Public Disclosure Authorized

cto OF 1164
Republic of the Philippines
Department of Agriculture
OFFICE OF THE SECRETARY
e
Elliptical Road, Diliman, Quezon City
° Quezon City 1100, Philippines SCANNED FILE COPY
1898
WBDOCS
Ref. No. 16-11-
DATE
November 2, 2016
November 29, 2016
Ms. FRAUKE JUNGBLUTH
ENCORR LOG NO.
EACPF-2016-000695
Task Team Leader
SECURITY CLASSIFICATION
Rural Development Unit, East Asia & Pacific Region Official Use Only
Public Disclosure Authorized

The World Bank Group

26th/F One Global Place AI EXCEPTIONS #7, #9, #10
5th Ave. cor. 25th St., Bonifacio Global City
Taguig City, Philippines FOLDER
P132317, P132424
Attention: Mr. Tomas JR Sta. Maria
Financial Management Specialist

Dear Ms. Jungbluth:

Public Disclosure Authorized

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
Public Disclosure Authorized

End.: a/s

Pocy 2 r
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
 r r"

CC- aito
ut
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,

ETYLVIA T. REGINO
DA I Supervising Audi
4e7:
 t Ar
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.
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

P 168,538,586.09
and the transactions thereon
b) Unreported various fund transfers and
147,177,870.46
liquidations
Total P 315,716,456.55

Accounting Deficiencies

a) Reported liquidations not supported with

P 50,689,895.92
Statement of Receipts and Expenditures
b) Deficiencies and unsupported grant of
45.154.005.04
incentive allowances
c) Fund transfers to LGUs not properly
63368,541.72
documented
Total 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

By:

EMMA ti'. REGIN

Supervising Auditor
Department of Agricul

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

lillnlitlIIIIIIIII.H1111111111111111411fillILMIll111011111111
in replying pis cite [ Tit rode
For Signature: FINANCE-5.0546-0159
Received - 051301201605..2 AM

3
 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

Notes 2015 2014

Revenue
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

Notes 2015 21)14

Balance at January I 20.1 117,440,923.84 5,496,445.88

Add/(Deduct):
Changes in Accounting Policy
Prior Period Adjustments/Unrecorded Income 3: Expenses 20.2 (82,302,761 47) (10,19721274)
Other Adjustments 20.3 (848,286 78) (59 995 OCi

Restated Balance 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

6
 PHILIPPHINE RURAL DEVELOPMENT PROJECT (PRDP)
CONSOLIDATED STATEMENT OF CASH FLOWS
FUND CLUSTER 02 (FUND 102)
FOR THE YEAR ENDED DECEMBER 3], 2015

Notes 2015 2014

Cash Flow from Operating Activities:
01511 Inflows:
Receipt of Notice of Cash Allocation Cash Inflows: 3,479,446,027.62 704,863.405.86
Collection of Income/Revenues 1,163,136.00
Collection of Receivables 11,129.24
Receipt of Intra-Agency Fund Transfers 1,093,352,034.49 100, 00,000.00
Other Receipts 40,882,130.79 106,422.75
Adjustments 131,723,655.56 7,293.154.06
Total Cash Inflows 4,746,578,113.70 812,862,982.67

Cash Outflows:
Remittance to National Treasury 153,867.83 161,780.41
Payment of expenses 414,178,130 98 74,637,557 60
Purchase of inventories 1 499,985 47 310,633.92
Grant of Cash Advance 4,272,700 40 3,011,550.15
Refund of Deposits 256,898.35
Payment of Accounts Payable 3.167,413 95 3,404,026.38
Remittance of Personnel Benefits Contribution and Mandatory Deduction 11,666,374 60 1.344,198.05
Release of Inter-Agency Fund Transfer 770,344,504.21 177,745,912.34
Release of Intra-Agency Fund Transfer 1,839,430, 604.63 205,426,987.59
Reversal of linutilized NCA 462,804,349 48 275,220,334.31
Adjusunents 16,157,242 22 2,924.926.99
Total Cash Outflows 3,523,675,173.77 744,444,806.09
Nei Cash Provided by (used in) Operating Activities 1.222,902.939.93 68,418,176.58
Cash Flow from Investing Activities:
Cash Inflows:

Total Cash Inflows

Cash Outflows:

Purchase/Construction of Property, Plant and Equipment 1,403,871 01 902,503 45

Total Cash Outflows 1,403,871.01 902,50345
Net Cash Provided By (Used in) Investing Activities (1,403,871.01) (902,503.451
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 1.221,499,068.92 67,515,673.13
Effects of Exchange Rate Changes on Cash and Cash Equivalents
Cash and Cash Equivalents„Ianuary I 69.229,972.94 1,714,299.8)

Cash and Cash Equivalents, December 31 6 1,290,729,041.86 69,229,972.94

See Accompai N IGHC101.5101enleMS

7
 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-

8
 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.
9
 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
10
 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.

11
 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.

12
 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

13
 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.

14
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
IS
 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, Unexpemled Balan e
Feed Cale Ohligations
Ouster Extended Curren1 Total Total Reverted Emended
02 MO 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
FIN 7 X 3,900.00 6000000 19,900 00 13.039 27 6,86073 000 6.860.73
CO 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
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
Grai cl Tot rl

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-Forei gn Currency 428,831,847.50 0.00
Cash in Bank — Treasury/Agency — 56,352,498.91 5,018,426.29
Cash Account
Total Cash and Cash P1,290,729,041.86 869,229,972.94
18
 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

2015
Reversal of
Inventories carried Inventories Inventory
Particulars Inventory
at the lower of cost carried at fair write-down
wr ite-down
Lund net realizable value less cost recognized
recognized
value to sell the tear
"ring 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,
P 1,897515.23
DECEMBER 31, 2015

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

20
9. Other Assets

9.1. Current and Non-Current Other Assets

2015 2014
Particulars
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 BO O
• 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

Machinery Furniture,
Infrastructure Construction in
(in thousand pesos) and Fixtures and Other PPE TOTAL
Assets Progress
Equipment Books

Gross Cost (Asset Accnomt Balance

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

Less. Ace. Depreciation 0.00 (37.67 (401.93)

(25.04) 0.00 (3.22)
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

2015 2014
Particulars
Current Current
P yables
A ccounts 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

2015 2014
Particulars
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 to NGAs,

LGUs. NGOs/POs and Others 0.00 0.00

Net Financial Assistance/Subsidy P2,509,64 4,732.30 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.