Arizona Charter Schools Bolstered by PPP Loans

Liz Sweeney
4 min readJun 1, 2021

Arizona charter schools that used the Paycheck Protection Program’s forgivable loan program bolstered their operations and cash on hand in fiscal 2020, according to data from the School Improvement Partnership (SIP) Database. Arizona charter schools that used the program were generally smaller than those that didn’t and had lower debt service coverage. They also ended fiscal 2020 with more days’ cash on hand and the same operating income as those that didn’t use the program, indicating that the PPP program helped to bolster their financial profiles.

Almost half of the schools in our sample(1) took out a PPP loan for a median $355,000, with a range of $24,000 to $1.6 million. The loans equated to a median 9% of revenue, 28% of unrestricted cash, and 33 days’ cash on hand. Although the loans weren’t designed to bolster days’ cash and must be expended under their terms in order to be forgiven, to the extent the loans were used for expenditures the school may have made anyway, such as payroll, the loans directly and positively impacted operating income, debt service coverage, and days’ cash.

In August 2020, Arizona charter schools received good news when the state auditor determined that receipt of PPP loans will not result in charter schools’ base-level funding being cut. For a while prior to that, there was uncertainty around whether PPP loans would be treated as an unallowable double payment to schools.

We found that accounting treatment of the loans varies significantly. For example, some treated the PPP loan as debt or other long-term liabilities, while others reported them as conditional contributions, refundable advances, or federal grants. Some recorded the loans as revenue as soon as they believed they met the terms for forgiveness, while others reported that they believed they met the terms for forgiveness but would record revenue only after formal notice of forgiveness. Several Arizona charter schools in our sample recorded a portion of the loan as revenue in 2020 and the rest as a refundable advance (a liability). One school determined that they had sufficient liquidity and returned the loan proceeds after the close of the fiscal year.

The variability in accounting treatment means that the impact of the loans on net income in 2020 is not comparable across schools that used the program. However, we view this as a timing issue, as most schools that did not record PPP loans as revenue in 2020 will record it as revenue in 2021. Analysts and other financial statement users should read the notes to the financial statements carefully to understand the accounting treatment and impact of the loans. In the SIP database, we report PPP loans separately regardless of where they were recorded on the balance sheet and income statement. We do this for comparability, to flag their presence for users, and to allow users the flexibility to make analytic judgements about treatment of the loans in their analytic process.

Created under the Coronavirus Aid Relief and Economic Security (CARES) Act in March 2020, PPP loans are unsecured loans targeted to small businesses, bearing a 1% interest rate and due 24 months after receipt of funds. They are forgivable if used for eligible costs, including retaining or quickly rehiring workers, maintaining salary levels, lease/mortgage interest, and utilities. Upon meeting the terms of forgiveness, the loan becomes revenue to the borrower, bolstering net income, cash flow, and debt service coverage. According to the Small Business Administration, which administers the loan program primarily through private lenders, as of May 2021 there were 11.6 million PPP loans made, for a total of $796 billion and an average loan size of $68,506.

School Improvement Partnership continues to maintain and grow the industry-leading School Improvement Partnership Database, featuring key operating statistics for every charter school in the nation. The database includes historical financial records of audited income statements, balance sheets, and cash flows statements, key pension plan data, future minimum lease requirements, and the use of Payment Protection Program (PPP) Loans. These financial metrics are measured alongside student enrollment statistics, academic performance, and other operating measures to offer users a complete picture of a charter school’s performance.

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Liz Sweeney is Chief Data Consultant at School Improvement Partnership. In this role she advises on data strategy, manages data acquisition, provides subject matter expertise, and conducts market outreach and education.



Liz Sweeney

Board member and public finance expert with specialties in credit analysis, debt advisory, municipal disclosure, ESG and climate change.