EDUCATION INDUSTRY

The education industry is made up of organizations that offer instruction and training over a broad spectrum of
subjects. Institutions with a focus on this field, like schools, colleges, universities, and training facilities, offer
this instruction and training. These businesses may be publicly owned and run, privately owned and run for
profit or not for profit. Additionally, they could provide their pupils with lodging and/or meal services. The
primary objective of education industry is to provide education.

In education industry, teachers or instructors are the one who teach, explain, demonstrates, supervise, and
provide direct learning for students. Instruction is given in a variety of places and through a variety of media,
including letters, television, the internet, and other electronic and distance-learning techniques. These places
and media include educational institutions, workplaces, and homes.

The education industry can be described as the collection of organizations and businesses that provide products
and services aimed at enhancing the quality of education in society. The education industry plays an
increasingly important role in supporting public education by meeting the demand for products and services that
both complement basic education services and supplement their underlying goals. The revenues in this industry
are earned through tuition fees and others (markup).

EDUCATIONAL INSTITUTIONS

The following are some of the Philippine legal requirements for educational institutions.

1. Registration and Recognition: Educational institutions in the Philippines are required to register with the
Department of Education (DepEd) or the Commission on Higher Education (CHED) depending on the level of
education they provide. This process involves submitting necessary documents, meeting specific standards, and
complying with applicable regulations.

2. Accreditation: Accreditation is a voluntary process that verifies the quality of education provided by an
institution. It is typically done by accrediting bodies recognized by DepEd or CHED, such as the Philippine
Accrediting Association of Schools, Colleges, and Universities (PAASCU) and the Association of Christian
Schools, Colleges, and Universities Accrediting Agency, Inc. (ACSCU-AAI).

3. Compliance with Curriculum and Standards: Educational institutions must follow the prescribed
curriculum and standards set by DepEd or CHED. These standards include guidelines for subjects, learning
outcomes, instructional hours, and academic requirements.

4. Licensing and Permits: Educational institutions are required to obtain appropriate licenses and permits from
the local government unit (LGU) where they operate. This may include business permits, zoning clearances,
sanitary permits, and fire safety clearances.

5. Teacher Qualifications: The qualifications for teachers and instructors in educational institutions are
regulated by DepEd or CHED. Generally, teachers must hold appropriate degrees, certifications, or licenses
depending on the level of education they are involved in.
6. Compliance with Labor Laws: Educational institutions must comply with Philippine labor laws, including
proper employment contracts, payment of wages, benefits, and working conditions for their staff and
employees.

7. Health and Safety: Educational institutions are expected to provide a safe and healthy environment for
students and staff. This includes complying with safety standards, fire safety regulations, and implementing
health protocols.

8. Financial and Administrative Regulations: Educational institutions are subject to financial and
administrative regulations, including proper bookkeeping, transparency in financial transactions, and
compliance with tax obligations.

In the Philippines, the terms "proprietary educational institution" and "non-proprietary educational institution"
are used to distinguish between two different types of educational institutions based on their ownership and
governance structure.

1. Ownership and Governance:

- Proprietary Educational Institution: is privately owned and operated by an individual, partnership,

corporation, or any for-profit entity. It is primarily driven by the goal of making a profit. The owner(s) have full
control over the institution's operations, decision- making, and financial management.

- Non-Proprietary Educational Institution: is typically a non-stock, non- profit organization. It may be governed
by a board of trustees or directors who are responsible for overseeing the institution's operations. The primary
objective of non-proprietary institutions is to provide education and fulfill a specific educational mission rather
than generating profit for shareholders or owners.

2. Profit Orientation:
- Proprietary Educational Institution: are profit-oriented, meaning they aim to generate income and make a
profit from the educational services they provide. The owners expect financial returns on their investment in the
institution.

- Non-Proprietary Educational Institution: are not profit-oriented. They may rely on various sources of funding,
such as tuition fees, donations, grants, or subsidies, to sustain their operations. Any surplus generated is usually
reinvested in the institution to improve facilities, enhance programs, or expand services.

When conducting an audit of educational institutions, there are several critical areas that auditors typically focus
on to ensure compliance, financial integrity, and effective management. The specific areas may vary depending
on the type and level of the educational institution, but here are some common critical audit areas:

1. Financial Management: Auditors review the institution's financial management practices, including
budgeting, revenue generation, expense allocation, cash management, and financial reporting. They assess the
accuracy and completeness of financial records, adherence to accounting principles and standards, and
compliance with applicable laws and regulations.
2. Tuition and Fee Collection: Auditors examine the institution's policies and procedures for tuition and fee
collection, assessing whether there are adequate controls to ensure the accurate recording, tracking, and
reconciliation of student payments. They may also verify the accuracy of tuition and fee rates, discounts,
scholarships, and financial aid programs.

3. Procurement and Contracts: Auditors review the institution's procurement process, including the
acquisition of goods and services, vendor selection, bidding procedures, and contract management. They assess
compliance with procurement policies, the existence of competitive bidding, and the adequacy of internal
controls to prevent fraud and abuse.

4. Payroll and Employee Benefits: Auditors examine the institution's payroll process, including the accuracy
and timeliness of salary payments, deductions, and tax withholdings. They also review employee benefits
programs, such as health insurance, retirement plans, and leave accruals, to ensure compliance with legal
requirements and proper administration.

5. Compliance with Laws and Regulations: Auditors assess the institution's compliance with various laws and
regulations applicable to educational institutions, such as those related to accreditation, student enrollment,
teacher qualifications, labor laws, tax obligations, and data privacy. They review policies, procedures, and
records to ensure adherence to these requirements.

6. Student Enrollment and Academic Records: Auditors examine the institution's student enrollment
processes, including admission criteria, enrollment procedures, student records management, and compliance
with enrollment regulations. They verify the accuracy and completeness of student records, including
attendance, grades, transcripts, and other academic documentation.

7. Facilities and Asset Management: Auditors evaluate the institution's management of physical facilities,
such as classrooms, laboratories, libraries, and dormitories. They review asset management practices, including
the acquisition, utilization, and disposal of assets, maintenance procedures, and controls over asset records.

8. Internal Controls and Risk Management: Auditors assess the institution's internal control environment,
including the design and effectiveness of controls over financial transactions, data security, fraud prevention,
and risk management. They may identify weaknesses in controls and provide recommendations for
improvement.

9. Governance and Board Oversight: Auditors review the institution's governance structure, including the role
and responsibilities of the board of directors or trustees. They assess the effectiveness of board oversight,
adherence to governance policies, conflict of interest management, and the institution's compliance with
applicable governance codes and regulations.

10. Student Welfare and Safety: Auditors evaluate the institution's measures to ensure student welfare and
safety, including policies and procedures for child protection, student discipline, health and safety protocols,
and emergency preparedness.
These critical audit areas provide a comprehensive overview of the key focus areas when auditing educational
institutions.

1. Regulation:

- Proprietary Educational Institutions: are subject to regulations imposed by government agencies such as the
Department of Education (DepEd) or the Commission on Higher Education (CHED). They need to comply with
requirements related to registration, curriculum, facilities, teacher qualifications, and other standards set by the
regulatory authorities.

- Non-Proprietary Educational Institution: also need to comply with government regulations and standards set
by DepEd or CHED. However, they may have additional regulatory requirements and obligations related to
their non-profit status, such as reporting financial information, transparency in operations, and compliance with
tax regulations.

2. Mission and Focus:

- Proprietary Educational Institutions: often operate with a market-oriented approach, focusing on meeting the
demands of students and parents, and may prioritize profit over other considerations. Their educational
programs may be tailored to attract students and gain a competitive advantage in the education market.

- Non-Proprietary Educational Institutions: are generally mission- driven, aiming to provide quality education,
contribute to the community, and fulfill a specific educational purpose. Their focus may be on imparting
knowledge, promoting certain values or ideologies, or addressing specific educational needs in society.

Accounting Standard of Education Industry

In the educational sector, accounting is concerned with making sure that educational institutions are reaching
their financial objectives and remaining within their budgets. This include developing budgets, examining
financial data to find opportunities for cost- and efficiency-savings, and projecting future financial performance.
Accountants also help to develop financial reports for stakeholders, monitor adherence to legal requirements,
and offer advice on financial strategy and investments.

IAS 20 Accounting of Government Grants and Disclosure of Government Assistance. Government grants are
recognized in Profit and Loss on a systematic basis over the periods in which the entity recognizes expenses for
the related costs of which grants are intended to compensate. It is recognized only when there is reasonable
assurance that an entity will comply with any condition. Non-monetary grants such as land or other resources
are accounted at fair value.

IFRS 15 establishes the principles that an entity applies when reporting information about the nature, amount,
timing and uncertainty of revenue and cash flows from a contract with a customer. Applying IFRS 15, an entity
recognizes revenue to depict the transfer of promised goods or services to the customer in an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Accounting Principle of Education Industry

The matching principle is the foundation for the accounting approach used in the education sector. This rule
stipulates that costs associated with offering educational services must be recognized within the same
accounting period as the income resulting from those services. This implies that expenses related to providing
educational services, such as the wages of teachers and staff, textbooks, and supplies, should be recorded as
expenses at the same time that tuition or other fees are paid. The education sector is also bound by particular
accounting laws and regulations, such as governmental accounting standards if the institution in question is a
public educational institution. The financial accounts of educational institutions are transparent and accurately
reported thanks to these accounting rules and norms.

In Statement of Financial Position, asset and liabilities resembles those of for- profit enterprises, however
individuals or organizations that provide resources do not expect earning or returns so the concept of Owner’s
Equity does not apply.

In Statement of Activities and Changes in Net Assets, this reports revenue, expenses, gains, losses and
reclassifications. Expenses were solely reported on Unrestricted Net Assets columns.

In Statement of Cash Flows, it uses the same cash flow classification and definitions as business enterprises
except that the description of financing activities is expanded to include resources that are donor-restricted for
long term purposes. It is encouraged to use direct method and must provide a schedule to reconcile the change
in net assets in the statement of activities.

Audit Procedures of Education Industry

In auditing for Educational Institutions, there are some points to consider. These are the following:

 Should independently check Internal control system for authorization procedures, safeguarding of assets,
record maintenance
 The auditor shall obtain list of books, documents, register and records
 Examine previous audit report of last year and note down observations
 In terms of Grants, the auditor should study the conditions
 Fees and Charges received on account should be based on the approved fees structure
 Verification of Counterfoil copies of fees receipt with fees register
 Donations received should be accounted according to nature
 Expenses like communications, utilities etc., should be supported with documents and purchases are
authorized by appropriate person.

Audit Risk of Education Industry

 Operational Risk- operational failure, ex day by day operation are not followed
Regulatory Risk- may hindi mameet sa mga regulation sa sobrang dami.
▪ Inflation Risk- can’t rise tuition, it must need to be in good process

▪ Solvency Risk-

▪ Model Risk- valuation can be misstated

  Specific Risk- ibat iba ang personality ng mga students approach

 The audit risk of the education industry includes operational risk, regulatory risk, inflation risk, model
risk, and specific risk. In operational risk, the day by day operations may not be followed consistently
because of the environment. In regulatory risk, the regulations are not followed at all times. In inflation
risk, the tuition fees and other fees if markups are needed, it should be in good process.
 Education industry is also exposed to the risk that the financial statements may contain material
misstatements, and that these material misstatements may not be detected immediately by the auditor.
Numerous variables, such as the institution's financial transactions' complexity, the dependability of its
internal controls, and the degree of judgment required by its accounting procedures, all have an impact
on this risk. To avoid these risks, the educational institutions should ensure that their auditors are
reliable and has sufficient knowledge in accounting for this industry and that the standards must be
followed properly.

Audit of Educational Institution

Main Source of Collection

 Admission fees, tuition fees, examination fees, fines, etc.

 Securities from students.
 Donations from public
 Grants from Government for building, prizes, maintenance, etc.

Types of Expenses / Payments

 Salary, allowances and provident fund contribution for teaching and non-teaching staff.
 Examination expenses
 Stationery & printing expenses
 Distribution of scholarships and stipends
 Purchase and repair of furniture & fixture
 Prizes
 Expenses on sports and games
 Festival and function expenses
 Library books
 Newspaper and magazines
 Medical expenses
 Audit fees and audit expenses
 Electricity expenses
 Telephone expenses
 Laboratory running & maintenance
 Laboratory equipment
 Building Repair & maintenance
The Audit of Educational Intuitions, sometimes referred to as Audit of Books in the education industry, is a
process of systematic evaluation and documentation of financial statements, taxes, expenditures, and incomes,
obtained by the educational organizations such as schools, colleges and universities from Registration &
Academic Fee, Payment Transactions, Fines & Penalties, Funds & Donations, Hostel Accommodation, Assets
& Investments, Grants from Government or other local bodies, and via other sources.

Preliminary Audit of Educational Institutions

Following points need to be considered by an Auditor while conducting audit of educational institutions:

 It is to be confirmed whether the letter of his appointment (the Auditor’s) is in order.

 The Auditor should obtain a list of books, documents, register and other records as maintained by the
educational institutions.
 He should examine the audit report of last year and should note down the observation and qualification, if
any.
 He should note down the important provisions regarding to accounts and audit from the Trust Deed, Charter
of Regulations.
 He should examine the Minutes of Meetings of the Board of Trustee or the Governing Body for important
decisions regarding the sale or purchase of fixed assets, investments or delegation of finance power.
 In case of colleges and university, the Grants Commission provides Grants to them subject to certain
conditions. The Auditor should study all the conditions concerning grants.
 The Auditor should examine the Code of State regarding grant-in-aid.
 He should be aware of all the provisions and rules of related laws concerning books of account and audit.
 Examine the support, generally pledge cards, for pledges. Other audit procedures may include investigation
of credit standing of pledgors, aging of accounts, review of collections, and confirmation from pledgors.
 Review of correspondence relating to gifts, with notation of the amount and nature of any restrictions.
 Comparison of total gifts received in the current period with prior periods and with fund- raising estimates
prepared by management. Investigation of substantial differences. Consideration of test confirmation of gifts
received.
 Determination of propriety of interfund transfers, particularly with respect to those involving restricted
funds.
 Determination of collectibility of interfund advances. Internal Control System

The Auditor should independently check the internal control system regarding authorization procedures,
record maintenance, safeguarding of assets, rotation and division of staff duty, etc. Following are some of the
important aspects that need to be considered by an Auditor to keep a check on the internal control system:

 Whether internal control and internal check system is working, if yes, how effectively.
 Is there is any system to physically verify the fixed assets, stores and consumables at regular interval.
 An Auditor should verify the control system concerning proper authorization, obtaining quotations, proper
maintenance of accounts and record regarding purchase of fixed assets, purchase of material, investment,
etc.
 Whether bank reconciliation statement is prepared at regular intervals and what kind of action is taken for
uncleared cheque which were pending since long.
 Whether waiver of fees is properly sanctioned by appropriate authorities.
 The person who is collecting fees and the cashier should not be the same person.
 Class wise fees receivable and the actual fees received reconcile or not.
 Whether collected fees is deposited in bank on a daily basis.
 Fees collection register should be maintained on a daily basis.
 Whether approved list of supplier of sports material, stationery, lab items are readily available.
 Whether control system for payment is adequate or not.
 The system of letting out conference hall and class rooms, etc. for seminars and conventions.
 Whether fees structure is properly authorized along with change in fee structure if any.

Audit of Assets and Liabilities

The following points need to be considered while conducting an audit of Assets and Liabilities:

 Verification of Assets register should be done considering grants on purchase of assets, if any received from
State Government/ University Grant Commission (UGC).
 Verification of depreciation is very important; it should be according to useful life of assets or as per the
Companies Act, whichever is applicable.
 If donation is received in the form of investment, an Auditor has to check all related correspondence with
the donor.
 All the applicable requirements of law should be fulfilled for the purchase of investments and fixed assets.
 An Auditor should read and note down the state code and provisions relating to the conditions and
procedures of Grants. He should also verify the requirements of State/UGC which are to be fulfilled by
educational institutions for receiving Grants and also for continuations of Grants.

Audit of Income of Educational Institutions

The following points need to be considered by an Auditor while conducting audit of the Income of Educational
Institutions:

 Fees and charges received on account of admission fees, tuition fees, sports fees, examination fees etc.
should be verified based on the approved fees structure.
 Verification of counterfoil copies of fees receipt with fees received register should be done.
 Prescribed conditions by the State Government and the University Grants Commission should be verified
whether fulfilled or not.
 Cash book should be verified with counterfoil of receipt book and fees register.
 Fees receivable and actual fees received should be reconciled.
 Charges and fees received and receivable should be examined on account of hostel accommodation, mess,
housekeeping and clothing, etc.
 Cash book should be verified with the donation received register.
 Donation received should be accounted for according to the nature of donation means careful distinction
should be there for revenue nature donation and capital nature donations; the same procedure is to be
followed for Grants received.
 The purpose and utilization of grant should be same.
 Investment register and cash book should be verified for income received on account of interest on
investment and dividends, etc.

Audit of Expenses of Educational Institutions

The following points need to be considered by an Auditor while conducting audit of Expenses of Educational
Institutions:

 Electricity expenses, telephone expenses, water charges, stationery and printing, purchase of sports items
should be properly verified with quotation, purchase bills, inward register and Bills received from service
providers, etc. All purchases should be authorized by appropriate person.
 In case where hostels purchase food items, provisions, clothing, etc. should be properly verified.
 Payment made on account of salary should be verified from terms of appointment and increment policy.
Auditor should verify the computation of salary and check whether all required deductions are made out of
it or not like advance salary, loan installment, absence from duty, etc. The Net Salary Payable amount will
be verified from cash book and bank pass book for salary paid.
 Terms and conditions, cash book, voucher and receipts should be the basis for the verification of scholarship
paid.
 Appropriate provision should be made on account of outstanding payments.

The fund groups usually encountered in an educational institution are as follows:

 Current funds
 Loan funds
 Endowment and similar funds
 Annuity and life income funds
 Plant funds
 Agency funds

UNRESTRICTED CASH FUND

 Includes those economic resources of the institution which are expendable for any purpose in performing
the primary objectives of the institution, i.e., instruction, research, extension, and public service, and
which have not been designated by the governing board for other purposes.
 A separate fund subgroup may be established for the unrestricted current funds of auxiliary enterprises.
 The balance sheet accounts of unrestricted current funds consist of the usual asset and liability accounts
such as cash, shortterm investments, accounts and notes receivable, inventories, prepaid expenses and
deferred charges, accounts and notes payable, accrued liabilities, deposits, deferred revenues, and fund
balances.
 The fund balance of unrestricted current funds represents the difference between the assets and
liabilities, including deferred revenues, of unrestricted current funds.
 Changes in the balances of unrestricted current funds include the gross amounts of all unrestricted
revenues and expenditures applicable to the reporting period as determined in accordance with the accrual
basis of accounting; transfers to and from other funds for the period; and transfers between unallocated and
allocated subaccounts where such subaccounts are maintained.
 The composition of the unrestricted current funds balances (auxiliary enterprises, reserve for encumbrances,
allocations, etc.) may be disclosed either in the balance sheet or in the statement of changes in fund
balances.

Internal Control Measures for Unrestricted Cash Fund:

1. Retention of gift documents and other supporting data and recheck of gift and grant documents.
2. Approval of scholarship and other credits to students' accounts.
3. Billing procedures for student fees, auxiliary services, and rentals (including occupancy) and assignment
records.

4. Control of tickets, conformity with budgets, and reasonableness of gross margins of auxiliaries.
5. Pre-numbered tickets for deposits and advance payments.
6. Coordination and independence of functions of purchasing, budgeting, approvals, and payments for both
materials and services.
7. Personnel appointment procedures and records for both academic and nonacademic personnel.
8. Coordination of appointment procedures with budgetary controls.

Audit Procedures for Unrestricted Cash Fund:

1. Summarization of cash accounts by funds and performance of the usual audit tests simultaneously.
Consideration as to whether tests of cash funds, investments, notes receivable, etc. should be carried out at
the same time.
2. Reconciliation and comparison of interfund accounts and determination as to whether cash offset is
practicable and reasonable.
3. Review of vouchers payable and outstanding purchase orders, and institutions determination of charges to
budgetary accounts as between materials and services received and those representing commitments for
merchandise or services to be received.

RESTRICTED CURRENT FUNDS

 Consists of those funds expendable for operating purposes but restricted by donors or other outside
agencies as to the specific purpose for which they may be expended.
 The assets of restricted current funds are almost exclusively of a liquid character such as cash,
investments, accounts receivable (including unbilled charges), and amounts due from other funds.
 The assets are sometimes combined with those of unrestricted current funds for reporting purposes.
 If the assets are combined, any intrafund borrowings within current funds should be disclosed.
 Regardless of whether or not the assets are segregated, restricted current fund balances should be disclosed
separately in the financial statements and appropriately classified.

Internal Control Measures for Restricted Current Funds:

1. Establishment of a separate fund subgroup for restricted current funds consisting of assets, liabilities, fund
balances, and addition and deduction accounts for each fund balance.
2. Establishment of appropriate budgetary procedures for the expenditures and transfers from these funds.
3. Maintenance of adequate gift records indicating the authorized use of restricted funds to support
classification in the accounts of the institution.
4. Establishment of an adequate acknowledgment procedure covering the receipt of gifts. 5. Submission of
statements of financial transactions to grantors and donors.

Audit Procedures for Restricted Current Funds:

1. Examination of selected expenditure vouchers and other documentation to determine that the use of the
resources is in conformity with gift and grant documents and that the proper disposition of the fund balance
is made upon completion of the project or grant.
2. Review of distribution of endowment income to ascertain whether donor restrictions are being observed.
3. Tests of abstracts of gift and grant documents for conformity with original documents.
4. Review of financial data furnished to grantors and donors.
5. Substantiation of distributions from the income account of the pooled endowment fund.

CURRENT FUNDS REVENUE

Current funds revenues include (1) all unrestricted gifts and other unrestricted resources earned during the
reporting period, and (2) restricted current funds to the extent that such funds were expended for current
operating purposes.

Educational and General Revenues

 Student Tuition and Fees. Tuition and fee remissions or exemptions should be assessed and reported as
revenue even though there is no intention of collecting from the student. The amount of such remissions or
exemptions should be offset as expenditures and appropriately classified as student aid or as staff benefits
associated with the functional category to which the personnel relate.
 Governmental Appropriations. Includes all unrestricted amounts received from or made available by
governmental sources and restricted appropriations to the extent expended for educational and general
(including student aid) purposes.
 Governmental Grants and Contracts. Amounts equal to direct costs incurred and related indirect costs
recovered are transferred from current restricted funds and reported as revenues. The amount equal to direct
costs incurred should be reported as restricted revenues and the amount equal to indirect costs recovered
should be reported as unrestricted revenues.
 Gifts and Private Grants. Income from funds held in revocable trusts or distributable by direction of the
trustees of such trusts should be reported under this classification, but should be separately identified as to
the source of the revenues.
 Endowment Income. If a portion of gains of endowment or quasi-endowment funds investments is utilized
for current operating purposes, the portion so utilized should be reported as a transfer rather than as
revenues. The unrestricted income from endowment and similar funds credited to revenues should be the
total ordinary income earned on the investments of these funds.
 Sales and Services of Educational Departments. Includes incidental revenues of educational departments
not directly associated with the training of students.
 Organized Activities Related to Educational Departments. If service to the students rather than instruction is
the primary purpose, the revenues should be classified under auxiliary enterprises. If services to the public
are the paramount purpose, as in the case of some hospitals operated by universities, the revenues should be
classified under a separate major category.
 Other Sources. Includes all items of revenues for educational and general purposes not covered elsewhere.
Examples are income and gains and losses from investments of unrestricted current funds.

Auxiliary Enterprises
   Auxiliary enterprises are the other major category of current funds revenues and reflects revenues
from activities conducted primarily to provide facilities or services for students, faculty, and staff.
  Interdepartmental transactions of service departments and storerooms which provide services to the
institution, as contrasted with services to students, faculty, and staff, should not be included as revenues
or expenditures.

Expired Term Endowments

  This category of current funds revenues reflects the amount of term endowment funds that become
unrestricted during the reporting period
  Such amounts may be included under other sources of educational and general revenues if not
material.

Internal Control Measures for Current Fund Revenue:

1. Budgetary control over recorded revenues, including comparison with budget estimates and analysis of
significant variations.
2. Control over revenues by recording on the accrual basis.
3. Independent control over issuance of credits, allowances (including scholarships), and other
adjustments.
4. Procedures for receiving and acknowledging gifts and grants.

Audit Procedures for Current Fund Revenue:

1. Review of each major revenue account and comparison with prior period and budget estimate and
determination of reasons for any significant variations.
2. Comparison of revenues with related statistical reports of enrollment, occupancy, meals served, etc.,
prepared by departments or individuals not related to the revenue-recording or cash-receiving functions.
3. Review and evaluation of the data underlying gifts, grants, and bequests, including gift documents,
correspondence, receipt acknowledgments and notifications of the grant awards, minutes of the governing
board, and comparison by type or nature with amounts for prior periods.
4. Review of the latest indirect cost computation, and review of the reports on examination of direct and
indirect costs by representatives of grantors. Review of the separation of functions and methods of
apportionment of applicable expenses in cases where the institution is administering large grants involving
research centers or similar operations.
5. Review of gross margin percentages of auxiliaries and comparison with those for prior periods and budgets.
6. Tests of records in support of revenues from sporting events including ticket sales records, ticket numbers,
free tickets, tax reports, and contracts with other institutions.

CURRENT FUNDS EXPENDITURES AND TRANSFERS

Current funds expenditures include those of both unrestricted and restricted current funds. Current funds
expenditures should be summarized by function.

Educational and General Expenditures

  Instruction and Departmental Research. Expenditures for departmental research not separately budgeted
should be included in this classification.
 Organized Activities Related to Educational Departments. Includes activities listed under the same
major classification of revenue.
 Sponsored Research. These are expenditures of restricted current funds since they arise exclusively from
gifts and grants restricted to research.
 Other Separately Budgeted Research. It does not include either sponsored research or departmental
research not separately budgeted.
 Other Sponsored Programs. Includes expenditures for training programs, instructional institutes, and
similar activities. If desired, these expenditures may be included with sponsored research under the
category, Sponsored Research and Other Sponsored Programs.
 Extension and Public Service. If these expenditures are material in amount they should be reported as a
separate major category.
 Libraries. Includes separately organized libraries, both general and departmental.
 Student Services. Includes the costs of the registrar's office, admissions office, financial aid office,
institutional subsidies to student activities, health services (unless operated as an auxiliary enterprise),
offices of deans of students, and guidance and testing programs.
 Operation and Maintenance of Plant. Appropriate allocations of operating and maintenance costs should
be made to auxiliary enterprises and any other activities not reported under the major caption,
"Educational and General."
 General Administration. Administrative costs should be allocated to auxiliary enterprises and any other
activities not reported under the major caption, "Educational and General."
 General Institutional Expense. The institution's policy will determine whether an amount should be
charged to this group or to the department or office benefited. General institutional expenses should be
allocated to auxiliary enterprises and any other activities not reported under the major caption,
"Educational and General."
 Student Aid. Expenditures for all forms of student aid financed from current funds, restricted or
unrestricted, should be charged to student aid. However, remissions of tuition and fees granted as a
result of either faculty or staff status, or family relationship of students to faculty or staff, should be
recorded and allocated as staff benefit expense rather than as student aid. Where services are required in
exchange for scholarship or other aid, the charges should be classified as expenses of the department or
organizational unit to which the service is rendered. Loans to students are not student aid expenditures,
but constitute a conversion of cash to receivables in the loan funds group.

Educational and General Mandatory Transfers

 Provision for Debt Service on Educational Plant. Includes mandatory debt service provisions relating to
educational plant including amounts set aside for debt retirement, interest, and required provisions for
renewals and replacements to the extent not financed from other sources.
 Loan Fund Matching Grants. Includes mandatory transfers to loan funds required to match outside gifts
or grants.

Auxiliary Enterprise and Mandatory Transfers

Expenditures and mandatory transfers should be separately reported. Other Transfers – Unrestricted Current
Fund
 Embraces all costs of operating the auxiliary enterprises, including charges for operation and maintenance
of physical plant, general administration, and general institutional expenses; also included are other direct
and indirect costs whether charged directly as expenditures or allocated as a proportionate share of costs of
other departments or units
 Are allocations of unrestricted resources between fund groups which are not required either by the terms of
loan or by other agreements with outside persons or agencies

Internal Control Measures for Current Funds Expenditures and Transfers:

1. To what extent are budgetary procedures used to exert control over expenditures for educational as well as
capital purposes?
2. Are management reports designed to conform with the concept of "responsibility reporting," that is,
reporting of expenditures according to those who are accountable for their control?
3. Have the cost adjustments made by research or other grantors been reasonable considering the related cost
claimed by the institution?
4. Are all expenditures recorded through liability or commitment accounts, thus affording a primary control
over payments?

Audit Procedures for Current Funds Expenditures and Transfers:

1. Review of procedures for evaluating and reporting contributed services.

2. Review of procedures for evaluating and reporting (for tax, insurance, and other purposes) lodging, meals,
or other perquisites furnished to employees.
3. Comparison of expenses with prior year expenses and with budget authorizations, and explanation of
significant variations.
4. Analysis of campaign and fund-raising costs. If costs of endowment and building campaigns have been
charged against the proceeds of such campaigns, determine that such charges are proper.
5. Consideration of special audit emphasis in the payroll, purchasing, and disbursement areas in view of the
following typical factors and tendencies of educational institutions:

Payroll—Salaries and wages usually constitute a very significant portion of total expenditures. If controls over
distribution of payroll checks are weak, surprise control of payroll distributions, review and comparison of
payroll check endorsements with employee signatures in personnel records, discussions with department heads
about selected employees, and review of student-faculty ratios and trends should be considered.

b. Purchasing and disbursements—Often the procedures surrounding initiation of purchases, receipt of goods
and services, and the ultimate payment of invoices are decentralized. If controls over these activities are weak,
audit emphasis on approvals and support for disbursements, including visits to selected departments to examine
or discuss with appropriate officials specific materials or services received, should be considered.

LOAN FUNDS

 The loan funds group consists of loans to students, faculty, or staff, and of resources available for such
purposes.
 The assets of loan funds may consist of cash, notes receivable for loans granted, and temporary investments
of cash available for loans.
 Notes receivable for loans should be carried at face value less allowance for doubtful loans. Provision for
doubtful loans should be charged to the equity account of the specific loan fund.
 Liabilities which appear in the balance sheet of loan funds might consist of amounts due collection agencies
for collection fees, amounts due unrestricted funds for unremitted share of administrative costs, and amounts
due as refunds on refundable loan funds.
 Changes in loan funds should be reported in the statement of changes in fund balances of loan funds.
 Interest on loans to students is not ordinarily recorded in the loan funds until collected.
 For appropriate disclosure, the source of the funds available for loan purposes at the balance sheet date
should be separately identified in the financial statements, such as donor- and governmental restricted loan
funds including funds provided by mandatory transfers required for matching purposes, unrestricted funds
designated as loan funds, and funds returnable to the donor under certain conditions.

Internal Control Measures for Loan Funds:

 The academic representatives develop the broad policies of the financial assistance program.
 The administrator of financial aid is responsible for administering the program including review of
applications, evaluation of need and qualifications of applicants, and amounts and lands of aid appropriate
in the circumstances.
 The financial officers of the institution are responsible for the custody and disbursement of funds for
financial assistance, receipt and custody of the loan notes and the accounting for, reporting, and collection
of the loans.
 The usual segregation of duties between the disbursing of funds and the recording of receivables and
custody of assets are equally applicable to loan fund administration.

Audit Procedures for Loan Funds:

1. A test of compliance with special terms and conditions found in restricted loan funds, such as loans limited
to students originating from particular geographical areas, loans limited to students pursuing particular
courses of study, government loan funds, and so forth.
2. A test of records documenting authorization for forgiveness of repayment of all or a portion of the amount
due.
3. A review of conformity with requirements covering refunds of loan funds, transfers to other funds, and
interest on loans.
4. A general review of procedures for maintaining records of names, changes of address, and other data with
respect to loans receivable.

ENDOWMENT AND SIMILAR FUNDS

Endowment and similar funds group generally includes endowment funds, term endowment funds, and
quasi-endowment funds.

 Endowment funds are funds with respect to which donors or other outside agencies have stipulated, as a
condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity and
invested for the purpose of producing present and future income which may either be expended or added to
principal
 Quasi-endowment funds (funds functioning as endowment) are funds which the governing board of an
institution, rather than a donor or other outside agency, has determined are to be retained and invested. Since
these funds are internally designated rather than externally restricted, the governing board has the right to
decide at any time to expend the principal.
 Annuity and life income funds, if insignificant in amount, may also be included in this group. If
significant, these funds should be reported in a separate fund group. The caption "Endowment and Similar
Funds" should be used where endowment, term endowment, quasi-endowment, annuity, and/or life income
funds are combined or grouped.
 Each endowment and similar fund is accounted for in a separate fund. Each fund will include its own
accounts for cash and investments unless the investments are pooled with the investments of other funds
 Transfers of investments between funds require that consideration be given to the market or appraised value
of the securities because any change in value up to the date of the transfer should accrue or be charged to the
owning fund for the holding period.
 Fund-raising expenses should not be charged to the principal of endowment and similar funds unless they
directly relate to the proceeds of a campaign for this purpose.

Internal Control Measures for Endowment Funds:

1. Segregation of similar funds in fund groups and maintenance of asset accounts for each fund or merged
assets for groups of funds.
2. Maintenance of adequate information for each individual fund indicating nature of principal, restrictions on
investment of principal or use of income, termination, etc. This usually involves the maintenance by the
institution of an up-to-date register of each endowment fund containing summary information about the
donor, time and amount of gift, type of fund, any external or internal restrictions, and reference to formal
acceptance by the institution, as well as individual files of correspondence with donors and their
representatives and copies of all bequests and other documents pertinent to the administration of a gift.
3. Adequate internal reporting of new gifts and the status and changes in principal of all individual or merged
funds.
4. Maintenance and periodic review of a record of contingent bequests.
5. Periodic review of basis of distribution of gains and losses to individual funds.

Audit Procedures for Endowment Funds:

1. Review of summary of investments of all funds and performance of the usual audit tests of all investment,
principal, and income and gain accounts simultaneously.
2. Review of basis of valuation, amortization of premiums and accumulation of discount policies, and changes
in participation in pooled investments. Tests of additions to and deductions from the pool or pools. Tests of
computations where unit or share method of accounting for pooled investments is utilized.
3. Consideration of necessity for a valuation allowance if quoted market values of investments are
substantially less than cost and there appears to be a permanent impairment in value.
4. Determination that the titles of the fund groups adequately describe the nature of the accounts included
therein and that all of the individual funds of a particular group have the same general characteristics.
5. Determination that disclosure is made in the classification of donor-restricted funds as contrasted with
unrestricted funds designated by the governing board to serve as quasi- endowment funds.
6. Review of gift acknowledgment procedures and determination that restrictive covenants are being followed.
7. Review of distribution of investment income and tests of accuracy of credits to restricted funds.
8. Review of distribution to individual funds of gains and losses on disposal of investments.
9. Consideration of obtaining confirmation from legal counsel of the propriety of any disposition of realized
or unrealized gains.

PLANT FUNDS

 The plant funds group consists of (1) funds to be used for the acquisition of physical properties for
institutional purposes but unexpended at the date of reporting; (2) funds set aside for the renewal and
replacement of institutional properties; (3) funds set aside for debt service charges and for the retirement
of indebtedness on institutional properties; and (4) funds expended for and thus invested in institutional
properties.
 Separate fund balances should be maintained.
 When physical plant assets are sold or otherwise disposed of, the carrying value should be removed
from the asset accounts and net investment in plant should be reduced accordingly.
 Student fees specifically assessed for debt service or plant expansion in such a manner as to create an
obligation equivalent to an externally imposed restriction should be reported as additions to the
appropriate plant fund subgroup.
 Indebtedness incurred to finance plant acquisition, construction, and the like, should be included as a
liability of the unexpended plant funds subgroup until the proceeds of the indebtedness are expended, at
which time the expended amount and the related liability should be transferred to the investment-in-
plant subgroup.
 Board-designated balances in each of the fund subgroups except for investment in plant —as opposed to
funds restricted by donors for plant fund purposes, should be disclosed.
 Transfers from other fund groups to plant funds for the acquisition of physical properties, renewals and
replacements, and debt service should be represented by the appropriate transfer of cash or other liquid
assets
 Temporary advances from other fund groups to plant funds should be made only upon authorization or
approval of the governing board stipulating the terms of repayment.

Internal Control Measures for Plant Funds:

1. Control by the governing board over capital budgets and changes therein.
2. Recording of commitments and appropriations as well as expenditures in control or project accounts as part
of the regular system of accounting.
3. Maintenance of plant ledgers.
4. Periodic internal physical inventory of moveable equipment.
5. Custodial control of both fixed and moveable equipment and control of interdepartmental movements.
6. Procedures for control over disposals and salvage.
7. Maintenance of records of property in the custody of, but not owned by, the institution.
8. Authorization and documentation procedures for creation of long-term debt, including records of assets or
revenue pledged, sinking funds, or installment payments required.
9. Records documenting building fund campaigns including records of restricted or special gifts.
10. Receiving and acknowledgment procedures for gifts of fixed assets.
11. Procedures for provisions and transfers from unrestricted current funds based on requirements for renewals,
replacements, and retirement of indebtedness.
Audit Procedures for Plant Funds:

1. Examination of provisions of gifts and bequests for plant purposes.

2. The review and testing, by reference to appropriate documents, of the validity of capitalizing expenditures
of current funds representing equipment purchased by such funds. Determination that title to the equipment
so acquired is vested in the institution.
3. The review and testing of transactions of building fund-raising campaigns.
4. Review of procedures relating to the receipt of gifts in kind, including methods used in valuing such gifts.
5. Review of provisions of long-term debt agreements and observation that requirements have been met,
including the nature and extent of pledging of assets and revenues and approval by governing board.
6. Examination on a test basis of documents supporting other changes in fund balances.

OTHER FUND GROUPS

Annuity Funds

- Annuity funds group consists of funds acquired by an institution subject to agreements whereby assets are
made available to the institution on the condition that the institution bind itself to pay stipulated amounts
periodically to designated individuals.
- Annuities can be issued only under regulations promulgated by the agency and, in some instances,
investments of the annuity funds must be deposited or a security deposit made with the governmental
jurisdiction.
- Upon termination, the principal of annuity funds is transferred to the fund group designated by the grantor or,
in the absence of such a designation, to unrestricted current funds revenue and accorded the same treatment as
unrestricted expired term endowments.
- The assets of annuity funds include cash, securities, and other types of investments, the valuation of which is
determined and reported in a manner comparable to that for investments of endowment and similar funds.
- The liabilities of annuity funds include indebtedness against any of the assets of the funds, annuity payments
currently due, amounts due to other funds for advances made on annuity payments, and the actuarial amount of
annuities payable.
- The basic statement of changes in annuity fund balances is usually combined with the changes in life income
funds.
Internal Control and Audit Procedures for Annuity Funds: Internal control features and audit procedures
which may be applicable to annuity funds do not differ materially from those applicable to endowment funds.
The annuity liability and fund balance amounts should be tested by reference to life expectancy and interest
tables.

Life Income Funds

- The life income funds group consists of funds contributed to an institution subject to the requirement that the
institution periodically pay the income earned on the assets to designated beneficiaries.
- Life income funds are usually accounted for as a separate fund group but are combined for reporting
purposes with annuity funds. When amounts are not material, both of these fund groups may be reported as a
subclassification of endowment and similar funds.
- The transactions of life income funds should be reported separately and not as current funds revenues or
expenditures.
- Upon termination, the balance of the fund is transferred to the fund group designated by the grantor or, in the
absence of a designation, to unrestricted current funds and accorded the same treatment as unrestricted expired
term endowments.
Internal Control and Audit Procedures for Life Income Funds: Internal control features and audit
procedures which may be applicable to life income funds conform generally to those appropriate for
endowment fund.

Agency Fund
- The agency funds group consists of funds held by an institution as custodian or fiscal agent for others such as
student organizations, individual students, or faculty members.
- Agency funds should be accounted for as a separate fund group although, if immaterial in amount, they may
be reported as assets and liabilities of current funds.
- Transactions of agency funds represent charges or credits to the individual asset and liability accounts and
are not transactions of unrestricted or restricted current funds.
- Accountability for agency funds usually requires the submission of periodic reports of transactions and
balances to the individual or organization that owns the net assets.

Internal Control for Agency Funds: Internal control over agency funds is similar to the control exercised over
cash, investments, and other assets of the institution. Control is improved by the segregation of such funds in a
separate fund group for accounting and reporting purposes. Internal control is exercised by requiring the
approval of transactions by the owning individual or organization. In the case of student organizations,
additional review may be exercised by a faculty advisor or administrator.

Audit Procedures for Agency Funds: Audit procedures applicable to agency fund assets are comparable to
procedures performed with respect to similar assets of other fund groups. Audit procedures applicable to
liabilities consist primarily of a test of the transactions, including a review of documentation and confirmation
on a test basis with the owning individuals or organizations.

OTHER FUNDS

The accounting, reporting, and auditing of other fund groups administered by the institution—such as pension
funds—are comparable with the procedures for endowment and/or agency funds, and in some instances are
comparable with those of commercial pension funds. A review of internal control must be performed in order to
tailor the audit procedures to the needs of the particular engagement with respect to these special funds.

Auditing Academic Institutions

Educational Services is widely considered a counter-cyclical industry. Typically, when the economy is doing
poorly and unemployment is rising, more working adults, as their career prospects start to dim, decide to
upgrade their education. This, in turn, leads to higher enrollment and increased profit at the schools. We note
that traditional undergraduate education for young students is generally non-cyclical. Culinary arts schools,
however, can be labeled as moderately cyclical. Also, certain types of educational institutions do perform
largely in sync with the broader economy. For example, providers of information technology instruction benefit
in good times, when companies are likely to boost related investment.
There is a growth element to this industry. Education companies are reporting a trend of rising demand from
working adults. More and more employers are requiring college degrees for a greater range of jobs. Enrollment
rates are tracking higher at most schools. To an 18-year-old, thinking about the future, or a 30-year-old without
a college degree, looking for a career boost, diplomas are becoming the standard rather than the exception.

1. Nature and Background of Specialized Industry

The Educational Services sector comprises establishments that provide instruction and training in a wide variety
of subjects. This instruction and training is provided by specialized establishments, such as schools, colleges,
universities, and training centers. These establishments may be privately owned and operated for profit or not
for profit, or they may be publicly owned and operated. They may also offer food and/or accommodation
services to their students.

Educational services are usually delivered by teachers or instructors that explain, tell, demonstrate, supervise,
and direct learning. Instruction is imparted in diverse settings, such as educational institutions, the workplace, or
the home, and through diverse means, such as correspondence, television, the Internet, or other electronic and
distance-learning methods. The training provided by these establishments may include the use of simulators and
simulation methods. It can be adapted to the needs of the students, for example sign language can replace verbal
language for teaching students with hearing impairments. All industries in the sector share this commonality of
process, namely, labor inputs of instructors with the requisite subject matter expertise and teaching ability.

The education industry can be described as the collection of organizations and businesses that provide products
and services aimed at enhancing the quality of education in society. The education industry plays an
increasingly important role in supporting public education by meeting the demand for products and services that
both complement basic education services and supplement their underlying goals. The industry is defined by
four main categories:

1. Schools/ Service Providers: – Providing Elementary and Secondary Education, Alternative/Special

Education Services, Education Management Organizations, Charter Schools, Virtual Schools, and
Proprietary Schools.
2. Supplemental Education Service Providers: Providing Higher Education, Vocational Education, Learning
Centers, Tutoring Services and Assessment Services.
3. Educational Products & Services Sector: Production and supply of educational material and products
including Educational Products, Publishing, and Supplemental Products.
4. Education Support Services Sector: – Providing support and ancillary services to the education industry
including Education Consultants, Education Information and Research, Education Investment Services,
Education Policy Specialists, and Technology Services.

Overview, Updates, Statistics of the Specialized Industry in the Philippines

Philippines’ education industry has showcased a significant growth in the past decade owing to the adoption of
the enhanced basic education model. The financial support and aid from the foreign countries such as Australia,
Canada, US and others have been aiding the Philippines government in restructuring the education system in the
country. The several programs and initiatives have been taken by the Philippines government to improve the
quality of education in the country. The increasing investments by the government and other local and foreign
agencies for the provision of universal access to quality education at all levels to the Filipinos are likely to boost
the total number of enrollments and establishments in the education industry in Philippines.

The K-12 education market has been the largest contributor to the overall revenues of the Philippines education
industry. The revenues of K-12 education market were estimated to be worth USD ~ million in 2013, which
grew from USD ~ million in 2008. The major growth driver in the K-12 education market was the
implementation of the enhanced basic education program in Philippines. This market has been highly
fragmented with the presence of large number of public and private players competing on the basis of tuition
fees, infrastructure and other services. The major segments in the K-12 education market are namely
kindergarten, primary and high school. Secondary level of education accounted for the majority share to the
overall revenues of the K-12 education market.

The higher education market is the second largest contributor to the revenues of the Philippines education
industry. The market share of the higher education market in Philippines declined to ~% in 2013. This declining
market share was possibly due to the inclining tuition fees for the private and public higher education
institutions. Some of the major players operating in this market are namely University of the Philippines, De La
Salle University and others. This market is likely to grow at a CAGR of ~% in the next 5 years.

The technical-vocational training segment accounted for a share of ~% in 2008 which declined marginally to ~
% in 2013. The major reason for this decline was the no or low fees charged by the public technical-vocational
training institutions in Philippines. This market is expected to witness an increase in the revenues to USD ~
million over the period from 2013 to 2018. The Philippines private tutoring market has contributed a share of ~
% in 2008 which decreased slightly to ~% in 2013. The trend of homeschooling in Philippines can be attributed
for the decline in the market share. The major players operating in the tutoring market are namely AHEAD
tutorial and review center, MSA Academic Advancement Institute and others. It is expected that the private
tutoring market in Philippines will grow at a CAGR of ~% during the period from 2013 to 2018.

The test preparation market has been the fifth largest market in the Philippines education industry. The market
revenues for test preparation increased from USD Ì ́ million in 2008 to USD ~ million in 2013. The Philippines
test preparation market has been dominated by the private players who compete with each other through review
fees and other flexibility options in timings and scheduling classes. The significant players in the Philippines
test preparation market for civil engineering review are namely Besaville Review Center, Padilla Review
Center, Gillesania Review Center and others. The inclining personal disposable incomes, escalating competition
have been some of the reasons for remarkable growth of this segment. This market is expected to grow at a
CAGR of ~% over the period 2013-2018.

The least share has been contributed by the Philippines teacher training market in 2008. It is likely to grow
gradually in the future years owing to the government initiatives and programs in this segment. The teacher
education market has also been growing rapidly and is expected to maintain its growth momentum in the future
years. The teacher education market has been segmented into bachelors and masters degree programs offered in
the field of teacher education in Philippines.

The Philippines e-learning segment has been expanding rapidly and includes online- learning and training,
software development and e-content development. This market is likely to grow at a remarkable rate in the
future years. The Philippines education industry is estimated to register escalating CAGR of ~% for the period
from 2013 to 2018 with the private players established in the industry driving the enrollments in the education
industry in the coming years.

The Philippines has 1,963 institutions of higher education. As of 2019, student enrollment was 1.5 million for
private and 1.6 million for public institutions. Through the Quality Tertiary Education Act, public university
tuition is free.

There is a strong presence of international schools in major cities such as Manila, Cebu, and Davao. In Manila,
there are more than ten popular schools: Brent International School, British School of Manila, Chinese
International School Manila, Domuschola International School, International School of Manila, The King’s
School Manila, Multiple Intelligence International School, Reedley International School, Korean International
School Philippines, The Beacon School, Faith Academy, Australian International School, and Southville
International School and Colleges. These international schools offer both International Baccalaureate (IB) and
Advanced Placement (AP) programs, with annual tuition fees ranging from $13,000 to $15,000.

Most Filipino students studying abroad are from the local private education network. This network is composed
of 18,350 schools. The Coordinating Council of Private Educational Associations (COCOPEA) is the umbrella
organization of all private schools in the Philippines. The Association consists of the Philippine Association of
Colleges and Universities (PACU); the Philippine Accrediting Association of Schools, Colleges, and
Universities (PAASCU); Association of Christian Schools, Colleges, and Universities (ACSCU); Catholic
Education Association of the Philippines (CEAP); and Technical Vocational Schools Association of the
Philippines (TVSA).

The U.S. Embassy in the Philippines and CHED signed a Joint Statement on Higher Education Cooperation in
2019 to increase collaboration in institutional linkages, capacity building, and developing
government/industry/academic ties. The joint statement recognizes the growing market, the possible economic
rebound after the pandemic, and the transition to a K-12 system to allow more middle-class students to have the
option of studying abroad.

SUB-SECTORS

 Community college programs and boarding schools: Continues to be a niche market. Most Filipino families
prefer direct university entry.
 Higher education (undergraduate and graduate): According to the IIE Open Doors Report, there were 3,295
Filipino students enrolled in the United States for the 2019-2020 academic year, including 1,753 pursuing
undergraduate degrees, 1,007 seeking graduate degrees, 444 pursuing Optional Practical Training (OPT),
and 91 in other programs. The states with the highest number of Filipino students are California, New York,
Texas, Massachusetts, Maryland, Illinois, Hawaii, Florida, Pennsylvania, and New Jersey. This mirrors
locations with the largest Filipino communities in the U.S., as community and family support networks are
determining factors in where Filipino students choose to study. With over 50% of the population aged 24
and younger, there will be a surge of youth positioned to enter higher education institutions.
 Online programs and education technology: The pandemic has sparked demand for online programs and
education technology tools across all academic levels for distance learning. However, this educational
model shift has experienced challenges, primarily due to the lagging Philippine Internet connectivity.
Speedtest Global Index documents Philippine mobile Internet speed at 14.24 Mbps (global average is 30
Mbps) and fixed broadband speed at 23.80 Mbps (global average is 74.64 Mbps). For many years, the
 Philippines’ Internet speed ranked lower than Syria and was the slowest in Asia. Cellular coverage is spotty
at best due to a long-lasting duopoly between two major players that has not encouraged investment in the
sector. The nation of 109 million people and 7,000 islands has only 20,000 cellular towers.
 Research and development: Research and development opportunities lie in academic programs relevant to
the government priority disciplines of science, maritime, medicine, health, engineering and technology,
agriculture, teacher education, hospitality, and architecture and town planning. Private and public
institutions welcome partnership opportunities for research and accommodate visiting fellows and
professors for knowledge exchange programs and capacity building.
 Professional training services: The majority of the Philippine workforce is aged 25 – 54 years old. There are
more than 500,000 Philippine small- and medium-sized enterprises (SMEs) seeking training to advance their
business operations. Several training centers partner with private and public sector employers to offer
technical training and programs. There is an increased interest in executive education programs and
certificates among Philippine business leaders. The Philippine Business for Education, a USAID-funded
education organization, and several others urge the government to create a national plan for workforce
competitiveness and skills development to support its growing economy.