KIPP Texas maintains 'superior' FIRST rating and projects a stronger fiscal year despite fundraising shortfall

Sanhan (chief financial officer) and senior finance staff briefed the board on Sept. 25 on the organization’s fiscal performance, external audit status and the Financial Integrity Rating System of Texas (FIRST) score. Finance staff said the most recent FIRST rating is 90 out of 100 (classified as “superior”); they expect coding corrections and year‑end results to push the score to about 94 in the next published cycle.

Fiscal highlights presented: staff reported a projected FY25 EBITDA of about $46 million, which exceeds the $44 million threshold that supports a 1.2 times debt service coverage ratio. Management said it expects to deliver approximately 1.3 times debt service coverage on year‑end results. Enrollment was close to targets — staff said the system was within 40 students of its target (about 99.9% of goal) — and attendance was reported at 94.5% year‑to‑date.

Fundraising and compensation: KIPP Texas raised $9.4 million in fundraising for FY25 against a $12.0 million goal. Management highlighted a one‑time $8.0 million staff retention incentive already issued to employees; finance staff said early analysis shows the incentive likely contributed to a modest increase (about 1 percentage point) in staff retention. Overall staff retention was reported at 78% (77% for teachers) and 69% retention for special education teachers, with the retention incentive under analysis.

Audit and compliance: auditors’ field work was nearly complete and staff expected no audit findings. Management noted that an issue described earlier in the audit required increased substantive testing but that the team passed the testing. Staff also disclosed publisher required information as part of FIRST reporting — the superintendent’s employment contract is posted on the KIPP Texas website and total reimbursements disclosed were approximately $2,400.

Budget outlook and timing: management reiterated an FY26 budgeted deficit of $18 million (unchanged from the June budget) and said the gap is expected to materially decrease once HB 2 revenue summaries are published in mid‑October; staff will update the finance work group on Oct. 30 and the full board in November (with the audit brought to board for approval on Nov. 13).

Board discussion: board members asked about coding corrections that affected the FIRST score, the status of the audit testing, and the interplay between fundraising shortfalls and operating plans. Finance staff credited forecasting discipline and said the organization reduced reliance on one‑time funds and expects to meet long‑term sustainability targets.