If you run a career school or college licensed by the Texas Workforce Commission (TWC), the agency doesn’t require the same level of CPA-prepared financial statements from every school. The one that you may need is an audit, a review, or a compilation, which comes down largely to one number: $100,000 in gross annual tuition and fee revenue.
Get the wrong service level and TWC will reject your submission. A mistake that costs schools weeks they don’t have before a renewal deadline. We see it every renewal season, usually with schools that grew past $100,000 in revenue and didn’t realize their requirement changed with it. Here’s how the rule actually works, and how to make sure you’re not one of them.
The Three Levels of Assurance
All three are “attest services” a CPA firm can provide, but they differ in how much verification work goes on behind the report:
- Compilation: The CPA formats your financial data based on management’s records, without testing the numbers. Lowest cost, lowest assurance. See a sample compiled financial statement.
- Review: The CPA runs analytical procedures and management inquiries to obtain limited assurance the statements don’t need material changes. More work than a compilation, less than an audit. See a sample review report.
- Audit: The CPA independently tests transactions and balances under GAAS (Generally Accepted Auditing Standards – the rulebook auditors follow) to provide the highest level of assurance the statements are free of material misstatement (an error or omission large enough to mislead someone relying on the numbers).
TWC assigns the required level, so schools don’t get to pick the cheapest option once revenue crosses the line.
The $100,000 Threshold
Under Texas Administrative Code Chapter 807, a compilation is only acceptable if:
- Gross annual revenue from tuition and fees, less refunds, is $100,000 or less, or
- Programs run less than 30 consecutive calendar days
Go even a dollar over that line, and TWC requires a review or audit instead. The same $100,000 figure also determines whether TWC classifies your school as “small” or “other than small” for licensing purposes — so this number touches more than just your financial statements.
Audit vs. Review: What Decides It
Once you’re above $100,000, two things determine whether you land on review or audit:
- Reviewed statements are the standard requirement for renewal once revenue passes $100,000.
- Audited statements are generally required after a school’s first full year of operation, regardless of revenue, unless a documented exception applies.
Ownership structure matters too. Sole proprietors typically owe a reviewed personal financial statement alongside the school, since TWC is evaluating the owner’s financial strength, not just the entity.
The most expensive version of this mistake: a school stays on last year’s compilation after quietly crossing $100,000, submits it at renewal, and gets rejected. This results in losing weeks re-engaging a CPA for the correct level of service, sometimes right up against the 180-day deadline. This is exactly the kind of thing we flag before it becomes a problem, not after.
A quick example: Say a cosmetology school brought in $92,000 in tuition last year and used a compilation, no problem. This year, enrollment picks up and tuition revenue hits $108,000. If the school submits the same compilation at renewal out of habit, TWC rejects it on sight. Therefore, the school is now required to have a review instead and has to restart the engagement with weeks potentially lost. Nothing about the school’s operations changed dramatically; the revenue crossing $100,000 is what changed the requirement.
Timeline and Penalties
Financial statements are due annually, no later than 180 days after your school’s fiscal year closes. (Newly licensed schools sometimes get a pass on their first year if their Certificate of Approval started within six months of fiscal year-end.)
Miss the deadline and TWC fines you $750 the first time, $1,000 for repeat late years. If you’re close to the $100,000 line or this is your first engagement with a new firm, start the conversation early – reviews and audits take real weeks, not days, especially the first time a CPA gets to know your school’s records.
Why Work With a Firm That Knows This Rule
Most general CPA firms don’t know the $100,000 threshold exists, let alone that it can shift your requirement mid-year as revenue grows. That gap is exactly where rejected submissions happen. A firm that specializes in TWC career school compliance will:
- Tell you which tier your school falls into before quoting the engagement
- Know the exact disclosures TWC checks for at each level
- Flag it in advance if you’re trending toward crossing $100,000, so renewal season isn’t a scramble
That’s the difference between finding out you need an audit from TWC’s rejection letter, or from your CPA three months earlier.
Frequently Asked Questions
No — even a dollar over moves you to a review or audit requirement.
Just gross tuition and fee revenue, less refunds — not other income streams.
Talk to your CPA before your fiscal year closes — the requirement is based on that year’s actual revenue.
No. Audits are generally required after a school’s first full year of operation regardless of revenue, separate from the review threshold.
Usually yes — a reviewed personal financial statement in addition to the school’s statements.
TWC rejects it, and you restart with the correct engagement — risking the late-filing penalty if it pushes past 180 days.
Get the Right Engagement the First Time
Not sure which tier your school falls into? We’ll tell you in your FREE consultation – no guessing, no wrong-service rejections.
This article is for general informational purposes and does not constitute legal or accounting advice specific to your situation. Confirm current requirements directly with the Texas Workforce Commission.