Report of Independent Auditors
1. CORPORATE INFORMATION 1 Background of the University
The Far Eastern University, Incorporated (the University or FEU or Parent Company) is a 93-year-old Philippine-based proprietary educational institution founded in June 1928 and registered with the Securities and Exchange Commission (SEC) on October 27, 1933 and became a publicly-listed corporation with the Philippine Stock Exchange (PSE) on July 11, 1986.
The University is a nonsectarian institution of learning, embracing equal opportunity, inclusivity and diversity. FEU is comprised of seven institutes as follows, under each, handling distinct courses and programs of study:
• Institute of Arts and Sciences;
• Institute of Accounts, Business and Finance;
• Institute of Education;
• Institute of Architecture and Fine Arts;
• Institute of Nursing;
• Institute of Tourism and Hotel Management; and,
• Institute of Law.
FEU has been designated the Autonomous Status by the Commission on Higher
Education (CHED) on July 25, 2012, with extended validity until May 31, 2023. Among the University’s flagship programs are the Teacher Education and Business Administration which are recognized by the CHED as Center of Excellence and Center of Development, respectively.
On top of existing highly accredited programs of local accreditors, eight additional
programs received the highest accreditation by the Philippine Association of Colleges and Universities Commission on Accreditation in 2021. Parallel International certifications by the ASEAN University Network – Quality Assurance were also granted similarly for eight programs namely Accountancy, Business Administration, Biology, Medical Technology, Psychology, Communication, Elementary and Secondary Education. While the Nursing program is accredited by the Philippine Accrediting Association of Schools, Colleges and Universities.
Further in the 2021 World’s Universities with Real Impact (WURI) Ranking, FEU placed 79th in the Global Top 100 Innovative Universities. The University ascended the
international rankings from last year’s 91st position. Compared to other educational ranking systems, which evaluate quantitative metrics such as the number of journal publications and employment rate of graduates, WURI evaluates universities’ flexible and innovative efforts to cultivate contributions to a workforce that meets the demands from industry and society at large.
As at May 31, 2021, 2020 and 2019, the University holds interest in the following subsidiaries which were all incorporated and are operating in the Philippines:
Percentage of Effective Ownership
Company Name 2021 2020 2019
Subsidiaries:
East Asia Computer Center, Inc. (EACCI) 100% 100% 100%
Far Eastern College – Silang, Inc. (FECSI) 100% 100% 100%
FEU Alabang, Inc. (FEUAI) 100% 100% 100%
FEU High School, Inc. (FEU High) 100% 100% 100%
Roosevelt College, Inc. (RCI) 97.43% 97.43% 97.43%
Roosevelt College Educational
Enterprises (RCEE)* 97.43% 97.43% 97.43%
Fern Realty Corporation (FRC)** 38.18% 38.04% 37.52%
Edustria, Inc. (Edustria) 51% 51% -
* Indirectly through the University’s ownership of RCI which owns 100% ownership interest in RCEE
**FEU’s interest held in FRC changed as a result of a reverse stock split made by FRC
The parent company and its subsidiaries are collectively referred to herein as the Group.
Except FRC, which is a real estate company leasing most of its investment properties to the University and other related parties, all other directly owned subsidiaries are operating as educational institutions offering basic education, senior high school and/or tertiary and post graduate courses of study. RCEE, prior to the cessation of its operations, was engaged in selling educational school supplies and food items in campuses of RCI.
1.2 Impact of COVID-19 Pandemic on the Group’s Operations
During fiscal years 2019 and 2020, improved results of operations were expected as these years marked the first two years of returning freshmen enrollees in the tertiary schools as part of the K-12 transition. However, the alarming pandemic level of COVID-19 on both a national and global scale brought about the 1st national level-mandated lockdown.
Starting mid-March 2020, traditional face-to-face classes were suspended and full remote learning modality became the norm. Accordingly, the anticipated growth trajectory in student population, after K-12, came to an abrupt halt.
Throughout the fiscal year 2021, the country remained under various quarantine restriction levels to curb the spread of COVID-19. The resulting economic hardship on top of health concerns impacted students and their families greatly. The Group delivered academic instruction on an online basis for the entire year.
On the health front, FEU invested in making the work and future study places as safe as possible. Information campaigns on safety protocols, health tracking systems and procedures, retro arranging spaces and investments in disinfection and ventilation equipment were all undertaken. Moderna vaccine supplies were also purchased for the entire workforce of FEU. Vaccination with owned vaccines has commenced and this effort together with the local government unit’s superb vaccination drive, will help reach the goal of top vaccination rate within the shortest possible time. The Group has also made the FEU Alabang campus available for the vaccination customers of Ayala Health.
On the operational front, face-to-face classes remained suspended throughout the year.
The Group faced challenges including a decline in enrollment, reduced revenue from discounted assessed tuition fees, more relaxed financial accommodation to students intending to continue their education, higher receivable default rates and much higher but necessary costs related to health and safety of personnel.
The Group recognized additional impairment losses, a three-fold increase or P173.2 million increase from last fiscal year’s P81.7 million (see Note 9).
Despite the 11% decrease in the Group’s total student population in the fiscal year 2021, last year’s tuition rebates (see Note 18.3) and cancellation of the third term for the
trimestral schools have somehow narrowed down the decrease in educational revenues to only 1% – as core revenues were recorded at P3,522.4 million. During the fiscal year 2021, the Group did not implement any increase in tuition fees and, instead, gave special credit considerations to assist students and ease the effect of the prevailing economic burden on students’ household. The University and its subsidiary schools combined, approved an unprecedented volume of student promissory note availment for the school year 2020-2021.
Fortunately, the FEU Group of schools invested heavily on this online learning platforms since 2017, as part of its strategic plans, even before the onset of the pandemic – showing the Group’s commitment to continuous innovation and improvement of its content and delivery of instructions to students. Despite such challenges, the Group’s strict cost management measures, coupled with better than prior years’ returns from investments in financial assets, timing of lower interest rates on bank loans, and tax savings due to lowered income tax rates, have produced optimistic results for the current fiscal year.
Management projects that the Group will continue to report positive results of operations in the future and would remain liquid to meet current obligation as they fall due.
Accordingly, management has not determined material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern.
1.3 Other Corporate Information
The registered offices and principal places of business of the University and its subsidiaries are as follows:
FEU, FRC and
FEU High - Nicanor Reyes Street, Sampaloc, Manila EACCI - P. Paredes Street, Sampaloc, Manila
FEUAI - Lot 1, Corporate Woods cor. South Corporate Avenues, Woods District, Filinvest City, Alabang, Muntinlupa City
FECSI - Metrogate Silang Estates, Silang, Cavite
RCI - No. 54 J. P. Rizal Street, Lamuan, Marikina City
RCEE - Roosevelt College Compound, Sumulong Highway,
Cainta, Rizal
Edustria - Block R & T, Lima Technology Center, Brgy.
Bugtong ng Pulo, Lipa City, Batangas The University also has a campus in Makati, which offers programs mainly in Law, Accountancy and Business Administration.
1.4 Approval for Issuance of Consolidated Financial Statements
The consolidated financial statements of the Group as of and for the years ended May 31, 2021 (including the comparative consolidated financial statements as of and for the periods ended May 31, 2020 and 2019) were authorized for issue by the Group’s Board of Trustees (BOT) on August 17, 2021.