordance with the DOE regulations, and is not part of financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP Financial Statements). However, each element listed in the Schedule has been derived from the accompanying GAAP Financial Statements which includes the Consolidated Statement of Financial Position (SFP), Consolidated Statement of Activities (SOA), Consolidated Statement of Cash Flows (SOCF), and the Notes to Consolidated Financial Statements (Notes). The DOE Ratio Methodology for Private Non-Private Institutions establishes the following ratios, each of which are defined in the regulations with underlying data elements that correspond to the elements listed in the Schedule. Definitions for certain data elements may include items that are not applicable to Nova Southeastern University (NSU) and are therefore not referred to in the Schedule or in the Notes. Primary Reserve Ratio: Expendable Net Assets Total Expenses without Donor Restrictions and Losses without Donor Restrictions Equity Ratio: Modified Net Assets Modified Assets Net Income Ratio: Change in Net Assets without Donor Restrictions Total Revenues without Donor Restrictions and Gains without Donor Restrictions 2. Composite Score Calculation A strength factor score is assigned to each ratio by applying a prescribed algorithm, with the maximum allowable strength factor score being a 3.0. A standard weight percentage is then applied to the strength factor score to generate a weighted score for each ratio. The composite score is derived by adding the three weighted scores. NSU’s calculation of the ratios and composite score is displayed on the Schedule and summarized as follows: Ratio Strength Factor Weight Composite Score Primary Reserve Ratio 0.6 3.0 40% 1.2 Equity Ratio 0.6 3.0 40% 1.2 Net Income Ratio 0.1 3.0 20% 0.6 3.0 The official calculation of the ratios and composite score will be performed by the DOE. 50
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