Training Completion Assurance Fund: financial security

Training Completion Assurance Fund

The Training Completion Assurance Fund (TCAF) is established under the Career Colleges Act, 2005. Participation in the TCAF is mandatory for all registered Ontario career colleges.

The purpose of the TCAF is to ensure that in the event a career college stops operating, the students will be given the opportunity to:

1. complete the vocational program as provided by another institution or other organization

or

2. receive a refund of the portion of the fees for which they did not receive any instruction

The TCAF is administered by the Superintendent of Career Colleges (Superintendent).
 

In accordance with the Career Colleges Act, 2005 and regulations, career colleges are required to:

1. provide the Superintendent with the prescribed amount of financial security

and

1. pay premiums into the TCAF

In the event of a career college closure, the financial security posted will be used to provide students with training completions or refunds. Once the financial security has been exhausted, outstanding student claims will be paid out of the TCAF.

Amount of financial security

career colleges are required to provide forecasted financial statements in their application to register with the Superintendent. The vocational revenue forecasted in these statements is used to determine a registrant’s financial security requirements.

Vocational revenue includes all fees from students with respect to the vocational program, including, but not limited to:

• tuition fees
• book fees
• expendable supplies
• uniforms and equipment
• major equipment
• field trips
• professional/exam fees
• other compulsory fees
• international student fees
• any optional fees

Once registered, career colleges must apply to renew their registration annually. The calculation of the amount of required financial security for the first period of registration differs from the calculation of financial security for the subsequent periods.

The formulas for calculation of the amount of required financial security and examples of calculations are provided below.

Financial security for the first registration period

New registrants are required to provide forecasted financial statements prepared by a public accountant licensed in Ontario in their application to register with the Superintendent. The vocational revenue forecasted in these statements is used to determine a registrant’s financial security requirement.

For the first period, registrants are required to provide financial security equal to the greater of:

1. $10,000

   
   or

2. 10%–20% of the forecasted gross annual revenue from vocational programs for the first year of operation

In b) above, the percentage of forecasted gross annual revenue from vocational programs used to calculate the financial security required from a career college is determined by the Superintendent using the career college Capacity Assessment Tool (PCAT). PCAT is a comprehensive tool that assesses the registrant’s risk level and calculates a percentage of forecasted gross annual revenue from vocational programs based on the registrant’s risk level. To determine risk level, PCAT takes into consideration the registrant’s key financial and business indicators and compliance history.

Financial security for subsequent periods of registration

career colleges are required to apply for renewal of their registration annually. This application must include audited:

• annual financial statements
• Schedule 1: Monthly Prepaid Unearned Revenue (PUR)
• Schedule 2: Revenue by Funding Source
• Schedule 3: International and Domestic Student Enrolment

After the first period of registration, data from the audited monthly schedule of prepaid unearned revenue (PUR) is used to determine both the amount of financial security and the TCAF premium requirements.

Schedule 1: Monthly Prepaid Unearned Revenue (PUR) 

For each month-end in the fiscal year, career colleges must calculate the amount of the collected vocational programs fees that have not been earned. Revenue from sales and service transactions shall be recognized when the requirements to performance obligations are satisfied, and collection of fees is reasonably assured. If goods or services have been partially delivered, a corresponding portion of the related fees may be considered earned.

To determine when revenue is earned, career colleges must follow their revenue recognition policy in accordance with generally accepted accounting principles. If a revenue recognition policy is not in place, it should recognize revenues from vocational programs as service or contract activity is performed, using either the percentage of completion method or the completed contract method.

The PUR schedule should not include fees collected from third-party funded students. These students do not directly contract with a PCC or pay for the provision of a vocational program, their training has been funded by a third-party. For further information, please refer to Superintendent’s Policy Directive: Exemption of Vocational Programs Funded by a Third-Party.

Only the collected amounts should be recorded in the prepaid unearned vocational revenue account balance. Payments that are due should not be included in the prepaid unearned balance.

Fees are not considered earned simply because they are non-refundable. They are earned to the extent that the related goods or services have been delivered.

Unearned fees from international students are to be included in the monthly PUR schedule.

career colleges shall not offset their PUR account balance with other accounts receivable.

Calculating financial security

At each renewal of registration, career colleges are required to provide financial security equal to the greater of:

1. $10,000

or

2. 25%–50% of the highest monthly PUR

In b) above, the percentage of PUR used to calculate the financial security required from a career college is determined by the Superintendent using the career college Capacity Assessment Tool (PCAT). PCAT is a wholistic tool that assesses the registrant’s risk level and calculates a percentage of PUR based on the registrant’s risk level. To determine risk level, PCAT takes into consideration the registrant’s key financial and business indicators and compliance history.

Superintendent’s discretion

Per Career Colleges Act, 2005 Regulation 414/06, the superintendent can increase the financial security amount if an increased security is required to protect students. The superintendent can also decrease financial security requirements if the superintendent determines that the reduced security will provide appropriate protection to students.

career colleges with registered charity status

career colleges that are registered charities are exempt from posting financial security. These organizations must provide a confirmation letter annually of charity status from the Canada Revenue Agency.

career colleges that are registered charities are not exempt from paying TCAF premiums.

Types of financial security

To be registered or have a registration renewed, career colleges must provide the ministry with the required amount of financial security. The security can be posted as one of the following:

• surety bond guaranteed by a surety company or another guarantor
• letter of credit issued by a bank or financial institution that is supervised or examined by the central bank of Canada or another governmental authority in Canada
• personal bond accompanied by collateral security issued by Canada or by any province of Canada

Placing a surety bond

career colleges interested in providing a surety bond as their financial security should contact a surety company licensed by the Financial Services Regulatory Authority (FSRA). A listing of licensed companies can be found on the FSRA (formerly Financial Services Commission of Ontario website. (See licensed Insurance companies in Ontario with classification: surety).

The surety bond agreement must be in the form specified by the Superintendent. Surety bonds that are not in the specified form will not be accepted. The surety bond template is available in the Program Approval and Registration Information System (PARIS), alternatively you can contact pcc@ontario.ca if you need this form.

Placing a letter of credit

career colleges interested in providing a letter of credit should contact a bank or financial institution and provide the ministry with an original copy of the letter of credit in the form specified by the Superintendent. Letters of credit that are not in the specified form will not be accepted. The letter of credit template is available in PARIS, alternatively you can contact pcc@ontario.ca if you need this form.

Placing a personal bond accompanied by collateral security

The career colleges that choose to place a personal bond accompanied by collateral security with the Superintendent must deposit collateral security with the ministry’s custodian, RBC Investor & Treasury Services, and provide the ministry with a completed Personal Bond form. The personal bond template is available in PARIS, alternatively you can contact pcc@ontario.ca if you need this form.

The steps for placing the collateral security are outlined below.

Step 1: Collateral Security Deposit

To deposit collateral security with the ministry’s custodian:

1. Contact the ministry at pcc@ontario.ca and advise that you would like to arrange a collateral security deposit. You will be directed to the appropriate person.
2. Ministry staff will coordinate an institution’s account set up with the ministry’s custodian. Once the account is opened, ministry staff will provide you with account details so that you can arrange an electronic funds transfer.
3. If the purchase of a federal or provincial government bond is needed, once the funds have been transferred, ministry staff will arrange to purchase a government bond on your behalf. Only bonds issued by Canada or by any province of Canada can be accepted as collateral security for a personal bond under the Career Colleges Act, 2005.

The ministry is responsible for setting up safekeeping accounts and for purchasing appropriate security for career colleges.

Step 2: Personal Bond Form

Once the collateral security is deposited with the ministry’s custodian, the ministry will issue a Personal Bond form. The Personal Bond form must be completed by an authorized officer in the presence of a witness from an approved occupation (see list below).

Completed forms must be returned to the ministry.

For colleges other than sole proprietorships, the authorized officers are:

• managing Partner for a partnership and
• a director, officer or agent who, under the corporation's by-laws, has the authority to exercise such powers for a corporation

Approved occupations for role of witness

• Chiropractor
• Dentist
• Geoscientist
• Judge
• Lawyer (member of a provincial bar association)
• Magistrate
• Mayor
• Medical doctor
• Minister of religion authorized under provincial law to perform marriages
• Notary public
• Optometrist
• Pharmacist
• Police officer (municipal, provincial or RCMP)
• Postmaster
• Principal of a primary or secondary school
• Professional accountant
• Professional engineer
• Veterinarian

Step 3: Submitting information

The original of the completed and signed Personal Bond form must be delivered to the following address:

Ministry of Colleges and Universities
Advanced Education Learner Supports Division
Career Colleges Branch
77 Wellesley St. W., P.O. Box 977
Toronto, Ontario
M7A 1N3

Any changes to collateral security on deposit with the ministry’s custodian (for example, increase/decrease of security amount) require the completion of a new Personal Bond form.

Changing the type of financial security

An operator may switch from one type of security to another at any time. To change security type, career colleges must obtain their preferred security by following the instructions above. Once the new security forms have been approved by the ministry, the Superintendent will approve the release of the old security.

Annual renewal of registration

Registered career colleges are required to apply for renewal of their registration annually. The deadline for renewal is six months after the organization’s fiscal year-end. At each fiscal year-end, the ministry will send a Notice of Renewal and Guidelines for Renewal of Registration. This will notify the registrant of the upcoming renewal and will provide information about reporting requirements for renewal. For further information regarding the renewal, refer to the most recent Renewal of Registration Guidelines.