Ministry of Advanced Education

Degree Authorization

Private and Out-of-province Public Institutions - Minister's Requirements: Financial Security

How to Calculate Unearned Revenue

Calculating the projected amount depends on the inter-relationship of student enrolments, tuition, and the timing of the tuition collection.

1. The formula used to calculate and project unearned revenue:
1. If students pre-pay full tuition for the contracted period the formula is as follows:
   projected student enrolment x tuition = unearned revenue
   
   
2. If students pay for the program in instalments, the formula is as follows:
   projected student enrolment x tuition instalment fee = unearned revenue
2. Financial security required is as follows:
   unearned revenue at its highest point of any one month during a 12-month period x 75% = required security

Note that the amount of financial security cannot be less than $100,000 per institution.

Example

The facts of the degree program:

• There will be 30 students
• Tuition fees will be $8,000 per year
• The school year is September – April
• The institution will collect: $4,800 (60%) in September, and $3,200 (40%) in December

projected student enrolment x tuition instalment fee = unearned revenue
September - 30 x $4,800 = $144,000
December – 30 x $3,200 = $96,000

The highest point of unearned revenue is in September.

unearned revenue at its highest point of any one month during a 12-month period x 75% = required security
$144,000 x .75 = $108,000

Financial Security required: $108,000

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Procedures for Providing and Maintaining Security

The institution must provide an updated projection for the maximum level of unearned revenue for each month for the specified period below:

1. for applicants – 12 month period from when financial security is provided;
2. for consent holders – 12 month period beginning from August 1 to July 31.

To support the amount required for security the institution must enclose a copy of the calculations using the standard form provided by the board secretariat.

If the institution has been operating for more than one year, the institution must also provide an audited statement indicating the total amount of tuition collected during the prior year.

Note: Maintaining the level of security and promptly notifying the minister of any changes that affect the level of security is a condition of consent.

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Security Instruments

The following security instruments may be used:

1. a surety bond issued by a bonding company or insurer registered to do business in British Columbia;
2. short term deposits registered in the name of the Minister of Finance issued by a Canadian financial institution (chartered bank, trust company, or credit union)
3. marketable bonds in fully registered form issued and/or guaranteed by the Government of Canada or the government of any province of Canada with a maturity date of not longer than three years, together with a duly executed power of attorney to the Minister of Finance;
4. treasury bill notes issued by the Government of Canada or the government of any province of Canada;
5. irrevocable letters of credit with a termination date beyond the required term of the security, issued by a Canadian financial institution, payable to the Minister of Finance.

Note: Instruments defined under 2, 3, and 4 must be covered by a safekeeping agreement with a financial institution and the government. The interest accumulated from these instruments belongs to the institution.

In the event a security matures, the institution must replace the maturing security with another acceptable security of appropriate value. The government will not release the maturing security until the replacement security is deposited.

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Forfeiture of Security

The Minister of Advanced Education may declare any security that has been submitted by an institution to be forfeit if the minister makes the determination that the institution is unable to continue offering the degree program covered by the security or is unable to meet its program obligations outlined in the terms and conditions of consent. The minister will provide written notice to the institution regarding the forfeiture.

If a security is forfeited, the minister is responsible for determining the amounts of tuition to be refunded to students. If the amount of all tuition to be refunded exceeds the amount of security, the security will be distributed pro rata.

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