Fund Balance Ratio

Full definition — The fund balance ratio (also called the fund balance percentage) is calculated by dividing a school's unrestricted fund balance by its total annual expenditures. It indicates how many months of operating expenses the school could cover from reserves if revenue were interrupted. Financial best practices for charter schools typically recommend maintaining a fund balance ratio of at least 10-15%. A low ratio signals financial vulnerability, while a very high ratio may indicate underinvestment in the school's mission.

Why It Matters

This ratio is one of the key metrics authorizers examine during financial reviews and charter renewal. Board members, especially the treasurer, should monitor it regularly to ensure the school maintains adequate reserves without hoarding resources.

Related Terms

• Fiduciary Responsibility
• Treasurer
• Charter Renewal
• Corrective Action Plan