TCAF premiums

For each year of registration under the Private Career Colleges Act, 2005, private career colleges are required to pay TCAF premiums. Calculation of the premiums is done by the Ministry of Colleges and Universities (ministry).

The ministry sends an invoice to each private career college with the amount and due date of its premiums, and the information on how the premiums were calculated.

A private career college can apply TCAF premium calculation formulas to estimate its premiums. The following types of premiums are outlined in the O.Reg 414/06 of the Private Career Colleges Act, 2005:

  1. initial annual premiums
  2. annual premiums
  3. premium surcharges
  4. levies

Initial annual premiums

Private career colleges that register for the first time are required to pay initial annual premiums for the first 24 months of the registration. The initial annual premium is equal to 0.875% of the annual gross revenue from vocational programs.

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 forecasted annual vocational revenue in these financial statements is used to determine a private career college’s initial annual premiums for the first registration period.

The gross vocational revenue forecasted in the financial statements is used to calculate initial annual premiums for the first 24 months of registration. Vocational revenue refers to 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
  • optional fees

Example: Calculation of initial annual premiums

ABC Hairstyling College (ABC) 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 its only vocational program, hairstyling, was forecasted as $200,000. ABC also forecasted that an additional $50,000 of revenue would be earned from sale of hairstyling kits and uniforms to its students.

ABC’s registration expires on February 28, 2022, 629 days after its registration start date. This is based on the fiscal year-end, June 30, 2021 plus 8 months.

To determine ABC’s initial TCAF Premiums:

  1. Determine the forecasted annual gross vocational revenue.
    $200,000 + $50,000 = $250,000
  2. Multiply forecasted vocational revenue by 0.875%
    $250,000 x 0.875% = $2,187.50
  3. Prorate the premium for the registration period.
    $2,187.50 / 365 days x 629 days = $3,769.69

The amount of initial TCAF premiums to be paid by ABC Hairstyling College is $3,769.69.

The Superintendent will adjust the initial TCAF premium based on audited annual vocational revenue submitted by the private career college during its first renewal of registration and will require the private career college either to pay the difference or process a refund if the amount of the initial TCAF premium based on audited annual vocational revenue is less than the amount of the payment previously received from the school.

Annual premiums

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 Vocational 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 TCAF premium requirements and the amount of financial security.
Private career colleges must pay annual premiums after the first 24 months of registration. The amount of the annual premium is the greater of:

  1. $500

    and
     
  2. the highest monthly balance of prepaid unearned revenue multiplied by the credit factor

The credit factor is determined based on a private career college’s credit rating according to the table below. Prepaid unearned revenue is calculated as described below.

Equifax credit ratings

To determine annual premiums, the ministry obtains their credit ratings from Equifax at the time when TCAF premiums are calculated. Based on their credit ratings, private career colleges are assigned high, medium or low credit risk levels (see the table below). If no credit rating is available, a registrant is assigned a high-risk level.

Equifax credit ratings
Credit ratingRisk levelCredit factor, %
101–375 or unavailableHigh1.25
376–451Medium1
452 or higherLow0.75

Registrants should obtain their credit rating from Equifax annually to ensure that the rating is accurate. Credit score issues should be addressed directly with Equifax.
Private career colleges may obtain a credit rating by ordering an Enhanced Commercial Credit Report from the Equifax website or by contacting Equifax customer service at 1-877-227-8800.

Schedule 1: Monthly Prepaid Unearned Vocational Revenue (PUR)

For each month-end in the fiscal year, private career colleges must calculate the amount of fees collected for vocational programs 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 private career college 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.

Example: Calculation of prepaid unearned revenue

ABC Esthetics College (ABC) delivers a three-month vocational program to one student.

  • The $6,000 tuition fee is collected from the student on January 30, 2020.
  • The program starts on February 1, 2020 and ends on April 30, 2020.
  • The student pays an additional $1,000 for books and a tool kit on the first day of class. As the books and tool kit are provided to the student immediately, there is no PUR with respect to these items.
  • ABC had no other students for this year.

To calculate the highest balance of ABC’s monthly PUR:

1. Prepare monthly PUR schedule for the fiscal year.

ABC Esthetics College monthly PUR for FY 2020
End of the monthPrepaid Unearned Revenue (PUR) balance, $
January 30, 20206,000
February 28, 20204,000
March 31, 20202,000
April 30, 20200
May 31, 20200
June 30, 20200
July 31, 20200
August 31, 20200
September 30, 20200
October 31, 20200
November 30, 20200
December 31, 20200

2. Determine the highest monthly PUR balance

The highest PUR balance = $6,000 (see the line for January 30, 2020)

Calculating annual premiums:

Example 1:

ABC Hairstyling College (ABC) has a medium risk level based on the information provided to the ministry by Equifax. The highest monthly PUR balance is $10,000.

To determine the private career college’s annual premium:

  • Determine the credit factor based on risk level.
  • ABC has a medium risk level; therefore, the credit factor is 1%
  • Multiply the highest monthly PUR by the credit factor.
  • $10,000 x 1% = $100
  • Annual premium is the greater of $500 and the amount calculated in 2 above.
  • Since $500 greater than $100; therefore, ABC’s annual premium is $500

Example 2:

ABC Esthetics College (ABC) has a low risk level based on the information provided to the ministry by Equifax. The highest monthly PUR account balance is $500,000.

To determine the private career college’s annual premium:

  1. Determine the credit factor based on private career college’s risk level.
    ABC has a low risk level; therefore, the credit factor is 0.75%
  2. Multiply the highest monthly PUR by the credit factor.
    $500,000 x 0.75% = $3,750
  3. Annual premium is the greater of $500 and the amount calculated in 2 above.
    Since $500 is less than $3,750, ABC’s annual premium is $3,750.

Premium surcharge

If, at the end of one of the TCAF's fiscal years, the value of the Training Completion Assurance Fund is less than the target balance, the Superintendent of Private Career Colleges will notify private career colleges of a premium surcharge along with their annual premiums.

The Superintendent will calculate the amount of the surcharge according to a calculation set out in Section 28 of the O. Reg 414/06 of the Private Career College Act, 2005. If applied, the premium surcharge can be from 3 to 6 times of the college’s annual premium based on the percentage of the target balance.

Levies

Levies are introduced only if the TCAF needs to be replenished immediately. The Superintendent may impose a levy on all private career colleges if:

  1. the value of the TCAF falls below 50% of the target balance, and
  2. the Superintendent is of the opinion that the money in the TCAF will not be sufficient to meet projected payments out of the TCAF.

Levies may be charged at any time, independent from other TCAF premiums or surcharges due for that year. To minimize impact on private career colleges, levies cannot exceed 0.875% of the school’s total gross vocational revenue.

Rebates

The Superintendent may decide to pay out of the TCAF a rebate on any premium, surcharge or levy if:

  1. the value of the TCAF is higher than 110% of the target balance
  2. the Superintendent is of the opinion that the money in the TCAF will be enough to meet the other projected payments.

The Superintendent may give notice of a rebate at any time. Rebates will be paid to all eligible registrants.

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 renewal, refer to the most recent Renewal of Registration Guidelines.