Licence Appeal Tribunal
Appeal en matière de permis
FILE: 9124/PCCA
CASE NAME: 9124 v. Superintendent, Private Career Colleges Act, 2005
Appeal from a Proposal of the Superintendent, Private Career Colleges Act, 2005, S.O. 2005, c. 28, Sch. L to Refuse to Renew Registration
Key2Careers College of Business and Technology Inc. Appellant
-and-
Superintendent, Private Career Colleges Act, 2005 Respondent
REASONS FOR DECISION AND ORDER
ADJUDICATOR: Simon Dann, Member
APPEARANCES:
For the Appellant: Suresh Jagtiani, Agent
For the Respondent: Fatema Dada, Counsel
Heard in Toronto: March 30, 2015
REASONS FOR DECISION AND ORDER
BACKGROUND
This is a hearing before the Licence Appeal Tribunal (the “Tribunal”) arising out of a Notice of Proposal ("NOP") issued by the Superintendent, Private Career Colleges Act, 2005 (the “Superintendent” and the “Act” respectively). The Notice of Proposal dated September 18, 2014, proposed to refuse to renew the registration of Key2Careers College of Business and Technology Inc. (the “Appellant”, “Key2Careers” and the “School”) under the Act.
The reasons cited by the Superintendent are:
- The school has not had any students enrolled in any vocational program for more than two successive periods;
- The Superintendent is no longer satisfied the school can be financially responsible ... in regard to its current financial position.
Counsel for the Superintendent, Fatema Dada, in her opening statement confirmed the Superintendent's position regarding the two reasons for his refusal to renew the registration as set out in the NOP and stated that the school's only source of revenue comes from non-vocational enrollments. It is the Superintendent’s position that there is no dispute of the school's financial troubles and also no proof that the school will fulfill its obligations.
The Appellant's Agent, Suresh Jagtiani, said that since the School was registered in 2005, it has had problems being competitive with lower cost community colleges and the inability of international students to receive visas to attend the School. Key2Careers has had vocational students from oil companies but the Act does not recognize third party funding for students. The School has now been approved under a new federal government program for international students and is asking for a 2 year time frame to show the School can succeed.
Mr. Jagtiani also offered that if the School does not meet the Act's criteria within the 2 year period then, the Superintendent can proceed with cancelling the registration.
DECISION
The Tribunal has considered all of the evidence and the submissions of Counsel. The Respondent has proven its case on a balance of probabilities. The registration of the Applicant will not be renewed for the reasons which follow.
EVIDENCE
For the Respondent
Margot Devlin is an investigator with the Private Career Colleges (the “PCC”) Branch and is focused on compliance issues. She noted that the difference between vocational and non-vocational programs is that one leads to employment while the other does not, i.e., trucking is a vocational program leading to employment while a soft-skill tutorial program such as Microsoft Word is not.
Ms Devlin became familiar with Key2Careers when it was transferred to her portfolio for review in 2010. She said the review began with the Appellant's request for the approval of a new program. Through that review process, it became apparent that Key2Careers had reported a net loss for the years 2006 through 2009 and had very few students (Exhibit 3, Tab 15).
Ms Devlin asked Mr. Jagtiani to provide "documentation to prove financial viability and long-term sustainability of your operation". This included a request for a business plan to show how the college would be turned into a profitable operation.
Ms Devlin received a business plan for 2011-2013 (Exhibit 3, Tab 9), which included enrollment and revenue projections. The plan also contained an intention to develop unique niche programs and initiate marketing programs to target and attract students from the Greater Toronto Area (the “GTA”) and Asia. On the basis of that plan, the Appellant's renewal application was approved.
A routine inspection in late 2011 revealed that Key2Careers had few students and the only people on-site were interns doing marketing research for another one of Mr. Jagtiani's businesses, First Choice ("FC"), which was located in the same facility and using the same phone number.
Her internal review report on the inspection findings (Exhibit 3, Tab 18) questioned why Key2Careers needed PCC registration as there were no students, "one last year and zero the year before". The corporate training that was taking place also did not need PCC registration.
She noted there was a successful soft skills business but these were non-vocational and the record keeping was poor. But, since there were no students, and therefore no risk to students, she felt the situation could be dealt with through an inspection report.
In early 2012, Ms Devlin sent Mr. Jagtiani a copy of her November 2011 inspection report which contained numerous areas that called for his "immediate attention" (Exhibit 3, Tab 21). The Appellant’s February 2012 reply to Ms Devlin left a number of outstanding compliance issues which she subsequently outlined in an internal memorandum (Exhibit 3, Tab 23).
Early in 2014, Ms Devlin did a follow-up investigation and essentially found the same situation as in 2011-2012 and that there were no vocational students. She again found third-party funded students and intern students for First Choice. This was followed by a March 2014 email from Ms Devlin to Mr. Jagtiani which listed a number of requested items and these were provided over the course of the next four months (Exhibit 3, Tab 27).
On April 16, 2014, a letter was sent to Mr. Jagtiani notifying him that the Superintendent was considering a proposal to refuse to renew the registration of Key2Careers on the basis that the school's statement of operations for the years 2011 and 2012 showed there had not been any students enrolled in any vocational program. Mr. Jagtiani had confirmed this fact in a letter dated August 19, 2014 (Exhibit 3, Tab 13).
In his April 16, 2014 reply, Mr. Jagtiani explained that he receives “over 200 applications from international students every year” and while these students require appropriate visas, no visas are issued. He states that community college applicants receive visas with their acceptance letters while his applicants, with similar acceptance letters, are refused visas.
Mr. Jagtiani also said that only recently has the federal international student program ("ISP") process been initiated and Key2Careers has applied in an effort to be more successful in seeing its international applicants receive student visas.
Ms Devlin reviewed the September 18, 2014, Notice of Proposal (“NOP”) to refuse to renew the registration of Key2Careers for the specific reasons that that there had not been enrollments for two successive periods and the concern that with the school's current financial position, it would not be financially responsible in the operation of a private career college.
In the NOP details, it was noted that the school had not developed the niche programs proposed 3 years earlier or to target students from the GTA. The financial data provided by the school showed that:
- the 2013 accumulated deficit had reached ($229,575);
- the retained earnings/total asset ratio measuring ability to accumulate earnings based on assets was 459% below the industry benchmark;
- the ability to pay short-term obligations over the following 12 month business cycle is 36% below the industry benchmark and shows the school would only be able to cover 45% of current liabilities;
- the debt ratio is 465% higher than the industry benchmark and shows the school has "no solvency at the moment"; and
- the financial position has failed to satisfy the condition for renewal under section 14(1)(d) of the Act.
Ms Devlin's view is that First Choice and the other skills training business operated by Mr. Jagtiani are profitable and it appears that PCC registration is not required for those.
Alan Chu is a PCC senior financial and business coordinator. His role includes assessment of renewal and new registrations. He also reviews assessments and moves them forward for approvals. His testimony included a review of the PCC Capacity Assessment process to "broadly assess risk in private career colleges" (Exhibit 3, Tab 30).
Mr. Chu then reviewed a PCC financial analyst's capacity assessment of Key2Careers which recommended refusing the school's renewal of registration. He pointed to the fact the school had no vocational students for the past three years and then to the financial deficiency indicators. He said the issue is that the school has no finances because there have been no enrollments of vocational students. For both 2012 and 2013, the revenues shown are from non-vocational and other sources. (Exhibit 3, Tab 11)
Mr. Chu acknowledged that a review of the financials for 2012 versus 2013 showed an improvement but when they were compared to the industry benchmark, it was still not good. He said that Key2Careers has relied on a one-time tax credit for improvement in the appearance of its financials, not from the business of vocational student enrollments.
As there have been no compliance issues with the Government of Canada, Key2Careers is only required to maintain the minimum financial security, which is in the form of a $10,000 security bond.
It was also noted that for every $1.00 of asset, Key2Career owes $5.00 to its creditors.
Cliff McLeod works currently as a government policy advisor and was previously an investigator with the PCC branch. He said the purpose of the international student program is to assist applicants with visa eligibility for a study period at a designated institution. Visa decisions are not made at the provincial level.
When asked about the Implementation Guideline for Postsecondary Institutions to Apply for Institutional Designation under the International Student Program, produced by the Ontario Ministry of Training, Colleges and Universities ("MTCU"), Mr. McLeod said he had no involvement in creating the document but was aware there was some review by all provinces in determining the final criteria. The document describes the requirements for institutions (such as Key2Careers) to be considered eligible for designation by Ontario as providing education services to foreign nationals requiring a visa to attend a program of study, in Canada, for more than 6 months.
Mr. McLeod said he was involved in the financial evaluation of Key2Careers in its application for eligibility for designation as an institution providing education services to foreign nationals and while the school was in a difficult position, it could mitigate its perceived risk by complying with a number of conditions listed in Schedule B of its agreement document with the MTCU (Exhibit 4, Tab 5).
Mr. McLeod agreed the financial health of the school is dependent upon the number of enrollments. He said the program applies to institutions with non-vocational programs as well as vocational ones. Since non-vocational programs are less expensive to deliver, any risk posed by the school's financial position would be mitigated if conditions were set for the school.
Referring to paragraph 2 of Schedule B (Exhibit 4, Tab 5, pg 247), Mr. McLeod said that if Key2Careers were to lose its PCC designation but could confirm that it would be using the same Ministry approved programs as before, its eligibility as a designated institution would continue.
When Mr. McLeod was asked when the new process, concerning visa applications for international students and designation of approved study institutions occurred, he replied that it was in June of 2014.
The Appellant called no witnesses.
CLOSING SUBMISSIONS
The Respondent's Counsel, Ms Dada, submitted that the Appellant's business plan and projections for vocational enrollments had not been realized. The fact that other parts of the Appellant's business were doing well showed that PCC registration was not needed.
While financial data confirmed the contribution the tax credit had provided to the school's financial statements that did not change the fact there was no revenue from vocational students and the school had a debt ratio of more than 450% over the industry benchmark.
Ms Dada submitted that Mr. McLeod confirmed that Key2Careers, with conditions, could still be designated as an eligible institution under the new international student program even without vocational programs.
The purpose of the Act is to provide students with consumer protection and while there were students at Key2Careers through corporation programs they do not fit with the Act criteria and therefore do not enjoy the same protection.
Ms Dada submitted that the issue for Key2Careers has been how to get vocational students. As this has not happened, the Ministry is asking the Tribunal to confirm the NOP to refuse to renew the Appellant's registration.
In the alternative, if the Tribunal determined that conditions would be more appropriate then, the conditions should include the requirement for an updated marketing plan to increase vocational student registrations, the provision of monthly student enrollment reports, as well as quarterly unaudited financial statements showing the breakdown of international and domestic students and whether they are vocational or non-vocational students.
Ms Dada said that in addition, the Ministry would want to review and approve the programs which have not been delivered for the past two years when there were no vocational students. The Ministry would also want to see a minimum of 7 students over a 6 month period.
In the Appellant's closing submissions, the Tribunal was asked by Mr. Jagtiani to review the documents found in Exhibit 7, Tab 16 which show that the Appellant has made best efforts to recruit students. The efforts were not successful because the student applicants were not issued visas.
Once the ISP program started, the Appellant said that international applicants were not able to get visas because Key2Careers was not on the Designated Learning Institute (“DLI”) list and he pointed to the Citizenship and Immigration letter to an applicant in 2014 (Exhibit 7, Tab 3). In 2015, Key2Careers was approved for the program and got on to the DLI list.
It was submitted that since Key2Careers has been approved as a DLI, it should be able to grow and overcome both financial and student issues.
On the subject of registration with conditions, Mr. Jagtiani said he disagreed with the need to review the 6 programs by the Ministry as nothing in them has changed and the monies he would need for that review should be used for marketing purposes.
Mr. Jagtiani said the suggested time frame of 6 months is too short as it takes 6-8 months for the visa approval process and he would not be able to show results before 2017 due to the time required for all the activities to occur. He had no objection to possible conditions of quarterly reporting and to provide a new business plan.
THE LAW
An applicant’s entitlement to registration is set out in section 14 of the Act as follows:
- (1) The Superintendent shall register an applicant to operate a private career college and shall renew an applicant’s registration if the Superintendent is satisfied that,
(b) the applicant will operate the private career college in compliance with this Act and the regulations;
(d) having regard to the applicant’s financial position, the applicant can be expected to be financially responsible in the operation of the private career college;
Regarding the right to registration, section 18 of the Act reads:
Revocation, suspension, refusal to renew
(2) Subject to section 19, the Superintendent may refuse to renew a registration or may suspend or revoke a registration if,
(a) the Superintendent believes that a requirement described in subsection 14 (1) is no longer met;
(d) no students have enrolled in any vocational programs at the private career college for at least two successive periods of the college’s registration under this Act;
The Tribunal’s right to hold a hearing and make an order is set out in section 19 (3) of the Act.
- (3) If an applicant or registrant receives notice of a proposed action under subsection (1), the applicant or registrant is entitled to a hearing by the Tribunal if, within 15 days after service of the notice, the applicant or registrant gives written notice to that effect to the Superintendent and the Tribunal.
ANALYSIS
After weighing and considering all of the evidence presented by the Parties, the Tribunal finds the following.
The Appellant has not, for a number of years, had any students for vocational courses approved by the Act;
The Appellant has had enrollments for non-vocational courses through its other associated training businesses but those businesses and programs do not require registration under the Act;
The Appellant has failed to meet the revenue and enrollment projections outlined in its 2011-2013 business plan, which in turn is seen to have contributed to an absence of vocational student enrollments for more than two successive periods;
The Appellant's training programs, targeted to international students, are now eligible for the government's International Student Program support but the Appellant's qualification or eligibility is not dependent upon registration under the Act.
While the Respondent argued that there was concern for the Appellant's financial viability, due to the absence of student enrollments and the fact the school's debt ratio showed it had "no solvency at the moment", it was acknowledged that there was no current financial risk to students, as there are no students.
In response to the Respondent's clear concern for the on-going viability of the School, the Appellant failed to provide any evidence to show there was financial capability and resources to draw upon and support the School's financial position on a continuing basis. The absence of such information is highly influential to the Tribunal's decision about the potential for the School to finance itself.
While the Appellant's financial record did show a revenue improvement in the 2012-2013 period, the Respondent's witness, Mr. Chu, pointed out that this was only due to a one-time tax credit and was not the result of student enrollments. Therefore the Tribunal does not consider this as evidence of the school's business improvement as it was not the result of any enrollments.
The Tribunal found Mr. McLeod's testimony instructive. His explanation of the ISP showed that the Appellant could be eligible for designation by Ontario as a provider of education services to foreign nationals requiring a visa to study in Canada for more than 6 months. He noted there could be some reporting conditions due to the school's financial record, but they could be easily complied with by the School.
The Tribunal understands the Appellant has now received that designation. Therefore, the international applicants for the non-vocational programs would also be able to receive ISP support for their visa applications. Mr. McLeod made clear he could not see why the Appellant needed registration under the Act to build the school's enrollments with students for the non-vocational programs.
The Tribunal was not impressed by the fact the Appellant placed the blame for the failure to have enrollments on the competition with community colleges and applicants' inability to obtain study visas. The Appellant agreed the advertising program had not been implemented due to the costs of such a program (they were not affordable) and referred to that as another factor for not being able to obtain enrollments. That explanation added to the Tribunal's concern about the school's financial viability.
In summary, the Tribunal has considered the evidence of no vocational student enrollments for two successive periods, the current financial condition of the school, and, most importantly, that the school is providing non-vocational programs which do not require registration under the Act.
Having received its designation as an institution providing education to foreign nationals, and designation as an approved institution under the ISP, the Tribunal notes the Appellant apparently does not require registration under the Act to continue to build its business in delivering its non-vocational programs.
The Tribunal finds that the reasons for refusing to renew the Appellant's registration, as stated in the Superintendent's NOP, have been proven on a balance of probabilities. It follows, therefore, that this School shall be refused renewal of its registration under the Act.
ORDER
Pursuant to the authority vested in it, the Tribunal directs the Superintendent to carry out the Proposal to refuse to renew the registration of the Appellant under the Act.
LICENCE APPEAL TRIBUNAL
Simon Dann, Member
Released: June 24, 2015