An institution which is not accredited by a Board-recognized accreditor and which does not meet the definition of institution of higher education contained in Texas Education Code, §61.003, must follow either the Certificate of Authority process or Alternative Certificate of Authority process in paragraphs (1) - (14) of this section in order to offer degrees or courses leading to degrees in the state of Texas. Institutions are encouraged to contact the Board staff before filing a formal application.

1. (1) Certificate of Authority.

   1. (A) Eligibility--The Board will accept applications for a Certificate of Authority only from those institutions:

      1. (i) proposing to offer a degree or credit courses alleged to be applicable to a degree; and

      2. (ii) which meet one of the following conditions:

         1. (I) has been legally operating, enrolling students, and conducting classes in Texas and has complied with state law as a non-degree-granting institution for a minimum of two (2) years;
         2. (II) has been legally operating, enrolling students, and conducting classes in Texas and has complied with state law as a degree-granting institution and wishes to open a new campus;
         3. (III) has been legally operating as a degree-granting institution in another state for a minimum of four (4) years and can verify compliance with all applicable laws and rules in that state; or
         4. (IV) held an Alternative Certificate of Authority for one year.
         5. (V) The Board may not issue a Certificate of Authority for a private postsecondary institution to grant a professional degree, as defined in §7.3(35) of this title (relating to Definitions) or to represent that credits earned in this state are applicable toward a degree if the institution is chartered in a foreign country or has its principal office or primary educational program in a foreign country.

   2. (B) To be considered by the Board as operating, means to have assembled a governing board, developed policies, materials, and resources sufficient to satisfy the requirements for a Certificate of Authority, and either have enrolled students and conducted classes or accumulated sufficient financing to do so for at least one year upon certification based on reasonable estimates of projected enrollment and costs. Sufficient financing may be demonstrated by proof of an adequate surety bond, assignment of account, certificate of deposit, irrevocable letter of credit, or a properly executed participation contract with a private association, partnership, corporation, or other entity whose membership is comprised of postsecondary institutions, which is:

      1. (i) In a form acceptable to the Board; and
      2. (ii) Conditioned to provide indemnification to any student or enrollee of the school or his/her parent or guardian determined by the Board to have suffered loss of prepaid tuition or any fees as a result of violation of any minimum standard or as a result of a holder of a Certificate of Authority ceasing operation, and provides evidence satisfactory to the Board of its financial ability to provide such indemnification and lists the amount of surety liability the guaranteeing entity will assume.

2. (2) Application for Certificate of Authority.

   1. (A) Applications must be submitted with an original and four (4) copies and accompanied by the fee described in paragraph (9) of this section.
   2. (B) The application form for the Certificate of Authority may be found on the Board's website.
   3. (C) Documentary evidence of compliance with paragraph (1)(A)(ii) of this section must be filed with the application.
   4. (D) Information regarding each degree or course leading to a degree which the institution proposes to offer.
   5. (E) Name and contact information of the designated Single Point of Contact as defined in §7.3 of this chapter (relating to Definitions).

3. (3) Authorization Process.

   1. (A) An institution must submit an application to the Board to be considered for a Certificate of Authority to offer specific degree(s), and courses which may be applicable toward a degree, in Texas.
   2. (B) Each institution must have either a Letter of Exemption or Certificate of Approval from the Texas Workforce Commission pursuant to Texas Education Code, Chapter 132.
   3. (C) An institution must submit detailed information describing the manner in which the institution complies with each of the Standards of Operations of Institutions contained in §7.4 of this chapter (relating to Standards for Operations of Institutions).
   4. (D) Institutions accredited by entities which are not recognized by the Board must submit all accrediting agency reports and any findings and institutional responses to such reports and findings.
   5. (E) Each institution must provide the required fee set by the Commissioner on a biennial basis which is necessary to cover the costs of the application review, site review team, and travel, meals, lodging and consulting fees for the review.
   6. (F) Based upon the information contained in the application, the Commissioner or his/her designee shall determine whether a site review team is necessary.
   7. (G) If a site review team is required, the Commissioner or his/her designee shall identify a site review team of no less than three individuals, all of whom have experience and knowledge in postsecondary education.
   8. (H) An institution must be fully operational as of the date of the on-site evaluation; i.e., it must have in-hand or under contract all the human, physical, administrative, and financial resources necessary to demonstrate its capability to meet the standards for nonexempt institutions. The conditions found at the institution as of the date of the on-site evaluation visit will provide the basis for the visiting team's evaluation and report, the Certification Advisory Council's recommendation, the Commissioner's recommendation, and the Board's determination of the institution's qualifications for a Certificate of Authority.
   9. (I) The site review team shall conduct an on-site review of the institution and prepare a report regarding the institution's ability to meet the Standards of Operation.
   10. (J) The institution shall have thirty (30) days in which to respond to the report.
   11. (K) The Certification Advisory Council shall review the report and the institution's response and make a recommendation regarding disposition to the Commissioner.
   12. (L) Upon receipt of the Council's recommendation, the Commissioner shall make his/her recommendation regarding the application to the Board.
   13. (M) After review of the Commissioner's and Council's recommendations, if the Board approves the application, the Commissioner shall immediately have prepared a Certificate of Authority containing the issue date, a list of the approved degree(s) or courses leading to degrees, and the period for which the Certificate is valid.
   14. (N) After review of the Commissioner's and Council's recommendations, if the Board does not approve the application, the Commissioner shall immediately notify the institution of the denial and the reasons for the denial.
   15. (O) Upon denial, the institution may not reapply for a period of one hundred eighty (180) days.

4. (4) Terms and Limitations of a Certificate of Authority.

   1. (A) The Certificate of Authority to grant degrees is valid for a period of two (2) years from the date of issuance.
   2. (B) Certification by the State of Texas is not accreditation, but merely a protection of the public interest while the institution pursues accreditation from a recognized agency, within the time limitations expressed in subparagraph (C) of this paragraph. Therefore, the institution awarded a Certificate of Authority shall not use terms to interpret the significance of the certificate which specify, imply, or connote greater approval than simple permission to operate and grant certain specified degrees in Texas. Terms which may not be used include, but are not limited to, "accredited," "supervised," "endorsed," and "recommended" by the State of Texas or agency thereof. Specific language prescribed by the Commissioner which explains the significance of the Certificate of Authority shall be included in all publications, advertisements, and other documents where certification and the accreditation status of the institution are mentioned.
   3. (C) An institution may be granted consecutive Certificates of Authority for no longer than eight (8) years. Absent sufficient cause, at the end of the eight (8) years, the institution must be accredited by a Board-recognized accrediting agency.

5. (5) Institutions holding a Certificate of Authority will be required to:

   1. (A) furnish a list of their agents to the Board;
   2. (B) maintain records of students enrolled, credits awarded, and degrees awarded, in a manner specified by the Board; and
   3. (C) report any substantive change.

6. (6) Grounds for Revocation of Certificate of Authority.

   1. (A) The Institution no longer holds a Certificate of Approval or Letter of Exemption issued by the Texas Workforce Commission.
   2. (B) Institution fails to comply with substantive change notification and data reporting requirements as outlined in §7.11 of this chapter (relating to Changes of Ownership and Other Substantive Changes) and §7.13 of this chapter (relating to Data Reporting), respectively.
   3. (C) Institution offers degrees for which it does not have Board approval.
   4. (D) Institution fails to maintain the Standards of Operation as defined in §7.4 of this chapter.
   5. (E) Failure to comply with paragraph (3)(D) of this section.

7. (7) Revocation of Certificate of Authority to Offer Degrees in Texas.

   1. (A) Board notifies institution of grounds for revocation as outlined in paragraph (6) of this section.
   2. (B) Within ten (10) days of its receipt of the Commissioner's notice, the institution must respond and offer proof of its continued qualification for the exemption, and/or submit data as required by §7.13 of this chapter.
   3. (C) After reviewing the evidence, the Commissioner will issue a notice of determination, which in the case of an adverse determination, shall contain information regarding the reasons for the denial, and the institution's right to a hearing.
   4. (D) If a determination under this section is adverse to an institution, it shall become final and binding unless, within forty-five (45) days of its receipt of the adverse determination, the institution invokes the administrative remedies contained in Chapter 1, Subchapter B of this title (relating to Dispute Resolution).
   5. (E) Until the Certificate of Authority is reinstated, the institution may not grant degrees, offer courses leading to degrees, or receive payments from students for courses which may be applicable toward a degree.

8. (8) Reapplication After Revocation of Certificate of Authority.

   1. (A) The institution will not be eligible to reapply for a period of one hundred eighty (180) days.
   2. (B) The subsequent application must show, in addition to all other requirements described herein, correction of the deficiencies which led to the denial.
   3. (C) The period of time during which the institution does not hold a Certificate of Authority shall not be counted against the eight (8) year period within which the institution must achieve accreditation from a recognized accrediting agency absent sufficient cause, as described in paragraph (4)(C) of this section; the time period begins to run again upon reinstatement.

9. (9) Fees Related to Certificates of Authority.

   1. (A) Certificates of Authority. Each biennium the Commissioner shall set the fee for initial and renewal applications for Certificates of Authority, which shall be equal to the average cost of evaluating the applications. The fee shall include the costs of travel, meals, and lodging of the visiting team and the Commissioner, or the Commissioner's designated representatives, and consulting fees for the visiting team members, if an on-site review is conducted.
   2. (B) Each biennium, the Commissioner shall also set the fees for amendments to Certificates of Authority.
   3. (C) The Commissioner shall report changes in the fees to the Board at a quarterly meeting.

10. (10) Renewal of Certificate of Authority.

    1. (A) At least one hundred eighty (180) days, but no more than two hundred ten (210) days, prior to the expiration of the current Certificate of Authority, an institution, if it desires renewal, shall make application to the Board on forms provided upon request. Reports not previously submitted to the Board, related to the application for or renewal of accreditation by national or regional accrediting agencies shall be included. The renewal application shall be accompanied by the fee described in paragraph (9) of this section.
    2. (B) The application for renewal of the Certificate of Authority will be evaluated in the same manner as that prescribed for evaluation of an initial application, except that the evaluation will include the institution's record of improvement and progress toward accreditation.
    3. (C) An institution may be granted consecutive Certificates of Authority for no longer than eight (8) years. Absent sufficient cause, at the end of the eight (8) years, the institution must be accredited by a recognized accrediting agency.
    4. (D) Subject to the restrictions of paragraph (3) of this section, the Board shall renew the certificate if it finds that the institution has maintained all requisite standards.

11. (11) Amendments to a Certificate of Authority.

    1. (A) An institution which wishes to amend an existing program of study to award a new or different degree during the period of time covered by its current certificate may file an application for amendment, on forms provided by the Board upon request. An institution may begin operating such a program upon filing the application, and the application shall be deemed to be granted if not rejected by the Board within one hundred twenty (120) days.
    2. (B) Applications for amendments shall be accompanied by the fee described in paragraph (9) of this section.
    3. (C) Unless the Board finds that the new program of study does not meet the required standards, the Board shall amend the institution's certificate accordingly.
    4. (D) A change of degree level would require an amended Certificate of Authority prior to beginning the program.

12. (12) Authority to Represent Transferability of Course Credit. Any institution as defined in §7.3 of this chapter, whether it offers degrees or not, may solicit students for and enroll them in courses on the basis that such courses will be credited to a degree program offered by another institution, provided that:

    1. (A) the other institution is named in such representation, and is accredited by a recognized accrediting agency or has a Certificate of Authority;
    2. (B) the courses are identified for which credit is claimed to be applicable to the degree programs at the other institution; and
    3. (C) the written agreement between the institution subject to these rules and the accredited institution is approved by both institutions' governing boards in writing, and is filed with the Board.

13. (13) Closure of an Institution.

    1. (A) The governing board, owner, or chief executive officer of an institution that plans to cease operation shall provide the Board with written notification of intent to close at least ninety (90) days prior to the planned closing date.
    2. (B) If an institution closes unexpectedly, the governing board, owner, or chief executive officer of the school shall provide the Board with written notification immediately.
    3. (C) If an institution closes or intends to close before all currently enrolled students have completed all requirements for graduation, the institution shall assure the continuity of students' education by entering into a teach-out agreement with another institution authorized by the Board to hold a Certificate of Authority, with an institution operating under a Certificate of Authorization, or with a public or private institution of higher education as defined in Texas Education Code §61.003. The agreement shall be in writing, shall be subject to Board approval, shall contain provisions for student transfer, and shall specify the conditions for completion of degree requirements at the teach-out institution. The agreement shall also contain provisions for awarding degrees.

    4. (D) The Certificate of Authorization for an institution is automatically withdrawn when the institution closes. The Commissioner may grant to an institution that has a degree-granting authority temporary approval to award a degree(s) in a program for which the institution does not have approval in order to facilitate a formal agreement as outlined under this section.

       1. (i) The curriculum and delivery shall be appropriate to accommodate the remaining students.
       2. (ii) No new students shall be allowed to enter the transferred degree program unless the new entity seeks and receives permanent approval for the program(s) from the Board.

14. (14) Alternative Certificate of Authority. In lieu of the standard Certificate of Authority requirements for institutions and their agents described in paragraphs (1) - (13) of this section, an institution may obtain an Alternative Certificate of Authority to issue degrees as provided by this subsection. Alternative Certificates of Authority shall be issued by the Commissioner and are temporary, being valid for twelve (12) months, after which a regular Certificate of Authority shall be required. A site visit shall be conducted by Board staff during the initial twelve (12) month period.

    1. (A) Surety Instrument Requirement. At the time application is made for an Alternative Certificate of Authority, or when new programs, stand-alone courses or continuing education courses are added, the applicant shall file with the Board a surety bond or surety alternative which meets the requirements set forth in these sections. Schools located in Texas each shall file one bond or surety alternative covering the school and its agents.

       1. (i) The amount of the bond or other allowable surety instrument submitted to the Board with an application for an Alternative Certificate of Authority shall be equal to or greater than the cost of providing a refund, including administrative costs associated with processing claims, for the maximum prepaid, unearned tuition and fees of the school for a period or term during the applicable school year for which programs of instruction are offered, including, but not limited to, on a semester, quarter, monthly, or class basis; except that the period or term of greatest duration and expense shall be utilized for this computation where a school's year consists of one or more such periods or terms.
       2. (ii) A school, whose surety value is found by the Board to be insufficient to fund the unearned, prepaid tuition of enrolled students, shall be noncompliant with these sections, and, if, after ten (10) working days from the issuance of a notice of noncompliance, the school has not increased its surety to an acceptable level, it shall be subject to revocation or suspension of its Alternative Certificate of Authority.
       3. (iii) Following the initial filing of the surety bond with the Board, the amount of the bond shall be recalculated annually based upon a reasonable estimate of the maximum prepaid, unearned tuition and fees received by the school for such period or term. In no case shall the amount of the bond be less than twenty-five thousand dollars ($25,000).
       4. (iv) The institution shall include a proposal in the form of a letter signed by an authorized representative of the school showing in detail the calculations made pursuant to this section and explaining the method used for computing the amount of the bond or surety alternative.

       5. (v) In order to be approved by the Board, a surety bond must be:

          1. (I) An original bond;
          2. (II) Executed by the applicant and by a surety company authorized to do business in Texas;
          3. (III) In a form acceptable to the Board; and
          4. (IV) Conditioned to provide indemnification to any student or enrollee of an in-state or out-of-state school or his/her parent or guardian determined by the Board to have suffered a loss of tuition or any fees as a result of violation of any minimum standard or as a result of a holder of an Alternative Certificate of Authority ceasing operation.

       6. (vi) In lieu of a surety bond, an applicant may file with the Board an assignment of savings account that:

          1. (I) Is in a form acceptable to the Board;
          2. (II) Is executed by the applicant; and
          3. (III) Is executed by a state or federal savings and loan association, state bank or national bank whose accounts are insured by a federal depositor's corporation.

       7. (vii) In lieu of a surety bond, an applicant may file with the Board a certificate of deposit that:

          1. (I) Is issued by a state or federal savings and loan association, state bank or national bank whose accounts are insured by a federal depositor's corporation;

          2. (II) Is either:

             (-a-) Payable to the Board;

             (-b-) In the case of a negotiable certificate of deposit, is properly assigned without restriction to the Board; or

             (-c-) In the case of a non-negotiable certificate of deposit, is assigned to the Board by assignment in a form satisfactory to the Board.

       8. (viii) In lieu of a surety bond, an applicant may file with the Board an irrevocable letter of credit that:

          1. (I) Is in a form acceptable to the Board; and
          2. (II) Is conditioned to provide indemnification to any student or enrollee of the school or his/her parent or guardian determined by the Board to have suffered loss of tuition or any fees as a result of violation of any minimum standard or as a result of a holder of an Alternative Certificate of Authority ceasing operation.

       9. (ix) In lieu of a surety bond, an applicant may file with the Board a properly executed participation contract with a private association, partnership, corporation or other entity whose membership is comprised of postsecondary institutions, which:

          1. (I) Is in a form acceptable to the Board; and
          2. (II) Is conditioned to provide indemnification to any student or enrollee of the school or his/her parent or guardian determined by the Board to have suffered loss of prepaid tuition or any fees as a result of violation of any minimum standard or as a result of a holder of an Alternative Certificate of Authority ceasing operation, and provides evidence satisfactory to the Board of its financial ability to provide such indemnification and lists the amount of surety liability the alternative entity will assume.

       10. (x) Whenever these sections require a document to be executed by an applicant the following shall prevail:

           1. (I) If the applicant is a corporation, the document must be executed by the president of the corporation or persons designated by the corporate board.
           2. (II) If the applicant is a limited liability corporation the document must be executed by the members.
           3. (III) If the applicant is a partnership, the document must be executed by all general partners.
           4. (IV) If the applicant is an individual, the document must be signed by the individual.
           5. (V) If the applicant is a state agency, the document must be signed by the Director of that Department.
           6. (VI) If the applicant is a local government, the document must be signed by the mayor or board president.
       11. (xi) Any bonding alternative entity must have independent financial resources necessary to meet the contractual obligation to the students of a failed member institution and resources equal to or exceeding the maximum bonds required of all single schools.
       12. (xii) A school applying for an Alternative Certificate of Authority shall be exempt from the surety instrument requirement if it can demonstrate a United States Department of Education composite financial responsibility score of 1.5 or greater on its current financial statement; or if it can demonstrate a composite score between 1.1 and 1.4 on its current financial statement and has scored at least 1.5 on a financial statement in either of the prior two (2) years.
    2. (B) Application and Statement. Institutions seeking an Alternative Certificate of Authority are urged to obtain informal guidance from Board staff before filing a formal application. The Board will accept applications for an Alternative Certificate of Authority only from those institutions proposing to offer a degree or credit courses alleged to be applicable to a degree.

    3. (C) An institution seeking an Alternative Certificate of Authority shall submit to the Board a completed application, which must demonstrate it meets, or has the ability to meet, depending on circumstances, the standards set out in §7.4 of this chapter; a signed and dated affirmation statement, acknowledging compliance with certification criteria set forth in this section; and a notarized attestation statement signed by the chief executive officer or equivalent. The application form shall contain:

       1. (i) The name and address of the institution and its purpose;
       2. (ii) The names of the sponsors or owners of the institution;
       3. (iii) The regulations, rules, constitutions, bylaws, or other regulations established for the government and operation of the institution;
       4. (iv) The names and addresses of the chief administrative officer, the principal administrators, and each member of the board of trustees or other governing board;
       5. (v) The names of faculty who have been retained, their area(s) of teaching, and their degrees held;
       6. (vi) The types of degrees to be awarded and a list of courses that may be included in each degree program; and
       7. (vii) The location of any facilities maintained or being constructed and a list of potentially hazardous equipment which requires a federal or state government license to operate, if any has been acquired, that is to be used by students in the teaching process.
    4. (D) Institutions shall certify that they maintain a list of their agents as defined in §7.3 of this chapter and have policies to ensure that their agents are of good character and provide accurate information to prospective students and their families, but such agents are not required to register with the Board or submit a fee.
    5. (E) Applications must be submitted with an original and four copies and accompanied by the required fee. Alternative Certificate of Authority fees shall be five hundred dollars ($500) more than the fee for a regular Certificate of Authority, as established in paragraph (9) of this section.

    6. (F) Board's Review of Applications.

       1. (i) Within ninety (90) days of receipt of a complete application, Board staff will review said application and recommend to the Commissioner either approval or denial of the application.
       2. (ii) Within one hundred twenty (120) days of receipt of a complete application, the Commissioner shall either award a one-year Alternative Certificate of Authority or deny the application.
       3. (iii) If a determination under this section is adverse to an institution, it shall become final and binding unless, within forty-five (45) days of its receipt of the adverse determination, the institution invokes the administrative remedies contained in Chapter 1, Subchapter B of this title.
       4. (iv) Upon denial, or after the institution has exhausted all appeal options and has not prevailed, the institution may not reapply for a period of one hundred eighty (180) days.

    7. (G) Terms and Limitations of an Alternative Certificate of Authority.

       1. (i) The Alternative Certificate of Authority to grant degrees is valid for one (1) year from the date of issuance.
       2. (ii) The institution shall notify the Board at least ten (10) working days prior to the start of the first class of its first year schedule. Board staff shall visit the institution and interview both staff and students at least once during the first year.
       3. (iii) Certification by the State of Texas is not accreditation, but merely a protection of the public interest while the institution pursues accreditation from a recognized agency, within the time limitations expressed in paragraph (10)(C) of this section. An institution awarded an Alternative Certificate of Authority shall not use terms to interpret the significance of the certificate which specify, imply, or connote greater approval than simple permission to operate and grant degrees in Texas. Terms which may not be used include, but are not limited to, "accredited," "supervised," "endorsed," and "recommended" by the State of Texas or agency thereof. Specific language prescribed by the Commissioner which explains the significance of the Alternative Certificate of Authority shall be included in all publications, advertisements, and other documents where certification and the accreditation status of the institution are usually mentioned, including the institution's catalog and the home page of the institution's Internet website.
       4. (iv) Approval of the application grants the institution the authority to award degrees or to enroll students for courses that may be applicable toward a degree only for those programs approved by the Alternative Certificate of Authority. Separate program approval shall be required for each additional degree program in accordance with this chapter.

       5. (v) The Commissioner may revoke an institution's Alternative Certificate of Authority to grant degrees at any time if the Commissioner finds that:

          1. (I) Any statement contained in an application for the certificate is untrue;
          2. (II) The institution has failed to maintain the standards of the Board, as described herein, on the basis of which the certificate was granted;
          3. (III) Advertising or representations made on behalf of the institution is deceptive or misleading;
          4. (IV) The institution has offered degrees or courses leading to degrees for which they have not been approved in an Alternative Certificate of Authority; or
          5. (V) The institution has violated any provision of this subchapter.

    8. (H) Continuing Operations after One Year.

       1. (i) At least one hundred eighty (180) days, but no more than two hundred ten (210) days, prior to the expiration of the current Alternative Certificate of Authority, an institution, if it desires to continue operations, shall make application to the Board for a Certificate of Authority following the process in paragraph (10) of this section. Only one Alternative Certificate of Authority will be granted.
       2. (ii) The application will be evaluated in the same manner as that prescribed for evaluation of an initial application.

Source Note:The provisions of this §7.8 adopted to be effective December 6, 2009, 34 TexReg 8515; amended to be effective November 29, 2010, 35 TexReg 10497; amended to be effective February 26, 2013, 38 TexReg 1152; amended to be effective November 24, 2013, 38 TexReg 8434.