715-045-0032 Standards for Financial Reporting (1) All private career schools shall submit at initial licensing, and annually thereafter in conjunction with the license renewal, financial information reflecting the fiscal condition of the school at its start-up or at the close of its most recent fiscal or calendar year, whichever is applicable. For such purposes the information submitted shall conform to the following: (a) At initial application for licensing, the school must submit a business plan based on the major goals of the school for the first two years of operation along with the methods and procedures for achieving the goals. Included as part of the plan will be an opening balance sheet, along with worksheets documenting the source and method of calculation for amounts listed on the balance sheet. The school shall have sufficient capital to provide all the appropriate instruction, support and administrative services (including appropriate comprehensive general liability insurance), staffing, equipment, and facilities. The Executive Director of the Higher Education Coordinating Commission will use financial ratios relevant to the private career school industry, such as those suggested by national professional organizations, accrediting organizations, and other appropriate financial statistics to determine the sufficiency of the planned capital. The plan also shall include a projected income statement showing the projected income and expenses for each of the first two years of operation, with the first year’s projections calculated on a monthly basis, and the second year’s projections calculated on a quarterly basis. (b) If the executive director finds sufficient evidence that a particular type or group of career schools faces serious challenges in the procurement of comprehensive general liability insurance that make them unable to obtain this insurance from admitted or non-admitted insurance dealers, the executive director may allow a school to substitute the requirement for comprehensive general liability insurance described in paragraph (a) of this subsection with the requirements listed in subsection (3)(e) of OAR 715-045-0029. The Commission shall post on its website a list of types or groups of career schools subject to the substituted requirements. (c) If a career school is found to be subject to the substitution regime described in paragraph (b) of this subsection, the career school in question will be required to provide a clear, legible, written notice, in no less than 12 point font, to potential students before they sign an enrollment agreement with the college that the school has no comprehensive liability insurance and may have difficulties reimbursing student’s tuition costs in the case where the school becomes financially insolvent. The notice shall state the following: “PLEASE NOTE: This school does not have general liability insurance and as a result, this school MAY BE AT RISK OF FINANCIAL HARM THAT COULD LEAD TO SCHOOL CLOSURE. By signing the school’s enrollment agreement, YOU ARE ACKNOWLEDGING THIS RISK, which may make it more likely that you will be unable to obtain a refund of tuition or other fees paid to this school if the school is forced to shut down due to expenses incurred due to a LACK OF GENERAL LIABILITY INSURANCE or for any other reason.” This notice shall be signed by such potential student as an acknowledgement of receipt. (d) In addition to the licensing requirements cited in paragraph (a), (b), and (c) of this subsection, financial requirements shall be based on a school's ability to fulfill its obligations to students, meet refund obligations, meet operational expenses and other financial obligations, and make the required contributions to the existing tuition protection fund. When the sufficiency of the planned capital is questionable, the executive director may require mechanisms be put in place to ensure the availability of operating funds and funds required to satisfy student tuition refund requests, including but not limited to a letter of credit, or the escrow of unearned tuition funds. (e)The financial report for license renewal may be prepared by the school owner or competent school personnel for schools with gross annual tuition income of less than $225,000. Such report shall cover the most recent annual accounting period completed. The balance sheet information must clearly show all assets, liabilities, and net worth, while the income statement must clearly show the profit or loss for the fiscal year. Each school also must provide a cash flow statement showing its: (A) Cash flow from operations; (B) Cash flow used in investing; and (C) Cash flow from financing activities. (f) The information for license renewal must also show total instructional income and expense for the school for the preceding fiscal year, along with supporting worksheets and documentation as provided by the commission. If a school offers both licensed programs and programs exempt from licensure, total instructional income for licensed programs and exempt programs shall be displayed separately so that gross tuition income from which license fees and the tuition protection fund assessment will be computed is clearly identified. At the option of the school owner, expenses may or may not be displayed separately for licensed and exempt programs. The amount of the tuition protection fund assessment required for an initial license will be computed on the basis of projected first year tuition income but shall not be less than a liability limit of $6,250; (g) At the option of the school, the financial report may be in the format provided by the commission; (h) Each school must certify in its financial report that all refunds due students have been made and are not in default. If any refund requests are pending, the school must disclose this information along with a status report of the request(s); documentation prepared for accreditation reviews or from reviewed financial reports may be submitted to satisfy this requirement; (i) In all instances, information supplied must be certified true and correct by the school owner or an authorized representative; (j) Schools reporting gross tuition income between $225,000 and $1,999,999, inclusive, will submit a reviewed financial report that conforms to Generally Accepted Accounting Principles (GAAP) and is completed and signed by an independent Certified Public Accountant (CPA). In lieu of a reviewed financial report, schools may submit income tax forms if all of the following conditions are met: (A) The income tax forms were prepared and signed by an independent Certified Public Accountant (CPA), and (B) The income tax forms are reporting financial information solely for the career school or the organization within which the school function is embedded if the career school is not a legal entity in its own right, and (C) The school or organization’s fiscal year matches the tax year, and (D) All sensitive information such as social security numbers have been redacted, and (E) The income tax forms are complete with all related schedules and worksheets and include all information that would be used to prepare a reviewed financial report, and (F) The requirements of paragraph (f) of this subsection are met. Separate forms displaying tuition costs for licensed programs versus exempt programs and other activities must be included if the career school is embedded within the operation of a larger organization and is not a legal entity in its own right. (G) Any income tax forms received by the commission that do not meet the requirements of paragraph (h) of this subsection will be shredded upon receipt. (k) Schools that are accredited and offer students state or federal financial aid may not submit income tax forms and must submit an audited financial report signed by an independent Certified Public Accountant, regardless of amount of gross tuition income. (l) Schools reporting gross tuition income of $2,000,000 or more will submit an audited financial report that conforms to Generally Accepted Accounting Principles, (GAAP), Generally Accepted Audit Standards, (GAAS), and Statements for Accounting and Review Services (SAARS) currently in effect. (2) If after analyzing a school's financial reports and records, the executive director determines the school is not financially responsible, as described in OAR 581-045-0063, or that the school's records are incomplete or inaccurate, the executive director may require the school to submit within 75 calendar days of written notice: (a) An audited financial report signed by an independent Certified Public Accountant (CPA); and (b) Its most recent federal and state income tax reports. (3) The executive director may waive or modify all or part of the requirements in subsections (1) and (2) of this rule for a school that operates within the context of a larger business structure and is not a legal business entity in its own right, or has other financial considerations that are best evaluated through examination of a different set of financial data. Statutory/Other Authority: ORS 345.325(8) Statutes/Other Implemented: ORS 345.325 History: HECC 11-2022, amend filed 12/09/2022, effective 12/09/2022 HECC 4-2022, temporary amend filed 08/12/2022, effective 08/12/2022 through 02/07/2023 Renumbered from 581-045-0032 by HECC 2-2014, f. & cert. ef. 4-23-14 ODE 16-2010, f. 11-15-10, cert. ef. 1-1-11 ODE 15-2006, f. 12-11-06, cert. ef. 1-1-07 ODE 17-2003, f. 12-30-03, cert. ef. 1-1-04 Renumbered from 581-045-0016, ODE 32-2000, f. 12-11-00 cert. ef. 1-1-01 EB 13-1996, f. & cert. ef. 7-26-96 EB 11-1990, f. & cert. ef. 2-1-90 1EB 30-1986, f. & ef. 7-23-86 1EB 34-1978, f. & ef. 10-5-78