(a) Definitions Relating to Financial Requirements.
  (1) Balance Sheet--A statement of financial position or statement of condition, showing the status of assets, liabilities and owner equity for a defined period i.e., monthly, quarterly, etc.
  (2) Current ratio--ability to pay current obligations from current assets.
  (3) Generally Accepted Accounting Principles (GAAP)--Conventions, rules and procedures that define accepted accounting practices to include both broad guidelines as well as detailed procedures.
  (4) Generally Accepted Auditing Standards (GAAS)--Conventions, rules and procedures that define accepted audit practices.
  (5) Stockholders Equity (net worth)--amount by which assets exceed liabilities.
  (6) Sworn statement--A notarized statement including the following language: "I swear or affirm that the information in these statements is true and correct to the best of my knowledge."
  (7) Unearned income (tuition) affidavit--A statement of income received but not yet earned during the current or most recent fiscal year. This is usually shown as a liability on a balance sheet, assuming it will be credited to income within the normal accounting cycle.
(b) The balance sheet required in this subchapter shall reflect the following:
  (1) positive equity or net worth balance;
  (2) unearned tuition as a current liability;
  (3) a current ratio of at least one-to-one (current assets divided by current liabilities); and
  (4) stockholder's equity or net worth exceeding the amount shown for goodwill, if applicable, under assets in the balance sheet.
(c) Compilations shall be accompanied by the owner's sworn statement that all submitted documents are true and correct to the best of the owner's knowledge.
(d) All financial statements shall identify the name, license number, and licensing state of the accountant associated with the statements and be in accordance with GAAP.
(e) A school that maintains a financial responsibility composite score that meets the general standards established in federal regulations by the U.S. Department of Education for postsecondary institutions participating in student financial assistance programs authorized under Title IV of the Higher Education Act of 1965, as amended, shall be considered to have met the financial standards of this subchapter.
(f) A school that qualifies under an alternative standard but not the general standard of these federal regulations will not be considered to have met the financial standards of this subchapter unless the school meets the other requirements stated in this subchapter.
(g) Requirements for Original Approvals.
  (1) The owner shall furnish the commission with the following:
    (A) a school owned by a sole proprietor must submit a reviewed personal balance sheet stating the disclosure of payments for the next five years to meet debt agreements as required by GAAP; or
    (B) all other ownership structures must submit an audited balance sheet consistent with GAAP and GAAS and certified by an accountant.
  (2) The facility shall submit a balance sheet, a list of the expected school-related expenses for the first three months of operation of the school; a sworn statement signed by the owner affirming the availability of sufficient cash to cover projected expenses at the date of the certification. Projected expenses may include the following:
    (A) employee salaries, listed by position title, including withholding and unemployment taxes, and other related expenses;
    (B) lease or rent payments for listed equipment;
    (C) lease or rent payments for facilities;
    (D) accounting, legal and other specifically identified professional fees;
    (E) an estimate of expenses such as advertising, travel, textbooks, office and classroom supplies, printing, telephone, utilities, taxes;
    (F) a projection of the gross amount of tuition and fees to be collected during each of the first two years of operation; and
    (G) such other evidence as may be deemed appropriate by the commission to establish financial stability.
(h) Prior to a change in ownership of a facility, the purchaser shall furnish the commission a current balance sheet meeting the requirements outlined in this subchapter for original approvals, excluding the sufficient cash requirement for initial expenses. The purchaser shall furnish any other evidence deemed appropriate by the commission to establish financial stability.
(i) The deletion or addition of any person that would be considered an owner is considered a change in facility ownership. The facility must notify the commission of the change in ownership within 14 days of the transaction.
(j) The commission may require submission of a full application for approval of a change in ownership.
(k) Management agreements must be disclosed to the commission. Parties to a management agreement shall be of good reputation and character.
(l) The deletion, addition or moving of a facility will be reported to the commission 14 days prior to the transaction.
(m) If the commission determines that the deletion, addition or moving of a facility presents an unreasonable transportation hardship which would prevent a student from completing the training at the new location, the school shall provide a full refund of all monies paid and a release from all obligations to the student.
(n) The commission shall be notified in writing of any legal action to which the facility, any of its owners, representatives or management employees is a party.
(o) The notification shall be within 14 days after the action is known to be filed or the facility, owner, representative or management employee is served.
(p) The facility shall include, with the required notice, a file-marked copy of the petition, complaint, or other legal instrument, including copies of any judgments.
(q) If the commission determines that reasonable cause exists to question the validity of any financial information submitted, or the financial stability of the facility, the commission may require at the facility's expense:
  (1) an audit of the facility that has been certified by an accountant; or
  (2) The owner must furnish any other evidence deemed appropriate by the commission to establish financial stability.
(r) The entity certified under this subchapter shall maintain, in a permanent format that is acceptable and readily accessible to the commission, a record of any funds received from, or on behalf of, the student. The entity shall clearly identify the payer, the type of funding, and the reason for the charges. These records shall be posted and kept current.
(s) An entity certified under this subchapter shall issue written receipts of any charges or payments to the student and maintain such records for review upon request by the commission. Each separately charged item shall be clearly itemized on the student-signed receipt.
(t) An entity certified under this subchapter shall develop and maintain a cancellation and refund policy.
(u) The student shall be entitled to a full refund of all monies paid to the facility if classes or courses are cancelled by the facility.
(v) For classes or courses cancelled by the student, refund policies will be based on a prorated basis or percentage of the class or program completed by the student.
(w) An entity certified under this subchapter shall comply with Chapter 437 of this title (relating to Fees).
(x) Upon application for renewal, an entity certified under this subchapter will provide a balance sheet with a sworn statement.

Source Note: The provisions of this §427.403 adopted to be effective May 9, 2007, 32 TexReg 2476; amended to be effective May 20, 2018, 43 TexReg 3103