Section 1540-01-02-.14 - 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(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.(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.Tenn. Comp. R. & Regs. 1540-01-02-.14
Original rule filed May 15, 1985; effective July 1, 1985. Repeal and new rule filed January 24, 1990; effective May 1, 1990. Amendment filed December 15, 1992; effective March 31, 1993. Repeal and new rule filed June 24, 1998; effective October 28, 1998. Amendment filed June 6, 2008; declared void and of no effect pursuant to Davidson County Chancery Court's October 2011 order. See also Attorney General's Opinion 11-78. Amendments filed April 1, 2013; to have been effective September 28, 2013. However, a petition for a rulemaking hearing was filed June 26, 2013. The Tennessee Higher Education Commission filed a withdrawal of the rule on July 26, 2013. Amendment filed September 2, 2014; effective December 1, 2014. However, the Government Operations Committee filed a 30-day stay of the amendment on November 19, 2014; new effective date December 31, 2014. The Tennessee Higher Education Commission withdrew the rule on December 10, 2014. Emergency rules filed August 15, 2016; effective October 3, 2016 through April 1, 2017. Repeal and new rules filed December 21, 2016; effective March 21, 2017. Emergency rules filed June 29, 2022; effective July 1, 2022 through December 28, 2022. Amendments filed September 30, 2022; effective 12/29/2022.Authority: T.C.A. §§ 49-7-2005, 49-7-2006, and 49-7-2015.