Financial Standards

(1) The Commission and its staff may share information with the Tennessee Student Assistance Corporation and other state and federal agencies as appropriate. (2) The institution shall maintain financial and business practices in-line with common business procedures utilizing standard accounting practices. (3) The institution shall maintain and be prepared to demonstrate at any time financial resources adequate to fund and maintain the following: (a) Facility maintenance and overhead; (b) Staff and faculty payroll; (c) Books, supplies or equipment utilized by students; and AUTHORIZATION AND REGULATION OF REGULARLY AUTHORIZED CHAPTER 1540-01-02 POSTSECONDARY EDUCATIONAL INSTITUTIONS (d) General operating costs. (4) When financial statements are required by the Reauthorization Application or the Certification of Compliance, such statements shall be completed for the fiscal year that ended prior to one hundred-twenty (120) calendar days of the application due date and shall be prepared in the following format and manner: (a) Institutions with annual gross tuition revenue at the authorized location of one million dollars ($1,000,000) or more shall submit audited financial statements, including an income statement, balance sheet, statement of cash flow, and notes, prepared in accordance with the Generally Accepted Accounting Principles by an independent certified public accountant. (b) Institutions with annual gross tuition revenue at the authorized location of less than one million dollars ($1,000,000) but more than one hundred thousand dollars ($100,000) shall submit a reviewed balance sheet and income statement prepared in accordance with the Generally Accepted Accounting Principles by an independent certified public accountant. (c) Institutions with annual gross tuition revenue at the authorized location of one hundred thousand dollars ($100,000) or less shall submit a balance sheet and income statement using forms prepared by Commission staff as long as those forms are completed by a certified public accountant or a bookkeeper certified by the National Association of Certified Public Bookkeepers. (d) As an alternative to subparagraphs (4)(a) through (c) of this rule, institutions owned by the same parent company may submit an audited consolidated corporate financial statement. The audited consolidated statement shall be prepared in accordance with the Generally Accepted Accounting Principles by an independent certified public accountant. Commission staff or the Commission may request additional campus or institution-specific information where needed to better understand the financial stability of a single authorized location or to protect the public interest. (5) The following is applicable to all financial statements: (a) The balance sheet must reflect the owner’s (proprietorship, partnership, corporation, or other) assets and liabilities. (b) The institution shall report total revenue on the income statement; however, total tuition revenue must be delineated. (c) Related parties must be disclosed, including, but not limited to, related party footnotes, debt agreements with owners, and supplemental footnotes on separate campuses or branches are expected. (d) It should be noted whether or not tuition revenue is recognized up front or on a pro rata basis. (e) Within three (3) years from initially receiving authorization, neither the ratio of total revenues to total expenditures nor the ratio of current assets to current liabilities of either the authorized location or the parent company, where applicable, shall be less than 1:1 without convincing explanation. AUTHORIZATION AND REGULATION OF REGULARLY AUTHORIZED CHAPTER 1540-01-02 POSTSECONDARY EDUCATIONAL INSTITUTIONS (f) An institution shall elect during reauthorization whether it will rely on the financial statements of the authorized location or the parent company and must use the financial statements of the elected entity for at least three (3) consecutive years. (6) When there are questions about the institution’s financial stability, the Commission staff may require the institution to file appropriate financial statements, which may include audited statements prepared in accordance with the Generally Accepted Accounting Principles by an independent certified public accountant, for the authorized location or the parent company. (7) All institutions must maintain a business account with a financial institution that is federally insured in said institution’s name.