NOTES TO FINANCIAL STATEMENTS

Note 1 General/Agency Profile

Caloocan became an urbanized City by virtue of Republic Act

No. 3278 which took effect on February 6, 1962. It is composed of one
hundred eighty-eight (188) barangays and serves as a general purpose
government for the coordination and delivery of basic services and effective
governance of the inhabitants within its territorial jurisdiction.

With the enactment of Republic Act No. 7160 or the Local

Government Code of 1991, the City of Caloocan, like other local government
units, enjoys autonomy in the delivery of basic services to its constituents
involving peace and order, health and sanitation, education, and other basic
services in conformity with the national governments thrust for sustainable
social and economic growth.

The City maintains three funds namely: General, Special Education

and Trust Funds.

Note 2 Basis of Financial Statements Preparation

The financial statements were prepared in accordance with the

generally accepted state accounting principles and standards.

Note 3 Significant Accounting policies

3.1 The agency adopts three methods of accounting for income.

3.1.1 Accrual method is used to record share from Internal Revenue

collections.
3.1.2 Modified accrual method is used for real property taxes.
3.1.3 Cash basis is used for all other taxes, fees, charges and other
revenues.

3.2 All expenses are recognized when incurred and reported in the
financial statements in the period to which they relate.

3.3 The cost of inventory of office supplies and materials and other
inventory items is computed using the moving average method.

3.4 For assets under construction, all related expenses incurred during the
construction of the project are capitalized and those incurred after the
construction are charged against the operating cost.

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 3.5 The property of the city government which are used by the general
public are accounted for under Public Infrastructures. The same are
dropped from the related PPE accounts and recorded in the Registry of
Public Infrastructures at year end.

3.6 Property, plant and equipment are carried at cost less accumulated
depreciation.

3.7 The straight-line method of depreciation is used in depreciating

property, plant and equipment with estimated useful lives ranging from
five to fifty years.

3.8 Payable accounts are recognized and recorded in the books of accounts
only upon acceptance of the goods/inventory/other assets and rendition
of services to the City.

3.9 Financial expenses, such as bank charges, are separately classified

from Maintenance and Other Operating Expenses (MOOE).

Note 4 Correction of Fundamental Errors

Fundamental errors of prior years are corrected by using the Prior

Years Adjustment account. Errors affecting current years operation are
charged to the current year accounts.

Note 5 Cash

This account consists of the following:

Fund 2010 2009

General Fund P 736,074,940 P 816,361,459
Special Education Fund 124,574,856 90,731,755
Trust Fund 185,480,183 105,698,884
Total P 1,046,129,978 P 1,012,792,098

Of the 2010 year-end balance of Payroll Fund Account, P51,587,261

or 29% pertains to advances granted to former paymasters and is presently
under court litigation under the Office of the Sandiganbayan. The remaining
balance of P124,993,637 or 71% pertains to active accounts which were
liquidated and/or accounted for after balance sheet date.

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 Cash in Bank - Local Currency, Current Account represents current
account deposits of the City with 31 depository bank accounts while Cash in
Bank-Local Currency, Time Deposits pertains to cash deposit with fixed
withdrawal period with the Land Bank of the Philippines (LBP).

Note 6 Receivables

This account consists of the following:

Fund 2010 2009

General Fund P 685,570,401 P 749,219,744
Special Education Fund 205,685,161 161,888,947
Trust Fund 39,313,211 41,220,951
Total P 930,568,773 P 952,329,643

Due from Officers and Employees includes cash shortages in the total
amount of P68,189,520 incurred by various accountable officers in 1999.
Their cases are with the trial courts.

Due from LGUs in the total amount of P50,422,314 exists in the books
for more than five years and are under review and reconciliation.

The account Advances to Officers and Employees includes advances of

P17,777,069 granted to elective city and barangay officials and persons who
retired from service, resigned, deceased and/or whereabouts are unknown.

Note 7 Inventories

Inventories of P32,244,423 recorded in the Citys General Fund books

includes Construction Materials Inventory of P811,938 at year-end which
were utilized and expended in subsequent year.

Note 8 Other Current Assets

This account pertains to prepayments made to various government and

private agencies, which exists in the books prior to 2001 and are identified as
follows:

Government Service Insurance System P 48,617,372

GOTESCO Investments, Inc. 41,592,359
Meralco 28,999,346
Treasurer of the Philippines 25,689,660
Metro Manila Development Authority 18,616,200
Philippine National Bank Loan 5,790,088

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 Deposit-Nawasa 4,020,209
Philippine Long Distance Telephone Co. 3,816,715
Deferred Charges 10,252
Guaranty Deposits 5,320,081
Miscellaneous 1,038,073
Total P 183,510,357

Meralco account represents pre-installation costs for various city

government structures while Government Service Insurance System (GSIS)
account represents the amount withheld by the Department of Budget and
Management from the Citys share in the Internal Revenue Allotment (IRA) to
be remitted to GSIS. This matter is the subject of reconciliation between the
City and the GSIS.

Note 9 Investments

This account is composed of investment in stocks with MERALCO in

the amount of P4,066,716, recorded in the General Funds books of the City.

Note 10 Property, Plant and Equipment (PPE)

This account is broken down as follows:

Dec. 31, 2009 Additions/ Dec. 31, 2010

Balance Reductions Balance
/
Land P 1,639,306,393 P 289,226,880 P 1,928,533,273
Land Improvements 1,374,822,302 527,760,187 1,902,582,489
Electrification, Power
and Energy Structure 0 10,499,360 10,499,360
Buildings 2,243,812,087 187,838,553 2,431,650,640
Office Equipment,
Furniture and Fixtures 417,365,838 24,425,347 441,791,185
Machineries and
Equipment 123,524,996 49,662,861 173,187,857
Transportation
Equipment 179,928,341 2,524,464 182,452,805
Other Property, Plant
and Equipment 78,917,962 7,898,714 86,816,676
Construction in
Progress 297,939,920 22,806,324 320,746,242
Total P 6,355,617,839 P 1,122,642,688 P 7,478,260,527
Less: Accumulated
Depreciation 377,586,232 713,842,697 1,091,428,929

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 Net Amount P 5,978,031,607 P 408,799,991 P 6,386,831,598

The balance posted an increase of P408.80 million or 6.84% percent as

compared to CY 2009. The Citys land acquisition; upgrading and
improvement of roads and drainage; construction and improvement of school
buildings; acquisition of various equipments transportation equipment account
for the increase.

Note 11 Current Liabilities

This account consists of the following:

2010 2009
Accounts Payable P 436,845,696 P 313,082,652
Due to Officers and Employees 113,818,618 98,301,362
Due to National Treasury 10 10
Due to BIR 145,450,479 140,137,465
Due to GSIS 86,062,792 88,309,001
Due to PAG-IBIG 1,903,453 1,581,950
Due to PHILHEALTH 4,421,048 4,161,532
Due to Other NGAs 39,764,920 40,758,791
Due to Other GOCCs 864,547 522,622
Due to LGUs 624,156,809 481,763,106
Guaranty Deposits Payable 42,612,953 21,099,498
Other Payables 164,286,611 144,779,351
Total P 1,660,187,937 P 1,334,497,340

Of the Accounts Payable balance of P436.85 million, P188.43 million

or 43.13% pertains to payables in 2009 and previous years and are still under
review and reconciliation. The remaining balance of P248.42 million pertains
to current years payables.

Due to GSIS includes the amount of P59,512,417 which the

Department of Budget and Management directly deducted from the share of
the City Government of Caloocan from Internal Revenue Allotment for the
years 1996, 1997 and 1998 for remittance to GSIS. This matter is the subject
of reconciliation between the City and the GSIS.

Due to NGAs and LGUs represent the unreconciled balance which is

subject of verification for adjustment in the books.

Note 12 Long Term Liabilities

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 This account consists of loans availed by the City as follows:

2010 2009
Philippine Veterans Bank P 25,294,117 P 37,435,294
Land Bank of the Philippines 984,559,515 809,308,802
Total P 1,009,853,632 P 846,744,096

A five (5) year long-term loan of P228,307,512 from the Philippine

Veterans Bank (PVB) was availed by the City in May 2003 purposely to
redeem Katipunan Bond Series A. The loan was restructured in 2006 for a
seven (7) year long-term loan. As of year end, the balance of loan account
with PVB totaled to P25.29 million.

The City also secured from the Land Bank of the Philippines (LBP) a
ten (10) year long-term loan of P1 billion in 2006 to finance various
infrastructure projects. Another ten (10) year long-term loan of P1.42 billion
was availed by the City in 2010 purposely to fund the Citys developmental or
welfare projects. Drawdowns for the latter loan amounted only to P269.08
million during the year. As of year end, balances of the two (2) loan accounts
with LBP totaled to P716.16 million and P268.40 million, respectively or a
total of P984.56 million.

During the year, the Sangguniang Panlungsod had also authorized the
City Mayor to represent the City for negotiating another credit facility with
PVB in the amount of P380 million for purposes of financing City
developmental projects, such as but not limited to the construction of new city
hall building, sports complex and others. The loan was approved in the same
year but no drawdowns yet had occurred during the year.

Note 13 Deferred Credits

This account consists of the following:

2010 2009
Deferred Real Property Tax Income P 484,590,443 P 484,590,443
Deferred Special Education Tax
Income 193,237,560 148,852,100
Other Deferred Credits 81,306,778 76,103,024
Total P 759,134,782 P 709,545,568

Other Deferred Credits pertains to income from business taxes which

were withheld in advance by the City from various contractors to ensure
collection of taxes.

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Note 14 Government Equity

The changes in this account during the year are shown below:

Beginning Balance, January 1 P 5,298,857,458

Net Income from Operations 641,518,699
Total P 5,940,376,157
/

Add:
Prior Years Adjustments
Expenses
Personal Services P 9,455,224
MOOE 630,642,572 (640,097,796)
/
Transfer of Public Infrastructure
Roads, Highways and Bridges P 6,407,717
Artesian Wells, Reservoirs,
Pumping Stations and
Conduits 3,493,712
Irrigation, Canals and Laterals 40,973,699
Other Public Infrastructures 92,299,897 (143,175,024)

Ending Balance, December 31, 2010 P 5,157,103,337

Of the P640.10 million prior years adjustments, P443.07 million

pertains to adjustments on depreciation expenses accounted and/or adjusted in
the books only in current year 2010.

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