Page:United States Statutes at Large Volume 106 Part 1.djvu/680

 106 STAT. 648 PUBLIC LAW 102-325—JULY 23, 1992 "(A) such institution submits to the Secretary third-party financial guarantees, such as performance bonds or letters of credit payable to the Secretary, which third-party financial guarsintees shall equal not less than one-half of the annual potential Uabihties of such institution to the Secretary for funds under this title, including loan obligations discharged pursuant to section 437, and to students for refunds of institutional charges, including funds under this title; "(B) such institution has its liabilities backed by the fiili faith and credit of a State, or its equivalent; "(C) such institution establishes to the satisfaction of the Secretary, with the support of a report of an independent certified public accountant prepared under generally accepted accounting principles, that the institution is a going concern capable of meeting all of its financial obligations, including (but not limited to) refunds of institutional charges and repay- ments to the Secretary for liabilities and debts incurred in programs administered by the Secretary; or "(D) such institution has met standards of financial responsibility, prescribed by the Secretary by regulation, that indicate a level of financial strength not less than those required in paragraph (2). "(4) The determination as to whether an institution has met the standards of financial responsibility provided for in paragraphs (2) and (3)(C) shall be based on an audited and certified financial statement of the institution. Such audit shall be conducted by a quahfied independent organization or person in accordance with standards established by the Americsui Institute of Certified Public Accountants. Such statement shall be submitted to the Secretary at the time such institution is considered for certification or recertification under this section. If the institution is permitted to be certified (provisionally or otherwise) and such audit does not establish compliance with paragraph (2), the Secretary may require that additional audits be submitted. "(5)(A) The Secretary shall establish requirements for the maintenance by an institution of higher education of sufficient cash reserves to ensure repayment of any required refunds. "(B) The Secretary shall provide for a process under which the Secretary shall exempt an institution of higher education from the requirements described in subparagraph (A) if the Secretary determines that the institution— "(i) is located in a State that hsis a tuition recovery fund that ensures that the institution meets the requirements of subparagraph (A); "(ii) contributes to the fund; and ^ "(iii) otherwise has legal authority to operate within the State. "(d) ADMINISTRATIVE CAPACITY STANDARD. —The Secretary is authorized— "(1) to establish procedures and requirements relating to the administrative capacities of institutions of higher education, including— "(A) consideration of past performance of institutions or persons in control of such institutions with respect to student aid programs; and "(B) maintenance of records;

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