Training Completion Assurance Fund: financial security
Learn how operators of private career colleges provide the financial security that the ministry requires.
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Training Completion Assurance Fund
- Surety bond of a guarantee company
- Irrevocable letter of credit
- Personal bond
Contact firstname.lastname@example.org if you would like a copy of these forms.
The Training Completion Assurance Fund (TCAF) is established under the Private Career Colleges Act, 2005. Participation in the TCAF is mandatory for all registered Ontario private career colleges.
The purpose of the TCAF is to ensure that in the event a private career college stops operating, the students will be given the opportunity to:
- complete the vocational program as provided by another institution or other organization
- 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 Private Career Colleges (Superintendent).
In accordance with the Private Career Colleges Act, 2005 and regulations, private career colleges are required to:
- provide the Superintendent with the prescribed amount of financial security
- pay premiums into the TCAF
In the event of a private 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
Private 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, private 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:
- 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 private career college is determined by the Superintendent using the Private 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.
Example: Calculation of financial security for the first registration period
ABC Hairstyling College (ABC) was registered as a private career college on June 10, 2020. In its application for registration, ABC included forecasted financial statements for the year ending June 30, 2021.
Tuition revenue from ABC's only vocational program, hairstyling, was forecasted to be $200,000. ABC forecasted that an additional $50,000 of revenue would be earned from hairstyling kits and uniforms sold by ABC to its students.
To calculate the amount of ABC's required financial security:
- Determine forecasted gross annual vocational
$200,000 + $50,000 = $250,000
- Multiply forecasted vocational revenue by 10%
$250,000 x 10% = $25,000
- Security requirement is the greater of $10,000 and the result of the calculation 2
Since $10,000 is less than $25,000, the new PCC registrant will be required to provide a financial security in amount of $25,000.
- Based on ABC's excellent financial performance and compliance history, the Superintendent set the percentage of gross vocational revenue (GVR) used to calculate ABC's financial security at 10%.
Financial security for subsequent periods of registration
Private 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, private 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, private 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.
Private career colleges shall not offset their PUR account balance with other accounts receivable.
Calculating financial security
At each renewal of registration, private career colleges are required to provide financial security equal to the greater of:
- 25%–50% of the highest monthly PUR
In b) above, the percentage of PUR used to calculate the financial security required from a private career college is determined by the Superintendent using the Private 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.
Example: Calculation of financial security for a subsequent registration period
ABC Esthetics College (ABC) delivers a three-month vocational program to 10 students. The $6,000 tuition fee is collected from every student on January 30, 2020. The program starts on February 1, 2020 and ends on April 30, 2020.
- All students also pay an additional $1,000 for books and a tool kit on the first day of class. As the books and the tool kit are provided to the students immediately, there is no PUR with respect to these items.
- Based on ABC’s excellent financial performance and compliance history, the Superintendent set the percentage of PUR used to calculate ABC’s financial security at 25%.
To calculate the amount of ABC’s required financial security:
- Prepare monthly PUR schedule for the fiscal year
ABC Esthetics College: Monthly PUR for Fiscal year 2020
|End of the month||Prepaid Unearned Revenue (PUR) balance based on 10 students, $|
|January 30, 2020||60,000|
|February 28, 2020||40,000|
|March 31, 2020||20,000|
|April 30, 2020||0|
|May 31, 2020||0|
|June 30, 2020||0|
|July 31, 2020||0|
|August 31, 2020||0|
|September 30, 2020||0|
|October 31, 2020||0|
|November 30, 2020||0|
|December 31, 2020||0|
- Determine the highest monthly PUR balance
Maximum PUR balance = $60,000
- Multiply the highest monthly balance by 25%
$60,000 x 25% = $15,000
- Security requirement is the greater of $10,000 and the result of the calculation 3 above
Since $10,000 is less than $15,000, the private career college will be required to provide a financial security in amount of $15,000.
The amount of financial security required for ABC Esthetics College is $15,000.
Per Private 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.
Private career colleges with registered charity status
Private 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.
Private 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, private 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
Private 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 email@example.com if you need this form.
Placing a letter of credit
Private 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 firstname.lastname@example.org if you need this form.
Placing a personal bond accompanied by collateral security
The private 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 email@example.com 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:
- Contact the ministry at firstname.lastname@example.org and advise that you would like to arrange a collateral security deposit. You will be directed to the appropriate person.
- 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.
- 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 Private Career Colleges Act, 2005.
The ministry is responsible for setting up safekeeping accounts and for purchasing appropriate security for private 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
- Lawyer (member of a provincial bar association)
- Medical doctor
- Minister of religion authorized under provincial law to perform marriages
- Notary public
- Police officer (municipal, provincial or RCMP)
- Principal of a primary or secondary school
- Professional accountant
- Professional engineer
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
Private Career Colleges Branch
77 Wellesley St. W., P.O. Box 977
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, private 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 private 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.