Economic Viability

The second social contract relates to economic viability. It exists between investors/funders and the school itself. Investors/funders agree to provide capital for development and improvement of school infrastructure, equipment, and pedagogy, and cash flow for ongoing operations. In return, the school commits to deliver education to students in an efficient, cost-effective, and sustainable manner, providing financial returns to investors, where appropriate.

The evaluation of economic viability is important because it reflects performance in all other areas of school operation and thereby serves as a good measure of the overall school health. Our assessment considers risks associated with:

• Stability, reliability, predictability, and diversification of revenues;
• Cost-effectiveness of operations;
• Financial sustainability - operating margins, unrestricted cash flow (liquidity), access to commercial capital and other financial resources;
• Repayment of debt;
• Generation of profitability (for-profit schools).

It also assesses the robustness of the school's financial management systems, including bookkeeping and accounting systems and procedures.