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Republic of the Philippines Department of Agriculture OFFICE OF THE SECRETARY Elliptical Road, Diliman, Quezon City Quezon City 1100, Philippines

Ref. No. 16-11 - November 2, 2016

Ms. FRAUKE JUNGBLUTH Task Team Leader Rural Development Unit, East Asia & Pacific Region The World Bank Group 26th/F One Global Place 5th Ave. cor. 25th St., Bonifacio Global City Taguig City, Philippines

Attention: Mr. Tomas JR Sta. Maria Financial Management Specialist

Dear Ms. Jungbluth:

We are submitting herewith the CY 2015 Consolidated Project Audit Report of the Philippine Rural Development Project (PRDP) under the Department of Agriculture.

Please note that this Audit Report contained the CY 2015 Audited Financial Statements.

Thank you and regards.

Very

ENGR. CIRILO N. NAMOC Assistant Deputy Project Director, PRDP

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Ref. No. 16-11 - November 2, 2016

Ms. FRAUKE JUNGBLUTH Task Team Leader Rural Development Unit, East Asia & Pacific Region The World Bank Group 26th/F One Global Place Sth Ave. cor. 25th St., Bonifacio Global City Taguig City, Philippines

Attention: Mr. Tomas JR Sta. Maria Financial Management Specialist

Dear Ms. Jungbluth:

We are submitting herewith the CY 2015 Consolidated Project Audit Report of the Philippine Rural Development Project (PRDP) under the Department of Agriculture.

Please note that this Audit Report contained the CY 2015 Audited Financial Statements.

Thank you and regards.

ENGR. CIRILO N. NAMOC ' Assistant Deputy Projec rector, PRDP

Encl.: a/s

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ETYLVIA T. REGINO DA I Supervising Audi

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Republic of the Philippines 414000,., CX;(2. • COMMISSION ON AUDIT National Government Sector

Cluster 8 — Agriculture and Environment . Department of Agriculture — Foreign Assisted Projects

DA Compound, Elliptical Road, Diliman, Quezon City

October 28, 2016

Hon. EMMANUEL F. PINOL Secretary Department of Agriculture Elliptical Road, Quezon City

Sir:

Pursuant to Section II-B(3), Schedule 2 of the Loan Agreement No. 8421-PH dated September 8, 2014 between the International Bank for Reconstruction and Development (IBRD) and the Republic of the Philippines, we are transmitting herewith the CY 2015 Audited Financial Statements contained in the Consolidated Project Audit Report of the Philippine Rural Development Project (PRDP) implemented by the Department of Agriculture.

Thank you.

Very truly yours,

4e7:

Art C 4

RECEIVED

PHILIPPINE RURAL DEVELOPMENT PROJECT Df \ce

Implemented by the Government of the Philippines thru the

Department of Agriculture

IBRD LOAN NO. 8421-PH

GEF Trust Fund Grant No. TFO i 7788

CONSOLIDATED PROJECT AUDIT REPORT

For the Year Ended December 31, 2015

Prepared in accordance with the

Philippine Public Sector Accounting Standards

PHILIPPINE RURAL DEVELOPMENT PROJECT (PRDP) IBRD LOAN NO. 8421-PH

GEF Trust Fund Grant No. TF017788

ANNUAL CONSOLIDATED FINANCIAL AND AUDIT REPORT For the Year Ended December 31, 2015

TABLE OF CONTENTS

PART PAGE

I AUDITED FINANCIAL STATEMENTS

Independent Auditor's Report Statement of Management's Responsibility 3 Consolidated Statement of Financial Position 4 Consolidated Statement of Financial Performance Consolidated Statement of Changes in Net Assets/Equity 6 Consolidated Statement of Cash Flows 7 Notes to Financial Statements

II AUDIT OBSERVATIONS AND RECOMMENDATIONS

Value for Money Audit 28 Financial Audit 29

Compliance Audit 52

III STATUS OF IMPLEMENTATION OF PRIOR YEAR'S AUDIT RECOMMENDATIONS 79

IV ANNEX A — CONSOLIDATED STATEMENT OF SOURCES AND USES OF FUNDS (SSUF)

PHILIPPINE RURAL DEVELOPMENT PROJECT (PROP) IBRD LOAN NO. 8421-PH

GEF Trust Fund Grant No. TF017788

PART I - AUDITED FINANCIAL STATEMENTS

Republic of the Philippines COMMISSION ON AUDIT

Commonwealth Avenue, Quezon City

INDEPENDENT AUDITOR'S REPORT

Hon. EMMANUEL F. rusioL Department of Agriculture Secretary Elliptical Road. Dilimam Quezon City

Pursuant to Section II-B(3), Schedule 2 of the Loan Agreement No. 8421-PH dated September 8, 2014 between the International Bank for Reconstruction and Development (1BRD) and the Republic of the Philippines through the Department of Agriculture, we have audited the accompanying consolidated financial statements of the Philippine Rural Development Project (PRDP) which comprise the consolidated Statement of Financial Position as at December 31, 2015, and the related consolidated Statement of Financial Performance, Statement of Cash Flows, and Statement of Changes in Net Assets/Equity for the year then ended, and the summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the Philippine Public Sector Accounting Standards and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatements. whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Philippine Public Sector Standards in Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatements of the consolidated financial statements, whether due to fraud or error. In making those risk assessments. the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

By:

EMMA ti'. REGIN Supervising Auditor Department of Agricul

We believe that the audit evidence we have obtained is sufficient and appropriate to provide basis for our audit opinion.

Basis for Qualified Opinion

As discussed in Part 11 — Observations and Recommendations of this report, we rendered a qualified opinion on the financial statements due to the following accounting errors/omissions and deficiencies:

Accounting Errors/Omissions Amount

a) Unreported GOP Trust Depository accounts and the transactions thereon

b) Unreported various fund transfers and liquidations

Total

Accounting Deficiencies

P 168,538,586.09

147,177,870.46

P 315,716,456.55

a) Reported liquidations not supported with Statement of Receipts and Expenditures

b) Deficiencies and unsupported grant of incentive allowances

c) Fund transfers to LGUs not properly documented

Total

P 50,689,895.92

45.154.005.04

63368,541.72

P 159,212,442.68

Opinion

In our opinion, except for the effects of the matters described in the Basis for Qualified Opinion paragraph. the consolidated financial statements present fairly, in all material respects, the financial position of the Department of Agriculture for the PRDP fund as at December 31, 2015, and the results of its financial performance, its cash flows. changes in net assets/equity for the year then ended, and the summary of sianificant accounting policies and other explanatory information in accordance with Philippine Public Sector Accounting Standards.

COMMISSION ON AUDIT

October 20. 2016

Republic of the Philippines Department of Agriculture OFFICE OF THE SECRETARY Elliptical Road, Diliman Quezon City 1100, Philippines

STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The management of DEPARTMENT OF AGRICULTURE is responsible for all information and representations contained in the accompanying Consolidated Statement of Financial Position of Philippine Rural Development Project (PRDP) under Fund Cluster 02 (Fund 102) as at December 31. 2015 and the related Consolidated Statement of Financial Performance, Consolidated Statement of Cash Flows. Consolidated Statement of Changes in Net Assets/Equity for the year then ended The financial statements have been prepared in conformity with the Philippine Public Sector Accounting Standards and generally accepted state accounting principles and reflect amounts that are based on the best estimates and informed judgment of management with an appropriate consideration to materiality

In this regard, management maintains a system of accounting and reporting which provides for the necessary internal controls to ensure that transactions are properly authorized and recorded, assets are safeguarded against unauthorized use or disposition and liabilities are recognized

OP P. AGAWIN ALLAN :MALI Assis t cretary for Finance Undersecretan fp! Admit: & Finance

DEPARTMENT OF AOR CATERv

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For Signature: FINANCE-5.0546-0159

Received - 051301201605..2 AM

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PHILIPPHINE RURAL DEVELOPMENT PROJECT (PRDP) CONSOLIDA FED STATEMENT OF FINANCIAL POSITION

FUND CLUSTER 02 (FUND ]02) AS AT DECEMBER 31, 2015

Notes 2015 2014

ASSETS

Current Assets

Cash and Cash Equivalent 6 1,290,729,041.86 69.229,972.94

Receivables 7 864.579.730.30 156,363,566 11

Inventories 8 1,897,515 23 727.478 60

Other Current Assets 9 32,286.485 70 1,509.305 03

Total Current Assets 2.189.492,773.09 227,830.322.68

Non - Current Assets

Property Plant and Equipment 10 74.247,746.93 30,906,333.54

Total Non - Current Assets 74.247,746.93 30906.333.54

Total Assets 2,263,740520.02 258,736,656.22

LIABILITIES

Current Liabilities

Financial Liabilities 11 116,963.037.28 33,070,373 50

Inter-Agency Payable 12 3,983.206.96 101,702,977.67

Intro-Agency Payable 45.644.00 2,978,006 00

Deferred Credits 42.564.66

Other Payables 13 7,088_393.44 3,501,816 55

Total Current Liabilities 128.080.281.68 141,295.732.38

Non - Current Liabilities

Total Not - Current Liabilities

Toal Liabilities 128,080.281.68 141,295,732.38

NET ASSETS/EQUITY

Accumulated Surplus/(Deficit) 20 I 2,135.660,238.34 117,440,923 24

Total Net Assets/Equity 2.135,660.238.34 117.440.923.84

Total Liabilities and Net Assets/Equity 2.263.740.520.02 258,736,656.22

Sire Accompanying Nolen Financial Staiemems

PHILIPPHINE RURAL DEVELOPMENT PROJECT (PRDP) CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE

FUND CLUSTER 02 (FUND 102) FOR THE YEAR ENDED DECEMBER 31, 2015

Revenue

Notes 2015 2014

Service Income and Business Income 14 1,418,857.60

Total Revenue 1.418,857.60

Less: Current Operating Expenses Personnel Services - Maintenance ex Operating Expenses 15 426.717.589.53 97.518,884.57

Financial Expenses 16 13,039.27 36,520.00

Non-Cash Expenses 17 347305.58 54.809.46

Total Current Operating Expenses 427.077.834.38 97,610,214.03

Surplus/(Deficit) front Current Operations (425.658,976.78) (97,610,214.03)

Net Financial Assistance/Subsidy 18 2,509,644.732.30 219.825,658.73

Sale of Assets

Gains 19.1 17.562,135.98

Losses 19.2 (23.660.92) Surplus/(Defleit) for period 2,101,524,230.58 122,215,444.70

See Accompanying Notes to Financial Statements

PHILJPPHINE RURAL DEVELOPMENT PROJECT (PRDP) CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS/EQUITY

FUND CLUSTER 02 (FUND 102) FOR THE YEAR ENDED DECEMBER 31, 2015

Balance at January I

Add/(Deduct): Changes in Accounting Policy

Prior Period Adjustments/Unrecorded Income 3: Expenses

Other Adjustments

Restated Balance

Notes

20.1

20.2 20.3

2015 21)14

117,440,923.84

(82,302,761 47)

(848,286 78)

5,496,445.88

(10,19721274)

(59 995 OCi

34,289,875.59 (4,76(1,761.86)

Add/(Deduct): Changes in Net Assets/Equity for the Calendar Year

Surpius/(Deficit) for the Period 20 1 2,101,524,230.58 122.215.444 70 Adjustment of Net Revenue Recognized directly in Net Assets/Equi 20.4 (153,867.83) (13.759 00)

Total recognized revenue and expenses for the period 2,101,370,362.75 122,201.685.70

Others

Balance at December 31 20.1 2,135.660,238.34 117,440,923.84

See Accompanying Notes to Financial Siammena

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PHILIPPHINE RURAL DEVELOPMENT PROJECT (PRDP)

CONSOLIDATED STATEMENT OF CASH FLOWS FUND CLUSTER 02 (FUND 102)

FOR THE YEAR ENDED DECEMBER 3], 2015

Cash Flow from Operating Activities: 01511 Inflows:

Receipt of Notice of Cash Allocation Cash Inflows: Collection of Income/Revenues

Collection of Receivables Receipt of Intra-Agency Fund Transfers Other Receipts Adjustments

Total Cash Inflows

Cash Outflows: Remittance to National Treasury Payment of expenses Purchase of inventories Grant of Cash Advance Refund of Deposits Payment of Accounts Payable Remittance of Personnel Benefits Contribution and Mandatory Deduction Release of Inter-Agency Fund Transfer Release of Intra-Agency Fund Transfer Reversal of linutilized NCA Adjusunents Total Cash Outflows

Nei Cash Provided by (used in) Operating Activities Cash Flow from Investing Activities:

Cash Inflows:

Total Cash Inflows

Cash Outflows:

Purchase/Construction of Property, Plant and Equipment

Total Cash Outflows Net Cash Provided By (Used in) Investing Activities Cash Flow from Financing Activities:

Cash Inflows

Total Cash Inflows

Cash Outflows

Total Cash Outflows Net Cash Provided by (Used in) Financing Activities Increase (deceased in Cash and Cash Equivallents Effects of Exchange Rate Changes on Cash and Cash Equivalents

Cash and Cash Equivalents„Ianuary I

Cash and Cash Equivalents, December 31

Notes 2015 2014

3,479,446,027.62 1,163,136.00

11,129.24 1,093,352,034.49

40,882,130.79 131,723,655.56

704,863.405.86

100, 00,000.00 106,422.75

7,293.154.06

4,746,578,113.70 812,862,982.67

153,867.83 414,178,130 98

1 499,985 47 4,272,700 40

3.167,413 95 11,666,374 60

770,344,504.21 1,839,430,604.63

462,804,349 48 16,157,242 22

161,780.41 74,637,557 60

310,633.92 3,011,550.15

256,898.35 3,404,026.38 1.344,198.05

177,745,912.34 205,426,987.59 275,220,334.31

2,924.926.99 3,523,675,173.77 744,444,806.09

1.222,902.939.93 68,418,176.58

1,403,871 01 902,503 45

1,403,871.01 902,50345

(1,403,871.01) (902,503.451

1.221,499,068.92

69.229,972.94

67,515,673.13

1,714,299.8)

6 1,290,729,041.86 69,229,972.94

See Accompai N IGHC101.5101enleMS

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PHILIPPINE RURAL DEVELOPMENT PROJECT (PRDP)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31, 2015

I. General Information and Agency Profile

1.1. The consolidated financial statements of the PRDP were authorized for issue on June 30, 2016 as shown in the Statement of Management Responsibility for Financial Statements signed by the Assistant Secretary for Finance and Undersecretary for Administration and Finance of the Department of Agriculture.

1.2 The PHILIPPINE RURAL DEVELOPMENT PROJECT (PRDP) is a project under the Foreign Assisted Project Fund of the International Bank for Reconstruction and Development (IBRD) thru World Bank.

1.3. The project is a six-year (6) project designed to establish the government platform for a modern, climate-smart and market-oriented agri-fishery sector. PRDP will partner with the Local Government Unit (LGU) and the private sector in providing key infrastructure, facilities, technology, and information that will raise incomes, productivity and competitiveness in the countryside.

The project comprises four components:

Component 1: Local and National Level Planning (I-PLAN) Component 2: Infrastructure Development (I-BUILD) Component 3: Enterprise Development (I-REAP) Component 4: Project Implementation Support (I-SUPPORT)

1.4. The Component 1: Local and National Level Planning (1-PLAN)

1.4.1. Enhancing the Agriculture and Fisheries Modernization Plan (AFMP).

1.4.2. Rationalization of the DA's planning, programming and budgeting processes related to the development of AFMPs as the main basis of decision making and operation in the DA at the national, regional and local levels.

1.4.3. Support for natural resource planning, management and resource utilization in selected marine protected areas.

1.5. The Component 2: Infrastructure Development (1-BUILD)

1.5.1. Value Chain Infrastructure Support. Carrying out of specific Sub-projects to support infrastructure development by participating LGUs in priority commodity value chains including among others. farm-to-market roads, bridges, tire tracks, communal irrigation potable water systems, post-

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harvest facilities, production facilities, fish landings, fish sanctuaries, tram lines, storage facilities, trading posts, green houses, solar driers, water towers, and slope stabilization works.

1.5.2. Approaches for Improving the Effectiveness and Sustainability of Infrastructure investments. Development of technical specification for climate resiliency and disaster risk irrigation for local infrastructure.

1.6. The Component 3: Enterprise Development (I-REAP)

1.6.1. Rural Agri-Fishery Enterprises and Productivity Enhancement:

1.6.1.1. Carrying Out of specific Sub-projects to support vertical horizontal clustering, joint business planning and investments by producer groups/enterprises operating within priority commodity value chains.

1.6.1.2. Promotion of biodiversity conservation and coastal resource co-management arrangements, as well as carrying out sustainable income-generating livelihood activities.

1.7. The Component 4: Project Implementation Support (1-SUPPORT), this aims to provide efficient and effective project management and implementation, establish a standard on services and technical assistance and effective mode on engagement with ECUs.

1.8. The Department of Agriculture is the implementing agency of PRDP, the National Project Advisory Board (NPAB) is responsible for over-all direction and oversight of Project implementation and the Regional Project Advisory Boards (RPABs), each chaired by the regional director of DA are responsible for the oversight of Project implementation at the regional level. There are four implementing units involved in the PRDP, namely :

1.8.1. National Project Coordination Office (NPCO) — This Office is within the DA - Central Office and over-all lead in the Project Implementation.

1.8.2. Four Project Support Office (PSO) — This refers to the Office that has been given responsibility by and under the supervision of the NPCO to supervise and monitor the activities and LGUs in coordination with the RPCOs. This compose of the following:

• PSO Luzon A

• PSO Luzon B • PSO Visayas

• PSO Mindanao

1.8.3. Regional Project Coordination Office (RPCO) — This office is within the DA Regional Office (RFO) that will assist the NPCO and PSO in the implementation of the projects.

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1.8.4. Local Government Units (LGUs) — This refers to the local organizational unit responsible for the direct implementation of sub-projects under the Enterprise Development and Infrastructure Development component.

2. Statement of Compliance and Basis of Preparation of Financial Statements

The consolidated financial statements have been prepared in accordance with and comply with the Philippine Public Sector Accounting Standards (PPSAS) issued by the Commission on Audit per COA Resolution No. 2014-003 dated January 24, 2014.

The consolidated financial statements have been prepared on the basis of historical cost, unless stated otherwise. The Statement of Cash Flows is prepared using the direct method.

3. Summary of Significant Accounting Policies

3.1 Basis of accounting

The consolidated financial statements are prepared on an accrual basis in accordance with the Philippine Public Sector Accounting Standards (PPSAS).

3.2 Consolidation

a. Consolidated entities/Controlled Entities

Consolidated entities

The consolidated financial statements reflect the assets, liabilities, revenues, and expenses of the reporting entity and all controlled entities. Includes in the financial statement of the PRDP are the transaction of the NPCO. four (4) PSO which are consolidated by the Central Office, to wit:

a) National Project Coordination ()Mee (NPC0)— DA Central Office h) Four (4) Project Support Office (PSO) —This compose of the

• PSO Luzon A Cluster - Pampanga • PSO Luzon B Cluster - Central Office • PSO Visayas Cluster - Iloilo City • PSO Mindanao Cluster - Davao City

3.3 Financial instruments

a. Financial assets

Initial recognition and measurement

Financial assets within the scope of PPSAS 29 Financial Instruments: Recognition and Measurement are classified as financial assets at fair

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value through surplus or deficit, loans and receivables, held-to-maturity investments or available-for-sale financial assets, as appropriate. PRDP determines the classification of its financial assets at initial recognition.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognized on the trade date, i.e., the date that the PRDP commits to purchase or sell the asset.

The PRDP's financial assets include: cash and short-term deposits; trade and other receivables; loans and other receivables; quoted and unquoted financial instruments; and derivative financial instruments.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification.

Financial assets at fair value through surplus or deficit

Financial assets at fair value through surplus or deficit include financial assets held for trading and financial assets designated upon initial recognition at fair value through surplus and deficit. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasin g in the near term.

Financial assets carried at amortized cost

For financial assets carried at amortized cost, the Department first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Department determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset's original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

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The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in surplus or deficit. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or transferred to the department. lf, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in surplus or deficit.

Impairment offinancial assets

The Department assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred "loss event") and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include the following indicators:

• The debtors or a group of debtors are experiencing significant financial difficulty

• Default or delinquency in interest or principal payments

• The probability that debtors will enter bankruptcy or other financial reorganization

• Observable data indicates a measurable decrease in estimated future cash flows (e.g. changes in arrears or economic conditions that correlate with defaults)

b. Financial liabilities

Initial recognition and measurement

Financial liabilities within the scope of PPSAS 29 are classified as financial liabilities at fair value through surplus or deficit or loans and borrowings, as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, plus directly attributable transaction costs.

The Department's financial liabilities include trade and other payables, bank overdrafts, loans and borrowings, financial guarantee contracts.

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Subsequent measurement

The measurement of financial liabilities depends on their classification.

Financial liabilities at lair value through surplus or deficit

Financial liabilities at fair value through surplus or deficit include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through surplus or deficit.

Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term.

This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IPSAS 29.

Gains or losses on liabilities held for trading are recognized in surplus or deficit.

Loans and borrowing

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Gains and losses are recognized in surplus or deficit when the liabilities are derecognized as well as through the effective interest method amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate.

Derecognition

A financial liability is derecognized when the obligation uncler the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in surplus or deficit.

c. Fair value of financial instruments

The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short

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positions), without any deduction for transaction costs.

d. Derivative financial instruments

Initial recognition and subsequent measurement

The Department of Agriculture uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its foreign currency risks and interest rate risks, respectively. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

Any gains or losses arising from changes in the fair value of derivatives are taken directly to surplus or deficit. The Department does not apply hedge accounting.

3.4 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and cash at bank, deposits on call and highly liquid investments with an original maturity of three months or less, which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.

3.5 Inventories

Inventory is measured at cost upon initial recognition. To the extent that inventory was received through non-exchange transactions (for no cost or for a nominal cost), the cost of the inventory is its fair value at the date of acquisition.

After initial recognition, inventory is measured at the lower of cost and net realizable value. However, to the extent that a class of inventory is distributed or deployed at no charge or for a nominal charge, that class of inventory is measured at the lower of cost and current replacement cost. Net realizable value is the estimated selling price in the ordinary course of operations, less the estimated costs of completion and the estimated costs necessary to make the sale, exchange, or distribution. Inventories are recognized as an expense when deployed for utilization or consumption in the ordinary course of operations of PRDP.

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3.6 Property, Plant and Equipment

Recognition

An item is recognized as property, plant, and equipment (PPE) if it meets the characteristics and recognition criteria as a PPE.

The characteristics of PPE are as follows:

• tangible items; • are held for use in the production or supply of goods or services, for

rental to others, or for administrative purposes; and • are expected to be used during more than one reporting period.

An item of PPE is recognized as an asset if:

• It is probable that future economic benefits or service potential associated with the item will flow to the entity; and

• The cost or fair value of the item can be measured reliably.

Measurement at Recognition

An item recognized as property, plant. and equipment is measured at cost.

A PPE acquired through non-exchange transaction is measured at its fair value as at the date of acquisition.

The cost of the PPE is the cash price equivalent or, for PPE acquired through non-exchange transaction its cost is its fair value as at recognition date.

Cost includes the following:

• Its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates;

• expenditure that is directly attributable to the acquisition of the items; and • initial estimate of the costs of dismantling and removing the item and

restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired, or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.

Measurement After Recognition

After recognition, all property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

When significant parts of property, plant and equipment are required to be replaced at intervals, the PRDP recognizes such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major

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repair/replacement is done, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized as expense in surplus or deficit as incurred.

Depreciation

Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.

The depreciation charge for each period is recognized as expense unless it is included in the cost of another asset.

Initial Recognition of Depreciation

Depreciation of an asset begins when it is available for use such as when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

For simplicity and to avoid proportionate computation, the depreciation is for one month if the PPE is available for use on or before the 15th of the month. However, if the PPE is available for use after the 15th of the month, depreciation is for the succeeding month.

Depreciation Method

The straight line method of depreciation shall be adopted unless another method is more appropriate for agency operation.

Estimated Useful Life

The PRDP uses the Schedule on the Estimated Useful Life of PPE by classification prepared by COA.

The PRDP uses a residual value equivalent to at least five percent (5%) of the cost of the PPE.

Impairment

An asset's carrying amount is written down to its recoverable amount, or recoverable service amount, if the asset's carrying amount is greater than its estimated recoverable service amount.

Derecognition

The PRDP derecognizes items of property, plant and equipment and/or any significant part of an asset upon disposal or when no future economic benefits or service potential is expected from its continuing use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal

16

proceeds and the carrying amount of the asset) is included in the surplus or deficit when the asset is derecognized.

3.7 Changes in accounting policies and estimates

The PRDP recognizes the effects of changes in accounting policy retrospectively. The effects of changes in accounting policy were applied prospectively it retrospective application is impractical.

The Project recognizes the effects of changes in accounting estimates prospectively by including in surplus or deficit.

The Project correct material prior period errors retrospectively in the first set of financial statements authorized for issue after their discovery by:

• Restating the comparative amounts for prior period(s) presented in which the error occurred; or

• if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and net assets/equity for the earliest prior period presented

3.8 Foreign currency transactions

Transactions in foreign currencies are initially recognized by applying, the spot exchange rate between the function currency and the foreign currency at the transaction.

Exchange differences arising (a) on the settlement of monetary items, or (b) on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements, are recognized in surplus or deficit in the period in which they arise. except as those arising on a monetary item that forms part of a reporting entity's net investment in a foreign operation.

3.9 Revenue from Exchange transactions

Interest income

Interest income is accrued using the effective yield method. The effective yield discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount. The method applies this yield to the principal outstanding to determine interest income each period.

3.10 Budget Information

3.9.1. Total allotment available during the year was 89,740,681,901.49 with obligations incurred of 87.969357,991.31 as shown on the next page.

17

Allolmen, Ohligations

Unexpemled Balan e

Extended Curren1 Total Total Reverted Emended

DE P. 339.236,504.87 82,281,199,00000 2,615,435,504 87 P 1.159.191818 02 0 i A61,243,686 85 591.612 38 8 1,460.652.074 47 7X 3,900.00 6000000 19,900 00 13.039 27 6,86073 000 6.860.73

2,078,061496.62 5,047,165,00000 7,125,226,490 02 6,815 153 139.02 310,073,36260 58.180.48292_ 251,89_287468

rl 1'2,412.30196149 P 7,328,380.000.00 8' 9,740,683.901.49 R 7,969,357,991.31 II 1,771,323,910.18 858,772.100.30 14 1.712,551.909.88

Feed Cale Ouster

02 MO FIN CO

Grai cl Tot

4. Changes in Accounting Policies

PRDP adopted the following new accounting policies:

4.1 On January 1, 2014, PRDP adopted the PPSASs No. 1 to 31, which replaced the existing standard. The new standard includes the requirement for recognition, measurement, presentation and reclassification to conform to the Revised Chart of Accounts prescribed under COA Circular No. 2013-002 dated January 20, 2013. We have accounted for these changes retroactively and have accordingly converted our financial statements to conform to the new Chart of Accounts and is effective for years beginning on or after December 31, 2014. This accounting change had significant impact on PRDP's consolidated financial statements.

4.2 Revenues are recognized using the appropriate accounts to which the Project are authorized to use and are required to be remitted to the National Treasury.

4.3 Property, Plant and Equipment and Supplies and Materials intended for distribution to beneficiaries are recorded as Property and Equipment for Distribution/Supplies and Materials for Distribution, and are expensed only when actually distributed to beneficiaries.

4.4 Impairment of Assets is being studied for application on corresponding PPEs. PPEs and Intangible Assets then are carried at cost less Accumulated Depreciation and Impairment Losses. Major repairs are being assessed for capitalization. Depreciation on assets is computed on a straight line method over useful life of the asset. The residual value is computed at 5% pursuant to PPSAS 17-Property, Plant and Equipment

S. Prior Period Adjustments

The PRDP has determined that fundamental errors of prior years are corrected by adjusting directly to Accumulated Surplus/(Deficit) account. Errors affecting the current year's operations are charged to the current year's accounts.

6. Cash and Cash Equivalents

Accounts 2015 2014

Cash on Hand P 224,585.00 B 39,481.00

Cash in Bank-Local Currency 805,320,110.45 64,172,065.65

Cash in Bank-Foreign Currency 428,831,847.50 0.00

Cash in Bank — Treasury/Agency — Cash Account

56,352,498.91 5,018,426.29

Total Cash and Cash P1,290,729,041.86 869,229,972.94

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Accounts 1 2015 2014 Equivalents

6.1. The Cash on Hand balance consists of Cash-Collecting Officers amounting to P9.585.00 which represents undeposited collection of excess cash advances/fund transfers of various PSO/RPCO, and Petty Cash account in the amount of 8215,000 which represents cash in the hands of the accountable officers for the payment of petty or miscellaneous expenses which cannot be conveniently paid thru check by concerned offices/project.

6.2 The Cash in Bank—Local Currency is composed of account balance of Cash in Bank—Local Currency, Current Account and Cash in Bank-Local Currency, Savings Account amounting to P805,315,642.45 and 84,468.00, respectively. Local Currency, Current Account includes funds received from different agencies for the implementation of various projects. It also includes transfer of funds from dollar to local currency account.

6.3. Cash in Bank—Foreign Currency, Savings Account amounting to P428.831,847.50 is net of Gain or Loss on Foreign Exchange (FOREX) on Bank Balances as of December 3L 2015 pursuant to Section 4, Volume 1 of the New Government Accounting System (NGAS) and includes various replenishment of working fund received for the implementation of the project.

6.4. The Cash in Bank, Treasury/Agency—Cash Accounts is composed of account balances of Cash—MDS, Regular of P56,352,498.91 representing restored amount of cash for the unreleased checks as of December 31, 2015 pursuant to COA GAFMIS Circular No. 2002-001 dated December 16, 2002.

7. Receivables

7.1 Inter-Agency Receivables

Accounts 2015 2014 Due from National Government Agencies P 455.059.035.53 j P 103,881.614.20

Due from Government-Owned and/or Controlled Corporations 462.01 0.00

Due from Local Government Unit 286.738.742.52 1 32.596,127.26 Elotal P741,798,240.06 I ¥136.477,741.46

7.1.1 The balance of account Due from National Government Agencies amounting to P455,059,035.53 includes the amount of P453,511,189.43 of RFO IX representing fund transfer to PSO-Mindanao Cluster which serves as a conduit for the implementation of PRDP and it also includes deposit made to Procurement Service for the purchase of supplies and materials.

7.1.2 The balance of account Due from Government-Owned and/or Controlled Corporations of 4462.01 represents the adjustment for reclassification of account made by NPCO.

19

7.1.3 The account Due from Local Government Unit (LGU) of P286,738,742.52 consists of fund transferred to LGUs by PSO/RPCO for the implementation of various infrastructures projects and post harvest facilities projects such as FMRs. and repair and rehabilitation of existing irrigation.

7.2 Intra-Agency Receivables

Accounts 2015 2014

Due from Regional Offices P 122.677.279.15 P 19,688,267.61

Due from Operating Units 34,468.00 0.00

Total P122,711,747.15 P19,688,267.61

7.2.1. The balance of account Due from Regional Offices of P122,677.279.15 consists of fund transferred to RPCOs by PSOs for the implementation of various project/program activities of PRDP.

8. Inventories

Accounts Balance

Office Supplies Inventory P 1,865,359.08

Other Supplies and Materials Inventory 37,156.15

Inventoly Held for Consumption 1.897.515.23

Inventories P1.897,515.23

Particulars

2015

Inventories carried

at the lower of cost

Lund net realizable

value

Inventories

carried at fair

value less cost

to sell

Inventory

write-down

recognized

"ring the tear

Reversal of

Inventory

wr ite-down

recognized

during the Year

Inventory Held for Consumption

Carrying Amount, January 1, 2015 P— 727,478.60

Additions/Acquisitions during the year I. 170.036.63

Expensed during the year except writ-

I down

i Write-down durnto the year

Reversal of Write-down durino the year

Carryini. Amount, December 3 . 2015 1 897.515 3

TOTAL, CARRYING AMOUNT,

DECEMBER 31, 2015 P 1,897515.23

S. I The balances of Inventory accounts consist of the following:

Accounts 2015 1 2014

Inventory Held for Sale P 0.00 P 0.00

Inventory Held for Distribution P 0.00 P 0.00

Inventory Held for Consumption P 1.897,515.23 P 727,478.60

Office Supplies Inventory 1.865.359.08 719.177.04

Other Supplies and Materials Inventory 32.156.15 8.301.56

Total Inventory P 1,897,515.23 j P 727,478.60

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9. Other Assets

9.1. Current and Non-Current Other Assets

Particulars 2015 2014

Current Non-Current Current Non-Curren t

Advances P 2,001,094.32 P 1,044,157.88 Prepayments 30,285,391.38 215,147-15 Other Assets 0.00 Deposits 0.00 250,000.00 _ TOTALS P 32,286,485.70 P 0.00 P 1,509,305.03 P 0.00

9.1.1. The Advances under Other Assets account includes Advances for Operating Expenses amounting to P276,790.39, Advances for Special Disbursing Officers amounting to P1,704,303.93 representing advances granted for special purpose project made by the NPCO/PSO and Advances to Officers and Employees amounting to P20,000.00 consisting of cash advances granted for travelling expenses which remained unliquidated at year end.

9.1.2. The Prepayment represents the amount for Advances to Contractors account of P30,285,391.38 which comprise the balance of mobilization fees for the construction of Farm-to-Markets Roads subprojects under the infrastructure component of PRDP.

10. Property, Plant and Equipment

Accounts 2015 2014 Land P 0.00 P 0.00 Land Improvements 0.00 0.00 Infrastructure Assets 30,000.000.00 30,000,000.00

Road Networks 30.000.000.00 30,000,000.00 Accumulated Depreciation - Road Networks 0.00 000

30,000,000.00 30,000.000.00 30,000,000.00 Buildings and Other Structures 0.00 0.00 Machinery and Equipment 6,772.404.73 621,453.83

Office Equipment 99,580.40 122,445.00 1 Accumulated Depreciation - Office Equipment (I 9.177.32) (11,257.12) Accumulated Impairment Losses - Office Equipment 0.00 0.00

Net Value 80,403.08 111,187.88 Information & Communication Technology Equipment 6.866.815.76 545,613 00 Accumulated Depreciation - IC Technology Equipment (332.222.75) (41,983.47) Accumulated Impairment Losses - IC Technology Equipment 0.00 0.00

Net Value 6.534.593.01 503,629.53 Communication Equipment 179,677.50 7.415.00 Accumulated Depreciation - Communication Equipment (22,268.86) (778.58) Accumulated Impairment Losses - Communication Equipment 0.00 0.00

Net Value 157.408.64 6.636.42 Transortation E. ui ment 0.00 0.00 I

Furniture, Fixtures and Books 633,92700 278,2(10.00

Furniture and Fixtures 6565.00 8,9 278,200.00 Accumulated Depreciation - Furniture & Fixtures (25,038.00) 0.00

IF

Net Value 633,927.00 278,200.00 Leased Assets I m . rovements 0.00 0.00

, Construction in Progress 36,833,854.27 _ 0.00 Construction in Progress - Infrastructure Assets 36.833_854.27 0.00

21

Heritage Assets 0.00 BOO

• Other Property. Plant and Equipment 7360.93 6,679.71

Other Property, Plant and Emoinment 04 7.470 (6,

Accumulated Depreciation - Other property, Plant & h equipment (3218.111 (79029

Accumula ted Impairment Losses - Other Property, Plat

dc Equipment 0.00 0 06

Net Value 7.560.93 6,679.7

Total Property Plant and Equipment 74.247346.93 2 30,966,333.54

(in thousand pesos) Infrastructure

Assets

Machinery and

Equipment

Furniture

Fixtures and

,

Books Progress

Construction in Other PPE TOTAL

Gross Cost (Asset Accnomt Balance

per Statement of Financial

Position( P30,000.00 P7,1460 P658.97 P36,833 85 P10.78 P74649 67

Less. Ace. Depreciation 0.00 (37.67 (25.04) 0.00 (3.22)

(401.93)

Allowance for Impairment 000 0.00 0.00 0.00 0.00 0.00

Carrying Amount, December 31,

2015 (As per Statement of

Financial Position) P30,000.0 P6,772.40t P633.93 P36,833.85 P7.56 P74,247.74 i

10.1 The Infrastructure Assets composed of account Road Networks of P30,000,000.00 represent all costs incurred by the Regions for the construction of Farm to Market Roads in different Provincial/Municipalities.

10.2 The Machineries and Equipment with a carrying value amounting to P6,772,404.73 million represents purchase/acquisition of various PPEs and receipts from other agencies which where taken up in the books of PSO in CY 2015.

10.3 The Construction in Progress is composed of account Construction in Progress —Infrastructure Assets of P36,833,854.27 which pertains to the on-going construction of infrastructure project of various regional offices which shall be transferred to appropriate agency asset account upon completion and acceptance.

11. Financial Liabilities

11.1 Payables

Particulars 2015 2014

Current Current

P yables Accounts Payable P116,063,627.10 P31869,36820

Due to Officers & Employees 899,410.18 201,005.30

Total Payables P116,963,037.28 33,070,373.50

11.1.1 The Accounts Payable balance of 4116,063,627.10 includes the amount of unreleased checks and due and demandable obligations of NPCO/PSOs to creditors as of December 31, 2015.

11.1.2 The account balance of Due to Officers and Employees of P899,410.18 represent various claims for reimbursement of travelling expenses,

2?

training and seminar expenses, and other operating expenses that remained outstanding at the end of the year.

12. Inter-Agency Payables

Particulars 2015 2014

Current Current Due to BIR P 1,929,363.85 P 1.102,977.67 Due to NGAs 42,000.00 100,600,000.00 Due to LGU 2,011 ,843. I I 0.00 Total Inter-Agency Payables P 3,983,206.96 P 101,702,977.67

12.1 The account balance of Due to BIR of P1,929,363.85 represent balances of the account of the NPCO/PSOs which will be remitted in CY 2016.

12.2 The Due to NGAs and Due to LGUs amounting to P42,000 and P2,011,843.11, respectively. consist mainly of fund transfers received from source regions and other national government agencies for the implementation of various projects.

13. Other Payables

The account Other Payables amounting to P7,088,393.44 represent various liabilities not falling under any specific payable accounts like liabilities arising from unpaid consultancy services, professional services, travelling expenses and reimbursements for contractual employees of PRDP which are still payable at year-end.

14. Service and Business Income

Particulars 2015 2014 Service Income P 144,899.85 i P 0.00

Fines & Penalties — Service Income 144,899.85 1 0.00 Business Income P 1,273,957.75 1 P 0.00

Interest Income 1373,957.75 i 0.00 Total Service and Business Income P 1,418.857.60 ! P 0.00

15. Maintenance and Other Operating Expenses

15.1 Traveling Expenses

Particulars 2015 2014 Traveling Expenses - Local P32,505.789.29 P13,356.139.89 Travelling Expenses - Foreign 532.491.46 36,385.16 Total Traveling Expenses P33,038,280.75 P13,392,525.05

1 5.1.3. The amount of Travelling Expenses-Local of P32,505,789.79 represents payment for traveling expenses incurred by regions/offices

23

during fieldwork validation and monitoring of projects and other official functions on agriculture for the implementation of PRDP projects/programs.

15.1.4 The account Travelling Expenses-Foreign amounting to P532,491.46 refers to per diems and fare cost incurred by officials and employees of the regions/offices invited by the agency for participation of their programs/activities outside the country.

15.2 Training and Scholarship Expenses

Particulars 2015 2014 Training Expenses P 86,294,18328 P 35,404,388.75 Scholarship Grants/ Expenses 0.00 0.00 Total Training and Scholarship Expenses P 86,294,183.28 P 35,404,388.75

15.2.1. The account Training expenses amounting to P86,294,183.28 represents payment for training programs for the implementation of PRDP projects/programs activities.

15.3 Supplies and Materials Expenses

Particulars 2015 2014 Office Supplies Expenses P 3,258,131.40 P 2,618,464.63 Accountable Form Expenses 0.00 10,777.50 Non-Accountable Form Expenses 0.00 44,585.00 Fuel, Oil and Lubricants Expenses 1,374,172.75 545,627.06 Agricultural and Marine Supplies Expenses 148,500.00 0.00 Other Supplies Expenses 886,453,52 383,405.34 Total Supplies and Materials Expenses P 5,667,257.67 P 3,602,859.53

15.4 Uti ity Expenses

Particulars 2015 , 2014 Water Expenses P 25.832.98 P1 0.00 Electricity Expenses 455,550.03 126,178.41 Total Utility Expenses P 481,383.01 P126,178.41

15.5 Communication Expenses

Particulars 2015 2014 Postage and Deliveries P 146,764.28 P 31.073.62 Telephone Expenses 2,908,231.01 1,147,196.64 Internet Subscription Expenses 127,667.30 12,996.04 Cable, Satellite, Telegraph and Radio Expenses 1,076.39 0.00 Total Communication Expenses P 3,183,738.98 P 1,191,266.33

15.6 Professional Services

Particulars 2015 2014

Auditing Services P 35,494.00 P 1,926.00 Consultancy Services 124,452,405.82 15,316,315.19

24

Particulars 2015 2014 Other Professional Services 32,506,343.53 i 11,200,144.8] Total Professional Services P 156,994,243.35 P 26,518,386.00

15.6.1 The Consultancy Services of P124,452,405.82 represents payment for consultancy services for contractual employees and incentive allowance of official and employees involved in the implementation of The PRDP projects.

15.6.2. The amount of Other Professional Services of P32,506.343.53 represents payment for the professional fees of contractual employees of the NPCO/PSOs/RCPOs.

15.7 General Services

Particulars 2015 2014 Security Services P 550,424.11 P 44,605.21 Total Genera] Services P 550,424.11 P 44,605.21

15.8 Repairs and Maintenance

Particulars 2015 2014 Repairs and Maintenance — Building 8..i Structures P 901.892.29 P 815,475.44 Repairs and Maintenance - Machinery and Equipment 29,750.00 7,885.00 Repairs and Maintenance—Transportation Equipment 1,322,345.01 225,698.00

Total Repairs and Maintenance Expenses P 2,253,987.30 P 1,049,058.44

15.9 Taxes, Insurance Premiums and Other Fees

Particulars 2015 2014 Taxes. Duties and Licenses P 0.00 P 447.11 Fidelity Bond Premium 114,375.00 55.589.06 Insurance Premium 22,336 08 5,356.00 Total Other Maintenance and Operating Expenses P 136,711.08 P 61,392.17

15.10 Other Maintenance and Operating Expenses

Particulars 2015 2014 Advertising Expenses P 155,832.00 P 250,191.00 Printing & Publication Expenses 410.565.70 _ 198.669.00 Representation Expenses 3.417.245.04 1.393.884.46 Transportation Expenses 2,704.00 0.00 Rent/Lease Expenses 2.077,290.00 751,351.25 Subscription Expenses 14,088.45 1,188.00 Donations 68,944,022.36 ! 0.00 Other Maintenance and Operating Expenses 1 63,095,632.45 13.336,219.88 Total Other Maintenance and Operating Expenses P 138,117,380.00 P 15,937,503.69

15.101 The Other Maintenance and Operating Expenses includes the account of Donation amounting to P68,944,022.36 representing various grants

25

in the implementation of the PRDP projects/programs with partner agencies and LGUs. These programs include distribution of construction and purchase of postharvest facilities and other postharvest infrastructures, rehabilitation of farm-to-market roads to beneficiaries.

16. Financial Expenses

Particulars 2015 2014 Bank Charges P 13,039.27 P 36,520.00

Total Financial Expenses P 13,039.27 P 36,520.00

17. Non-Cash Expenses

17.1 Depreciation

Particulars 2015 2014 Depreciation - Machinery and Equipment P 319.974.51 P 54,019.17

Depreciation — Furniture and Fixtures 25,038.00 0.00

Depreciation—Other PPE 2,193.07 790.29

Total Depreciation P 347,205.58 P 54,809.46

18. Net Financial Assistance/Subsidy

Financial Assistance/Subsidy from NGAs

Particulars 2015 2014 Subsidy from National Government P2,509.644.732.30 P 219.825.658.73

Total Financial Assistance/Subsidy from NGAs P2,509444,732.30 1 P 219,825,658.73

Less: Financial Assistance/Subsidy to NGAs, LGUs, NGOs/POs and Others

Particulars 2015 2014

Total Financial Assistance/Subsidy LGUs. NGOs/POs and Others

to NGAs, 0.00 0.00

Net Financial Assistance/Subsidy

P2,509,644,732.30

P 219,825,658.73

18.1 For CY 2015, the total amount of Notice of Cash Allocation amounting to P2.964,289,677.64 was received from the DBM for payment of operational expenses and liabilities of PRDP. The amount of P2.509.644,732.30 as reflected in the Consolidated Statement of Financial Performance is net of reversion of unutilized NCA and remittance of tax withheld thru Tax Remittance Advice (TRA).

26

19. Non-Operating Income, Gain or Losses

19.1. Non-Operating Income/Gain

Particulars 2015 2014 Gain on Foreign Exchange (FOREX) P 17,562,135.98 P 0.00

Total Non-Operating Income/Gain P 17,562,135.98 P 0.00

19.2. Non-Operating Losses

Particulars 2015 2014 Loss on Foreign Exchange (FOREX) P(23,660.92) P(0.00)

Total Non-Operating Losses P(23,660.92) P(0.00)

19.2.1. The amount of Gain and Loss on Foreign Exchange of P17,562,135.98 and P23,660.92, respectively, is the accumulated difference between the rate used in the Notice of Cash Allocation and the prevailing exchange rate of the depository bank at the date of transaction or transfer of the dollar to the peso account. The loss was due primarily to the appreciation of the peso vis-à-vis the dollar from the time it was received by the Treasury and value-dated by the BSP, and the time it was actually converted to peso and deposited to the Peso Account.

20. Accumulated Surplus/(Deficit)

20.1. The Accumulated Surplus (Deficit) as of end of CY 2015 is P2,135,660,238.34 after taking into consideration the Accumulated Surplus/(Deficit) as of December 31, 2014 amounting to P117,440,923.84 and Surplus/(Deficit) for CY 2015 amounting to P2,101,524,230.58.

20.2. Prior Period Adjustment amounting to P82,302,761.47 represents the net effects of various adjustments that were made on the prior year's transaction affecting the other accounts.

20.3. Other adjustment amounting to P848,286.78 represents material errors/unrecorded revenues/expenses of various regions.

20.4. Adjustment of Net Revenue Recognized directly in Net Assets/Equity amounting to P153,867.83 represents collection of income, refund of cash advances/funds transfer and other payments which are remitted to the Bureau of Treasury of NPCO/PSOs.