Notes to Financial Statements

(All amounts in Philippine Peso unless otherwise stated)

Note 1 - Profile

The province was created by virtue of Republic Act No. 7878 dated February 14,
1995, the law which converted the sub-provinces of Kalinga and Apayao into two
regular and independent provinces. The conversion increased the territorial
coverage of Cordillera Administrative Region (CAR) into six provinces and one
chartered city. The province lies on the central part of the Cordillera
Administrative Region. It is landlocked and bounded on the west by the province
of Abra, north of Apayao, east of Cagayan and on the south of Mountain Province.
The province of Kalinga is composed of seven (7) municipalities and one
component city and 153 barangays. The municipalities are Pinukpuk, Rizal,
Balbalan, Tanudan, Lubuagan, Pasil, Tinglayan and Tabuk City which is the
provincial capital of the Province.

The goal of governance was addressed through efficient and effective management
of resources. As envisioned in the Provincial Medium-Term Development Plan,
the province continues to pursue programs and projects for sustained economic
growth and improved levels of social and peace development for its constituents.
Its vision is that “Kalinga as an agro-industrialized center and eco-tourism
destination in the Cordillera with God-loving, empowered, self-reliant, healthy and
united people proud of their cultural heritage under transparent, responsive and
dynamic governance living in a peaceful and sound environment.”

Note 2
The consolidated financial statements of the LGU have been prepared in accordance
with and comply with the Philippine Public Sector Accounting Standards (PPSAS).
The consolidated financial statements are presented in pesos, which is the functional
and reporting currency of the LGU. The accounting policies have been applied
starting the year 2015.

Note 3- Summary of Significant Accounting Policies

3.1 Basis of Accounting

The consolidated financial statements are prepared on accrual basis in

accordance with the Philippine Public Sector Accounting Standards (PPSAS).

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 3.2. Revenue recognition

Revenue from non-exchange transactions

Taxes, fees and fines

The LGU recognizes revenues from taxes and fines when the event occurs and
the asset recognition criteria are met. To the extent that there is a related
condition attached that would give rise to a liability to repay the amount,
liability is recognized instead of revenue. Other non-exchange revenues are
recognized when it is improbable that the future economic benefit or service
potential associated with the asset will flow to the entity and the fair value of
the asset can be measured reliably.

Transfers from other government entities

Revenues from non-exchange transactions with other government entities are

measured at fair value and recognized on obtaining control of the asset (cash,
goods, services and property) if the transfer is free from conditions and it is
probable that the economic benefits or service potential related to the asset will
flow to the LGU and can be measured reliably.

Revenue from exchange transactions

Rendering of services

The LGU recognizes revenue from rendering of services by reference to the

stage of completion when the outcome of the transaction can be estimated
reliably. Where the contract outcome cannot be measured reliably, revenue is
recognized only to the extent that the expenses incurred.

3.3 Investment Property

Investment properties are measured initially at cost, including transaction

costs. The carrying amount includes the replacement cost of components of an
existing investment property at the time that cost is incurred if the recognition
criteria are met and excludes the costs of day-to-day maintenance of an
investment property.

Investment property acquired through a non-exchange transaction is measured

at its fair value at the date of acquisition. Subsequent to initial recognition,
investment properties are measured using the cost model and are depreciated
over a 30-year period.

Investment properties are derecognized either when they have been disposed
of or when the investment property is permanently withdrawn from use and no

11
 future economic benefit or service potential is expected from its disposal. The
difference between the net disposal proceeds and the carrying amount of the
asset is recognized in the surplus or deficit in the period of derecognition.
Transfers are made to or from investment property only when there is a
change in use.

3.4 Property, Plant and Equipment

All property, plant and equipment are stated at cost less accumulated
depreciation and impairment losses. Cost includes expenditure that is directly
attributable to the acquisition of the items. When significant parts of property,
plant and equipment are required to be replaced at intervals, the LGU
recognizes such parts as individual assets with specific useful lives and
depreciates them accordingly. Likewise, when a major inspection is
performed, 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 in surplus or deficit as incurred.
Where an asset is acquired in a non-exchange transaction for nil or nominal
consideration the asset is initially measured at its fair value.

Depreciation on assets is charged on a straight-line basis over the useful life of

the asset.

Depreciation is charged at rates calculated to allocate cost or valuation of the

asset less any estimated residual value over its remaining useful life.

The assets’ residual values and useful lives are reviewed, and adjusted
prospectively, if appropriate, at the end of each reporting period. An asset’s
carrying amount is written down immediately to its recoverable amount, or
recoverable service amount, if the asset’s carrying amount is greater than its
estimated recoverable amount or recoverable service amount. The LGU
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 proceeds and the carrying amount of the asset) is included in the
surplus or deficit when the asset is derecognized.

Public Infrastructures were not previously recognized in the books. The LGU
availed of the five (5) year transitional provision for the recognition of the
Public Infrastructure.

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3.5. Impairment of non-financial assets

Impairment of cash-generating assets

At each reporting date, the LGU assesses whether there is an indication that an
asset may be impaired. If any indication exists, or when annual impairment
testing for an asset is required, the LGU estimates the asset’s recoverable
amount. An asset’s recoverable amount is the higher of an asset’s or cash-
generating unit’s fair value less costs to sell and its value in use and is
determined for an individual asset, unless the asset does not generate cash
inflows that are largely independent of those from other assets or groups of
assets.

Where the carrying amount of an asset or the cash-generating unit (CGU)

exceeds its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset. In determining fair value less costs to sell, recent market
transactions are taken into account, if available. If no such transactions can be
identified, an appropriate valuation model is used.

Impairment losses of continuing operations, including impairment on

inventories, are recognized in the statement of financial performance in those
expense categories consistent with the nature of the impaired asset.

For assets, an assessment is made at each reporting date as to whether there is

any indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the LGU estimates the
asset’s or cash-generating unit’s recoverable amount. A previously recognized
impairment loss is reversed only if there has been a change in the assumptions
used to determine the asset’s recoverable amount since the last impairment
loss was recognized. The reversal is limited so that the carrying amount of the
asset does not exceed its recoverable amount, nor exceed the carrying amount
that would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is recognized in
surplus or deficit.

Impairment of non-cash-generating assets

The LGU assesses at each reporting date whether there is an indication that a
non-cash-generating asset may be impaired. If any indication exists, or when
annual impairment testing for an asset is required, the LGU estimates the
asset’s recoverable service amount. An asset’s recoverable service amount is
the higher of the non-cash generating asset’s fair value less costs to sell and its
value in use.

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 Where the carrying amount of an asset exceeds its recoverable service
amount, the asset is considered impaired and is written down to its
recoverable service amount.

In assessing value in use, the LGU has adopted the depreciation replacement
cost approach. Under this approach, the present value of the remaining service
potential of an asset is determined as the depreciated replacement cost of the
asset. The depreciated replacement cost is measured as the reproduction or
replacement cost of the asset, whichever is lower, less accumulated
depreciation calculated on the basis of such cost, to reflect the already
consumed or expired service potential of the asset. In determining fair value
less costs to sell, the price of the assets in a binding agreement in an arm's
length transaction, adjusted for incremental costs that would be directly
attributed to the disposal of the asset is used. If there is no binding agreement,
but the asset is traded on an active market, fair value less cost to sell is the
asset's market price less cost of disposal. If there is no binding sale agreement
or active market for an asset, the LGU determines fair value less cost to sell
based on the best available information.

For each asset, an assessment is made at each reporting date as to whether

there is any indication that previously recognized impairment losses may no
longer exist or may have decreased. If such indication exists, the Group
estimates the asset's recoverable service amount. A previously recognized
impairment loss is reversed only if there has been a change in the assumptions
used to determine the asset’s recoverable service amount since the last
impairment loss was recognized. The reversal is limited so that the carrying
amount of the asset does not exceed its recoverable service amount, nor
exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognized for the asset in prior
years. Such reversal is recognized in surplus or deficit.

3.6 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.

3.7 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

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 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 the LGU.

3.8 Provisions

Provisions are recognized when the LGU has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits or service potential will be required
to settle the obligation and a reliable estimate can be made of the amount of
the obligation.

Where the LGU expects some or all of a provision to be reimbursed, for

example, under an insurance contract, the reimbursement is recognized as a
separate asset only when the reimbursement is virtually certain.

The expense relating to any provision is presented in the statement of financial

performance net of any reimbursement.

Contingent liabilities

The LGU does not recognize a contingent liability, but discloses details of any
contingencies in the notes to the financial statements, unless the possibility of
an outflow of resources embodying economic benefits or service potential is
remote.

Contingent assets

The LGU does not recognize a contingent asset, but discloses details of a
possible asset whose existence is contingent on the occurrence or non-
occurrence of one or more uncertain future events not wholly within the
control of the LGU in the notes to the financial statements. Contingent assets
are assessed continually to ensure that developments are appropriately
reflected in the financial statements. If it has become virtually certain that an
inflow of economic benefits or service potential will arise and the asset’s
value can be measured reliably, the asset and the related revenue are

15
 recognized in the financial statements of the period in which the change
occurs.

3.9 Changes in accounting policies and estimates

The LGU recognizes the effects of changes in accounting policy

retrospectively. The effects of changes in accounting policy are applied
prospectively if retrospective application is impractical.

The LGU recognizes the effects of changes in accounting estimates

prospectively by including in surplus or deficit.

3.10 Related parties

The LGU regards a related party as a person or an entity with the ability to
exert control individually or jointly, or to exercise significant influence over
the LGU, or vice versa. Members of key management are regarded as related
parties and comprise the Governor, Mayors, Vice-Governors and Vice-
Mayors, Sanggunian Members, Committee Officials and Members,
Accountants, Treasurers, Budget Officers, General Services and all Chiefs of
Departments/Divisions.

3.11 Service concession arrangements

The LGU analyses all aspects of service concession arrangements that it

enters into in determining the appropriate accounting treatment and disclosure
requirements. In particular, where a private party contributes an asset to the
arrangement, the LGU recognizes that asset when, and only when, it controls
or regulates the services the operator must provide together with the asset, to
whom it must provide them, and at what price. In the case of assets other than
’whole-of-life’ assets, it controls, through ownership, beneficial entitlement or
otherwise – any significant residual interest in the asset at the end of the
arrangement. Any assets so recognized are measured at their fair value. To the
extent that an asset has been recognized, the LGU also recognizes a
corresponding liability, adjusted by a cash consideration paid or received.

3.12 Budget information

The annual budget is prepared on the modified cash basis, that is, all planned
costs and income are presented in a single statement to determine the needs of
the LGU. As a result of the adoption of the modified cash basis for budgeting
purposes, there is basis, timing or entity differences that would require
reconciliation between the actual comparable amounts and the amounts
presented as a separate additional financial statement in the statement of
comparison of budget and actual amounts. Explanatory comments are
provided in the notes to the annual financial statements; first, the reasons for

16
 overall growth or decline in the budget are stated, followed by details of
overspending or underspending on line items.

3.13 Significant judgments and sources of estimation uncertainty

Judgments

In the process of applying the LGU’s accounting policies, management has

made judgments, which have the most significant effect on the amounts
recognized in the consolidated financial statements.

Estimates and assumptions

The key assumptions concerning the future and other key sources of
estimation uncertainty at the reporting date, that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year, are described below. The LGU based its
assumptions and estimates on parameters available when the consolidated
financial statements were prepared. However, existing circumstances and
assumptions about future developments may change due to market changes or
circumstances arising beyond the control of the LGU. Such changes are
reflected in the assumptions when they occur.

Useful lives and residual values

The useful lives and residual values of assets are assessed using the following
indicators to inform potential future use and value from disposal:

a) The condition of the asset based on the assessment of experts

employed by the LGU;

b) The nature of the asset, its susceptibility and adaptability to changes in

technology and processes;

c) The nature of the processes in which the asset is deployed; and

d) Changes in the market in relation to the asset

Impairment of non-financial assets – cash-generating assets

The recoverable amounts of cash-generating units and individual assets have

been determined based on the higher of value-in-use calculations and fair
values less costs to sell. These calculations require the use of estimates and
assumptions. It is reasonably possible that the assumptions may change, which
may then impact management’s estimations and require a material adjustment
to the carrying value of tangible assets.

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 The LGU reviews and tests the carrying value of assets when events or
changes in circumstances suggest that the carrying amount may not be
recoverable. Cash-generating assets are grouped at the lowest level for which
identifiable cash flows are largely independent of cash flows of other assets
and liabilities. If there are indications that impairment may have occurred,
estimates of expected future cash flows are prepared for each group of assets.
Expected future cash flows used to determine the value in use of tangible
assets are inherently uncertain and could materially change over time.

Impairment of non-financial assets – non- cash generating assets

The LGU reviews and tests the carrying value of non-cash-generating assets
when events or changes in circumstances suggest that there may be a
reduction in the future service potential that can reasonably be expected to be
derived from the asset. Where indicators of possible impairment are present,
the LGU undertakes impairment tests, which require the determination of the
fair value of the asset and its recoverable service amount. The estimation of
these inputs into the calculation relies on the use estimates and assumptions.

Any subsequent changes to the factors supporting these estimates and

assumptions may have an impact on the reported carrying amount of the
related asset.

Fair value estimation – financial instruments

Where the fair value of financial assets and financial liabilities recorded in the
statement of financial position cannot be derived from active markets, their
fair value is determined using valuation techniques including the discounted
cash flow model. The inputs to these models are taken from observable
markets where possible, but where this is not feasible, judgment is required in
establishing fair values. Judgment includes the consideration of inputs such as
liquidity risk, credit risk and volatility. Changes in assumptions about these
factors could affect the reported fair value of financial instruments.

Provisions

Provisions were raised and management determined an estimate based on the

information available. Provisions are measured at the management's best
estimate of the expenditure required to settle the obligation at the reporting
date, and are discounted to present value where the effect is material.

3.14 Financial instruments - financial risk management

Exposure to currency, commodity, interest rate, liquidity and credit risks

arises in the normal course of the LGU’s operations. This note presents

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information about the LGU’s exposure to each of the mentioned risks, policies
and processes for measuring and managing risk, and the LGU’s management
of capital. Further quantitative disclosures are included throughout these
financial statements. Fair values set out below, is a comparison by class of the
carrying amounts and fair value of the LGU’s financial instruments.

The fair value of the financial assets and liabilities are included at the amount
at which the instrument could be exchanged in a current transaction between
willing parties, other than in a forced sale or liquidation.

The following methods and assumptions were used to estimate the fair values:

a) Cash and short-term deposits, trade receivables, trade payables and other
current liabilities approximate their carrying amounts largely due to the
short-term maturities of these instruments;

b) Long-term fixed-rate and variable-rate receivables / borrowings are

evaluated by the LGU based on parameters such as interest rates,
individual creditworthiness of the customer and the risk characteristics of
the financed project. Based on this evaluation, allowances are taken to
account for the incurred losses of these receivables and market related
interest rates. As at December 31, 2015 the carrying amounts of such
receivables, net of allowances, are not materially different from their
calculated fair values;

c) Fair value of financial assets is derived from quoted market prices in

active markets, if available.

Investments

The LGU limits its exposure to credit risk by investing with only reputable
financial institutions that have a sound credit rating (rated BB and above),
which are within the specific guidelines set in accordance with the LGU
Finance Committee and the Sanggunian approved investment policy.
Consequently, the LGU does not consider this to be any significant exposure
to credit risk.

Receivables

Receivables are amounts owed by consumers, and are presented net of

impairment losses. The LGU has a credit risk policy in place, and the
exposure to credit risk is monitored on an ongoing basis. The LGU is
compelled, by its constitutional mandate, to provide all of its residents with
basic minimum services, without recourse to an assessment of
creditworthiness. There were no material changes in the exposure to credit

19
risk and its objectives, policies and processes for managing and measuring the
risk during the year under review.

The LGU establishes an allowance for impairment that represents its estimate
of anticipated losses in respect of receivables.

Cash and cash equivalents

The LGU limits its exposure to credit risk by investing cash and cash
equivalents with only reputable financial institutions that have a sound credit
rating, and within specific guidelines set in accordance with the Sanggunian’s
approved investment policy. Consequently, the LGU does not consider there
to be any significant exposure to credit risk.

Liquidity risk

Liquidity risk is the risk of the LGU not being able to meet its obligations as
they fall due. The LGU’s approach to managing liquidity risk is to ensure that
sufficient liquidity is available to meet its liabilities when due, without
incurring unacceptable losses or risking damage to the LGU’s reputation.

The LGU ensures that it has sufficient cash on demand to meet expected
operating expenses through the use of cash flow forecasts.

Capital management

The primary objective of managing the LGU’s capital is to ensure that there is
sufficient cash available to support the LGU’s funding requirements,
including capital expenditure, to ensure that the LGU remains financially
sound. The LGU monitors capital using a gearing ratio, which is net debt,
divided by total capital, plus net debt.

Currency risk

The LGU is exposed to foreign-currency risk through the importation of

goods and services, either directly or indirectly, through the award of
contracts to local importers. The LGU manages any material direct exposure
to foreign-currency risk by entering into forward exchange contracts. The
LGU manages its indirect exposure by requiring the local importer to take out
a forward exchange contract at the time of procurement, in order to
predetermine the peso value of the contracted goods or services. The LGU
was not a direct party to any outstanding forward exchange contracts at the
reporting date. The movement in the currency was not material to the LGU’s
procurement.

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Note 4 - Cash and Cash Equivalents

Cash on Hand 2018 2017

Cash-Local Treasury 22,698.31 (1,600.25)
Cash in Bank
Cash in Bank -Local Currency, Current 497,585,100.7 541,013,862.0
Account 5 1
Cash in Bank -Local Currency, Savings 456,391,335.66 402,388,664.6
Account 5
Total 953,999,134.72 943,400,926.41

Cash in bank earns interest based on the prevailing bank deposit rates. Short-term
deposits are made for varying periods, depending on the immediate cash requirements
of the LGU and earn interest at the respective short-term deposit rate.

The Cash in Bank-LCCA is supported with bank reconciliation statements and

schedule of depository accounts with its respective balances for each fund. The main
depository bank is Land Bank of the Philippines (LBP), however, the province also
maintain an account with the Development of the Philippines (DBP).

Current, Savings and Time Deposits are maintained under General Fund. Only
current accounts are maintained under Trust Fund and Special Education Fund (SEF).
Time deposits of the province have no cash that are restricted for withdrawals.

Cash in Bank under the Trust Fund comprise funds transferred from other
government agencies and private entities/individuals for specific purpose.
Accordingly, the LGU is contractually bound to spend these funds only in connection
with the specific purpose identified.

Note 5 - Receivables
2018 2017
Loans and Receivable Accounts
Accounts Receivable 141,993.20 141,831.77
Loans Receivables-Others 5,449,732.75 5,449,732.75
Inter-Agency Receivables
Due from LGUs 4,353,869.56 1,676,196.14
Intra-Agency Receivables
Due from Other Funds 13,181,956.02 4,674,362.28
Advances
Advances for Operating Expenses 119,820.30 460,463.64
Advances for Payroll 113,693.88 157,232.78
Advances to Special Disbursing Officer 3,996,399.81 1,307,641.74
Advances to Officers and Employees 176,309.43 297,351.63
Other Receivables
Receivables - Disallowances/Charges 49,428,653.81 39,523,326.61
Due from Officers and Employees 41,625.34 13,538.77
Other Receivables 266,053.29 266,053.29
Total 77,270,107.39 53,967,731.40

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 Accounts Receivable are recorded and valued at cost as they arise and no allowance
for impairment is provided. It includes receivables from various creditors arising from
overpayment of claims, sale of weanlings and palay.

Loans Receivable are receivable arising from releases to organizations or

cooperatives for projects assisted by the DA, DSWD and DOLE for livelihood
programs under a loan scheme. It also includes motorcycle loan to Rural Health Unit
(RHU) personnel, binhian loan to rice producers and Early Child Care and
Development (ECCD) loan assistance for livelihood projects and cost of cows
released to various individuals.

Due from LGU’s are receivables from municipalities for unremitted real property
taxes as of end of the year.

Due from Other Funds under the General fund represents checking of erroneous entry
on disbursement and receivable from TF on sand and gravel fees. Under the Trust
Fund and Special Education Fund, it represents amounts to be transferred from
General Fund.

Advances for operating expenses represents advances granted to accountable officers

for payment of operating expenses specifically for provincial and district hospitals.

Advances for Payroll represents cash withdrawal by the disbursing officers for
salaries, wages and other personnel benefits.

Advances to Special Disbursing Officer represents amount granted to agency’s

officers and employees for special purpose and undertakings to be liquidated upon
serving its purpose.

Advances for Officers and Employees represents amount granted to agency’s

personnel for travelling expenses.

Receivables-Disallowances/Charges include unsettled disallowances of suppliers,

creditors and employees of the LGU issued by the Commission on Audit (COA). It
includes also audit disallowances from CNA and PEI of LGU officers and employees.

Due from Officers and Employees represent claims from agency’s personnel arising
from overpayment and shortages issued by the LGU.

Other Receivables comprises claims from retired and deceased personnel of the LGU.

Note 6 – Inventories

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 2018 2017
Merchandise,
Merchandise Inventory 223,351.71 223,351.71 agricultural
Agricultural Produce for Distribution 2,506,664.00 2,506,664.00
Office Supplies Inventory 689,404.79 215,893.33
Drugs and Medicines Inventory 31,199,795.40 11,688,831.90
Medical, Dental and Laboratory Supplies 28,404,198.50 7,436,439.00
Inventory
Agricultural and Marine Supplies 23,890.00 -
Inventory
Other Supplies and Materials Inventory 1,764,300.05 600,449.04
Total 64,811,604.45 22,671,628.98
stocked for issuance to agency’s authorized officers and employees for office
consumption. Drugs and medical supplies represent inventory stocked at the
Provincial Hospital and District Hospitals for issuance and consumption of qualified
patients.

Note 7 – Prepayments

2018 2017
Advances to Contractors 7,835,224.58 35,933,439.46

Advances to Contractors represent advance payment to contractors for mobilization

under the Philippine Rural Development Project (PRDP).

Note 8 – Investments

2018 2017
Investment in Treasury Bills 20,000,000.00 20,000,000.00

Investments represent Treasury Bills at the Development Bank of the Philippines

(DBP). It was issued on September 20, 2016 and will mature on September 20, 2026.

Note 9 – Property, Plant and Equipment

Adjustments/ Accumulated
Account Name Prior Year Additions Current Year Depreciation Net Book Value
Land and Land Improvements
Land 101,672,484.00 (200,000.00) 101,472,484.00 101,472,484.00
Other Land 25,187,716 283,500.0 6,321,330.0
Improvements .06 0 25,471,216.06 19,149,886.00 6
Infrastructure Assets
Road Networks 33,838,782.99 21,157,684.47 54,996,467.46 3,717,982.08 51,278,485.38
Flood Control 989,425.7 981,592.7
System - 1 989,425.71 7,833.00 1
Sewer Systems 1,053,529.42 8,476,195.71 9,529,725.13 127,715.00 9,402,010.13
Water Supply 4,493,652 1,953,322.3 5,683,513.2
Systems .76 3 6,446,975.09 763,461.88 1
Parks, Plazas and 3,520,150 102,500.0 3,289,955.2
Monuments .28 0 3,622,650.28 332,695.00 8
Other 3,647,111.41 5,353,169.29 9,000,280.70 726,961.71 8,273,318.99

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Infrastructure
Assets
Buildings and Other Structures
Buildings 79,248,599.27 79,248,599.27 21,501,038.00 57,747,561.27
Hospitals and 113,229,282 488,492.6 52,386,896.4
Health Centers .75 8 113,717,775.43 61,330,879.00 3
Markets 2,779,407.08 - 2,779,407.08 2,508,415.00 270,992.08
Hostels and 9,761,686 8,832,780.0
Dormitories .00 9,761,686.00 928,906.00 0
43,541,503 6,147,159.5 25,753,268.5
Other Structures .98 8 49,688,663.56 23,935,395.00 6
Machinery and Equipment
Machinery 7,529,202.56 37,526.00 7,566,728.56 5,951,420.40 1,615,308.16
Office Equipment 11,563,310.45 2,482,569.00 14,045,879.45 8,709,549.44 5,336,330.01
ICT Equipment 20,599,358.26 6,491,962.00 27,091,320.26 15,702,010.00 11,389,310.26
Agricultural and 5,008,736.00 453,280.00 5,462,016.00 4,164,621.00 1,297,395.00
Forestry
Equipment
Communication 4,155,955 (36,605.0 1,035,208.2
Equipment .25 0) 4,119,350.25 3,084,142.00 5
Construction and 17,185,000 12,585,000.0 22,046,120.0
Heavy Equipment .00 0 29,770,000.00 7,723,880.00 0
Disaster Response
and Rescue 231,917 123,340.0 154,654.0
Equipment .00 0 355,257.00 200,603.00 0
Military, Police
and Security 714,461 168,465.0
Equipment .00 714,461.00 545,996.00 0
Medical 63,271,235 10,758,761.9 43,124,066.3
Equipment .85 6 74,029,997.81 30,905,931.50 1
1,574,642 141,206.0 914,885.7
Sports Equipment .74 0 1,715,848.74 800,963.00 4
Technical and
Scientific 935,977 449,700.0 722,831.7
Equipment .74 0 1,385,677.74 662,846.00 4
Other Machinery 1,707,274 751,300.0 1,507,389.9
and Equipment .91 0 2,458,574.91 951,185.00 1
Transportation Equipment
78,609,917 7,363,040.0 43,230,374.5
Motor Vehicles .52 0 85,972,957.52 42,742,583.00 2
1,292,500 564,388.0
Watercrafts .00 1,292,500.00 728,112.00 0
Furniture, Fixtures and Books
Furniture and 16,266,429 1,641,064.9 7,756,596.4
Fixtures .56 0 17,907,494.46 10,150,898.00 6
Books 534,660.98 51,989.00 586,649.98 348,534.00 238,115.98
Construction in Progress
Construction in
Progress -
Infrastructure 227,970,246 199,536,086.9 427,506,333.0
Assets .11 1 427,506,333.02 - 2
Construction in
Progress -
Buildings and 4,622,978 39,530,424.3 44,153,402.3
Other Structures .07 0 44,153,402.37 - 7
Other Property,
Plant and 10,905,078 3,264,535.7 7,421,231.8
Equipment .10 8 14,169,613.88 6,748,382.00 8
Total 896,652,788.10 330,376,630.62 1,227,029,418.72 275,152,824.01 952,202,094.71

24
 The adjustment/additions column relates to reclassifications between the different
classes of assets, purchases for the year and also to other categories of assets.

The LGU measured the residual value of 5% on all items of property, plant and
equipment and these will be utilized for their entire economic lives. During the
current financial year, the LGU reviewed the estimated useful lives and residual
values of property, plant and equipment, where appropriate.

The straight line method of depreciation is used. The economic useful life of the
assets are based on COA Circulars No. 2005-002 and 2003-007 and also depends on
the estimated number of years the asset will be used.

Note 10 – Biological Assets

2018 2017
Breeding Stocks 325,500.00 325,000.00

The above balances are stated at acquisition cost and no impairment had been
recognized in the current year.

Note 11 – Financial Liabilities

2018 2017
Accounts Payable 54,794,763.05 21,032,879.84
Due to Officers and Employees 62,379,074.35 64,477,106.95
Total 117,173,837.40 85,509,986.79

Accounts Payable represents unpaid obligation to suppliers and other creditors as of

December 31, 2018. Due to Officers and Employees represents unpaid obligation to
officers and employees of the province. These accounts are normally settled within
the year.

Note 12 – Inter-Agency Payables

2018 2017
Due to BIR 15,473,048.97 15,755,316.93
Due to GSIS 749,137.31 13,162.92
Due to PAG-IBIG 31,680.72 (24,149.17)
Due to PHILHEALTH 6,491.12 187,200.00
Due to NGAs 108,076,081.38 230,175,754.06
Due to GOCC's 1,531,404.21 1,556,112.00
Due to LGU's 11,944,045.19 3,173,159.98
Total 137,811,888.90 250,836,556.72

Due to BIR, GSIS, Pag-ibig and PhilHealth represents amount deducted from the
salaries of officials and employees and remitted to the respective government

25
 agencies immediately on the month following the month for which these were
deducted. Due to GOCCs represents amount withheld from salaries of officers and
employees for payment of their salary loan at the Development Bank of the
Philippines (DBP) and Landbank of the Philippines (LBP).

On the other hand, Due to NGAs represents balances of funds received by the LGU
for specific purposes while Due to LGUs represents payables of the province for
share of the municipalities and barangays on sand and gravel tax as well as subsidy to
barangays.

Note 13 – Intra-Agency Payables

2018 2017
Due to Other Funds 43,114,269.24 32,341,001.39

Due to Other Funds represents payable to either the General Fund, Trust Fund or
Special Education Fund (SEF) accounts maintained by the provincial government.

Note 14 – Trust Liabilities

2018 2017
Trust Liabilities 368,129,031.80 212,493,784.79
Trust Liabilities-Disaster Risk Reduction 33,786,681.91 21,939,491.70
and Management Fund
Guarantee/Security Deposits Payable 69,873,841.37 45,105,819.05
Total 471,789,555.0 279,539,095.5
8 4

Trust liabilities and Guarantee/Security Deposits Payable comprise fund entrusted for
specific purposes which constitute amounts withheld from suppliers and contractors
from their contract which is refundable upon compliance of conditions and
performance of obligation required by law or contract.

Note 15 – Other Payables

2018 2017
Other Payables 118,586,774.55 57,619,825.34

Other Payables represent collections from bid documents, registration fees, trust
receipts to cooperatives and other organizations which are not certainly due within the
year.

Note 16 – Tax Revenue

2018 2017
Professional Tax 155,700.00 175,850.00
Real Property Tax-Basic 3,610,453.70 1,903,676.7
8

26
 Special Education Tax 3,953,664.07 2,996,862.2
7
Real Property Transfer Tax 1,142,616.08 708,491.3
6
Tax on Sand, Gravel and Other Quarry 4,545,396.95 2,909,077.7
Products 7
Tax on Delivery Trucks and Vans 563,400.00 633,969.92
Franchise Tax 228,315.59 347,866.57
Printing and Publication Tax 27,544.00 98,295.00
Tax Revenue-Fines and Penalties- 670,313.09 371,360.5
Property Taxes 6
Total 14,897,403.48 10,145,450.23

Note 17 – Share from Internal Revenue Collections

2018 2017
Share from Internal Revenue Collections 850,423,547.00 793,619,304.00

Represent annual share of the provincial government from the Internal Revenue
Allotment.

Note 18 – Service and Business Income

Service Income 2018 2017

Permit Fees 443,895.00
502,425.00
Registration Plates, Tags and Sticker 92,075.00 102,550.00
Fees
Clearance and Certification Fees 1,021,628.88 729,555.74
Verification and Authentication Fees 56,259.50 103,188.7
0
Processing Fees 34,650.00 39,363.0
0
Other Service Income 715,095.40 822,067.4
8
Affiliation Fees 10,400.00
Business Income
Rent Income 1,008,925.00 1,554,210.0
0
Hospital Fees 140,632,039.25 127,162,052.3
5
Interest Income 4,206,715.49 4,074,947.7
1
Other Business Income 61,145,502.80 61,582,576.92
Total 209,367,186.32 196,672,936.90

Note 19- Shares, Grants and Donations

2018 2017
Share from National Wealth 10,784.72

27
 Share from PCSO 83,686.96
Share from PAGCOR 6,310.71
Total 94,471.68 6,310.71

This represents share from PAGCOR and share from National Wealth.

Note 20 – Personnel Services

2018 2017
Salaries and Wages - Regular 205,014,125.54 186,320,047.3
6
Personnel Economic Relief Allowance 17,338,310.20 17,084,330.3
(PERA) 0
Representation Allowance (RA) 3,361,894.09 3,039,488.7
7
Transportation Allowance (TA) 326,587.50 213,750.0
0
Clothing/Uniform Allowance 4,184,000.00 3,693,752
Subsistence Allowance 3,655,500.01 3,645,029.3
6
Laundry Allowance 517,499.05 526,259.0
8
Productivity Incentive Allowance 3,636,000.00 2,910,000.0
0
Honoraria 42,800.00 38,166.0
0
Hazard Pay 9,667,195.40 9,622,285.5
3
Overtime and Night Pay 1,282,890.22 689,512.5
3
Year End Bonus 16,954,461.30 15,357,174.7
0
Cash Gift 3,574,500.00 3,564,850.0
0
Other Bonuses and Allowances 16,407,176.00 26,241,248.0
0
Life and Retirement Insurance Contributions 24,390,748.55 22,191,819.8
6
PAG-IBIG Contributions 873,513.70 855,879.9
4
PHILHEALTH Contributions 2,366,403.29 1,884,650.00
Employees Compensation Insurance 979,047.90
Premiums 864,971.97
Terminal Leave Benefits 17,597,002.01
11,961,082.50
Other Personnel Benefits 11,712,931.59 17,905,673.3
6
Total Personal Services 343,882,586.35 328,609,971.26

28
Note 21– Maintenance and Other Operating Expenses

2018 2017
Travelling Expenses - Local 7,504,530.22 7,399,578.58
Training Expenses 6,097,577.40 7,071,512.84
Scholarship Grants/Expenses 1,000,000.00 542,210.00
Office Supplies Expense 6,264,284.75 5,487,581.92
Accountable Forms Expenses 795,200.00 772,850.00
Animal/Zoological Supplies Expense 545,623.00 391,778.00
Food Supplies Expenses 7,901,580.49 5,751,101.18
Welfare Goods Expenses 73,050.00
Drugs and Medicines Expenses 31,744,285.63 39,337,933.37
Medical, Dental and Laboratory Supplies Expenses 18,612,809.40 36,397,344.39
Fuel, Oil and Lubrication Expenses 16,764,459.68 11,926,183.29
Agricultural and Marine Supplies Expenses 311,005.50 268,096.00
Other Supplies and Materials Expenses 7,035,005.63 5,546,811.76
Water Expenses 404,851.95 335,887.25
Electricity Expenses 10,977,281.69 10,954,782.76
Postage and Courier Service 35,266.00 48,026.37
Telephone Expenses 1,882,978.96 1,667,254.70
Internet Subscription Expenses 470,818.72 1,122,195.72
Cable, Satellite, Telegraph and Radio Expenses 14,988.00 10,700.00
Awards and Rewards Expenses 89,000.00 400,500.00
Legal Services 17,210.00
Prizes 542,500.00
Other Professional Services 63,774,052.19 62,231,165.02
Environment/Sanitary Services 29,800.00
Janitorial Services 30,538.00 47,875.00
Security Services 2,999,969.04 2,605,772.12
Other General Services 41,842,634.74 28,959,003.03
Repairs and Maintenance - Infrastructure Assets 67,542,054.55 29,588,446.13
Repairs and Maintenance - Buildings and Other 3,694,756.76 4,785,170.60
Structures
Repairs and Maintenance - Machinery and Equipment 951,237.02 1,208,987.66
Repairs and Maintenance - Transportation Equipment 5,883,127.32 4,760,858.98
Repairs and Maintenance - Furniture and Fixtures 15,750.00 51,091.12
Repairs and Maintenance - Other Property, Plant and 50,495.00 16,105.00
Equipment
Taxes, duties and Licenses 189,470.52 92,829.11
Fidelity Bond Premiums 45,586.74 46,223.25
Insurance Expenses 757,346.20 742,110.73
Advertising Expenses 1,033,722.11 818,952.24
Printing and Publication Expenses 57,250.00 37,677.00
Representation Expenses 13,751,621.00 11,120,536.00
Transportation and Delivery Expenses 191,531.23 15,724.00
Membership Dues and Contributions to Organizations 16,910.00 254,090.00
Subscription Expenses 167,374.00 165,109.00
Donations 32,572,213.35 24,115,348.58
Other Maintenance and Operating Expenses 9,324,580.66 8,134,698.85

29
 Total 363,886,267.45 315,350,161.55

Note 22 – Non-Cash Expenses

2018 2017
Depreciation-Land Improvements 610,021.00 392,534.0
0
Depreciation-Infrastructure Assets 2,993,217.00 1,706,274.00
Depreciation - Buildings and Structures 8,893,317.00 8,727,593.0
0
Depreciation-Machinery and Equipment 12,263,827.00 10,392,127.00
Depreciation - Transportation Equipment 7,123,399.00 6,997,342.0
0
Depreciation -Furniture, Fixtures and Books 1,307,387.00 1,185,011.0
0
Depreciation- Other Property, Plant and 1,284,845.00 1,149,988.0
Equipment 0
Total Non-cash Expenses 34,476,013.00 30,550,869.0
0

Note 23– Gains

2018 2017
Gain on Sale of PPE 224,223.00 28,313.24
Gain on Sale of Biological Assets 374,660.00 547,500.00
Total 598,883.00 575,813.24

Represent gain or proceeds from sale/disposal of condemned/disposed and

unserviceable item of PPE. Gain on sale of biological assets represents gain on sale of
livestock being disposed by the Veterinary Office.

Note 24 – Other Income

2018 2017
Miscellaneous Income 396,082.93 356,051.1
9

Note 25 – Financial Assistance/Subsidy

2018 2017
Subsidy to Other Local Government Units 3,490,000.00 6,379,644.7
0
Subsidy to Other Funds 38,903,879.62 20,096,678.0
0
Subsidy-Others 300,000.00 484,800.0
0

30
 Transfer of Unspent Current Year DRRM 27,537,752.99 27,537,752.9
Funds to the Trust Funds 9
Total 70,231,632.61 54,498,875.69

Note 26 – LDRRMF

Appropriations Obligations Balance

MOOE 46,044,464.40 46,044,464.40 8,331,521.93
Capital Outlay 12,380,000.00 12,380,000.00 1,033,350.00
Total 58,424,464.40 58,424,464.40 9,364,871.93

The balance of the unobligated allotment for CY 2018 LDRRMF of MOOE and
Capital Outlay (CO) are due for transfer to Trust Fund account.

Note 27 – Reconciliation of Net Cash Flows from Operating Activities to Surplus/(Deficit)

The Reconciliation of Net Cash Flows from Operating Activities to Surplus/(Deficit)

for CY 2018 is not prepared due to the recognition of prior period adjustments from
prior years that directly affect the balance of current assets and liabilities. Also, there
are adjustments made due to erroneous entry/recording of transactions for CY 2018
that affect the current assets and liabilities and no effect on Cash Flows from
Operating Activities making the report on Reconciliation of Net Cash Flows from
Operating Activities to Surplus/(Deficit) not reconcilable.

Note 28 – Road Network System

The LGU of Kalinga has a total of 238.67 kilometers of roads with a total cost of
₱421,408,440.00 based on 2014 market value valuation. For the year ended, the LGU
spent a total of ₱21,157,684.47 for local road additions and ₱51,431,722.14 for major
repairs and regular maintenance. No impairment has been made for the year.

Note 29
Reconciliation between actual amounts on a comparable basis as presented in this statement
and in the Statement of Financial Performance for the Year Ended December 31, 2018

Personnel
Income MOOE Capital Outlay
Services
Comparison Statement of Budget 1,588,627,642.66 424,984,480.62 480,952,010.68 299,081,192.00
and Actual
Entity Differences
Basis Differences:
Income not considered budgetary
items

31
Decrease in Revenue Collection (6,113,877.66)
Gain on Sale of Assets
Receipts not considered as income
Sale of Capital Assets
Income from Prior Years (510,689,854.66)
Non-cash Expenses:
Depreciation
Amortization – Intangible Assets
Impairment Loss
Losses
Debt Service (Loan Amortization,
Retirement of Debt Instruments)
Interest Expenses Capitalized
Capital Expenditures (233,587,377.92)
Timing Differences:
Decrease in Actual Expenditures (81,101,894.27) (119,272,643.23) (65,493,814.08)
Prepayments charged to current
appropriations
Unconsumed Inventories
charged to current
appropriations
Deferred charges charged to
prior period appropriations
Per Statement of Financial
1,071,823,910.34 343,882,586.35 361,679,367.45 -
Performance

32