Annex A Republic of the Philippines Commission on Audit Commonwealth Avenue, Quezon City INDEPENDENT AUDITOR'S REPORT The Department Secretary Department of Social Welfare and Development Batasan Hills, Quezon City We have audited the accompanying financial statements of Kapit-bisig Laban sa Kahirapan - Comprehensive and Integrated Delivery of Social Services: National Community Driven Development Project - World Bank/International Bank for Reconstruction and Development, which comprise the Statement of Financial Position as at December 31, 2018, and the Statement of Financial Performance, Statement of Cash Flows and Statement of Changes in Net Assets/Equity for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and a summary of significant accounting policies and other explanatory information. Opinion In our opinion, the accompanying financial statements present fairly, in all material respects, the tinancial position ot the Kapit-bisig Lanan sa Kanrapan - uomprehensive and Integrated Delivery of Social Services: National Community Driven Development Project - WB/IBRD as at December 31, 2018, and of its financial performance, statement of cash flows and statement of net assets/equity, for the year then ended in accordance with the Philippine Public Sector Accounting Standards (PPSAS) Basis for Opinion We conducted our audit in accordance with the International Standards of Supreme Audit Institutions (ISSAls). Our responsibilities under those standards are described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the agency in accordance with the Revised Code of Conduct and Ethical Standards for Commission on Audit Officials and Employees (Code of Ethics) together with the ethical requirements that are relevant to our audit of the financial statements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 21 Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine Public Sector Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAls will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISSAls, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or override of internal control. * Obtain an understanding of internal control relevant to the audit 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 agency's internal control * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit observations, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them 22 all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. COMMISSION ON AUDIT By: CORAZON S. ROCAS State Auditor V Supervising Auditor June 28, 2019 23 VDSWD De.penmewnt of Soia Welead Develop,ment Annex B STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS National Community-Driven Development Project WBIBRD Loan No. 8335-PH The management of Department of Social Welfare and Development is responsible for all information and representations contained in the accompanying Statement of Financial Position as of December 31, 2018 and the related Statement of Financial Performance, Statement of Cash Flows, Statement of Comparison of Budget and Actual Amounts, Statement of Changes in Net Assets/Equity and the Notes to Financial Statements 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. WAYNE C. BELIZAR ASEC. RODOLFO M. SANTOS, CESO III Director, Finance and Management Service Officer-in-Charge Office of the Undersecretary for General Administration and Support Services Date Signed Date Signed DSWD Cenral Office, IBPRoad, Batasan Pambansa Complex, Constiltion Hills, Quezon City. Philippines 1126 Email: osec(ddsw&gov ph Tel Nos : (632) 931-8101 1o07 Telefax: (632) 931-8191 24 Annex C DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT Statement of Financial Position As of December 31, 2017 Support to Foreign-Assisted Fund - General Fund - New General Appropriations - NCDDP-WBIlBRD (in Philippine Peso) 2018 2017 ASSETS Current Assets Cash and Cash Equivalents (Note 6) 1,780,819,588.17 2,544,998,386.68 Receivables (Note 7) 2,263,837,105.60 1,204,459,165.13 Inventories (Note 8) 12,622133.49 12,901,819.44 Other Current Assets (Note 10) 511,915.20 1,202,435.68 Total Current Assets 4,057,790,742.46 3,763,561,806.93 Non - Current Assets Property, Plant and Equipment (Note 9) 55,949,627.19 68,635,859.92 55,949,627.19 68,635,859.92 Total Assets 4,113,740,369.65 3,832,197,666.85 LIABILITIES Current Liabilities Financial Liabilities (Note 11) 117,905,623.33 186,945,322.46 Inter-Agency Payables (Note 12) 3,957,689.28 10,338,051.61 Other Payables (Note 13) 628,418.82 2,110,679.91 Total Current Liabilities 122,491,731.43 199,394,053.98 Non- Current Liabilities Total Non- Current Liabilities Total Liabilities 122,491,731.43 199,394,053.98 NET ASSETS/EQUITY Accumulated Surplus/(Deficit) 3,991,248,638.22 3,632,803,612.87 Total Net Assets/Equity 3,991,248,638.22 3,632,803,612.87 Total Liabilities and Net Assets/Equity 4,113,740,369.65 3,832,197,666.85 This statement should be read in conjunction with the accompanying notes. 25 Department of Social Welfare and Development STATEMENT OF FINANCIAL PERFORMANCE Annex D For the period ending December 31, 2018 NCDDP-WBIIBRD (in Philippine Peso) 2018 2017 Revenue Service and Business Income(Note 14) 3,114,382.04 2,165,659.00 Other Non-Operating Income(Note 15) 118,543.93 22,252.72 Gains 0.00 11,775.00 Total Revenue 3,232,925.97 2,199,687.22 less: Current Operating Expenses Maintenance and Other Operating Expenses (Note 16) 93,027,878.57 1,494,240,374.42 Financial Expenses (Note 17) 8,224.95 39,906.70 Non-Cash Expenses Depreciation (Note 18) 16,188,699.99 15,438,882.05 Current Operating Expenses 109,224,823.51 1,509,719.163.17 Surplus/(Deficit) from Current Operations (105,991,897.54) (1,507,519,475.95) Financial Assistance/Subsidy from NGA, LGUs, GOCCs (Note) Subsidy from National Government 2,040,563,460.72 6,972,023,178.19 Subsidy from Central Office 2,243,939,536.79 6,061,809,681.18 Less: Subsidies-Others-Financial 3,960,897,807.14 10,055,121,337.64 Net Financial Assistance/Subsidy (Note 19) 323,605,190.37 2,978,711,521.73 Gains (Note 20.1) 217,901,806.49 2,815,621.28 Losses (Note 20.2) (72,641,420.11) (65,637,114.79) Surplus(Deficit) for the period 362,873,679.21 1,408,370,552.27 26 Annex E Department of Social Welfare and Development STATEMENT OF CASH FLOWS For the period ending December 31, 2018 NCDDP- WBIBRD (in Philippine Peso) 2018 2017 Cash Flows From Operating Activities Cash Inflows Receipt of Notice of Cash Allocation - 6,972,023,178.19 Collection of Service and Business Income 3.262,260.08 1,762,313.45 Collection of Other Income 2,037,356.79 1,648,679.17 Receipt of shares, grants and donations - Collection of Receivables 18,041.00 Receipt of Inter-Agency Fund Transfers - 34,242,004.24 Receipt of Intra-Agency Fund Transfers 2,242,413,176.87 6,061,809,681.18 Other Receipts 18,139,359.10 16,712,620.43 Adjustments 17,679,112.23 16,839,750.34 Total Cash Inflows 4,322,057,369.00 13,103,407,588.83 Cash Outflows Remittance to National Treasury 4,129,526.63 1,709,507.29 Payment of Expenses 408,367,683.55 2,061,439,705.85 Purchase of Inventories 5,234,524.52 20,491,840.31 Grant of Cash Advances 356,981.15 8,187,464.72 Prepayments - 884,826.32 Payment of Accounts Payable 54,636,583.82 201,947,620.83 Remittance of Personnel Benefit Contributions and 130,544,232.39 Mandatory Deductions 19,080,712.10 Grant of Financial Assistance/Subsidy 2.152,426,919.19 2,838,367,367.27 Release of Inter-Agency Fund Transfers Release of Intra-Agency Fund Transfers 2,242,106,931.88 4,061,809,681,18 Other Disbursements 770,353.77 Adjustments 341,346,886.24 19,348,688.01 Total Cash Outflows 5,227,686,749.08 11,345,451,287.74 Cash Provided by (Used in) Operating Activities (905,629,380.08) 1,757,906,301.09 Cash Flows from Investing Activities 3,749,430.80 8,107,228.88 Cash Inflows Total Cash Inflows Cash Outflows 3,749,430.80 8,107,228.88 Purchase/Construction of Property, Plant & Equipt Total Cash Outflows 3,749,430.80 8,107,228.88 Increase (Decreased in Cash And Cash Equivalents Effects of Exchange Rate Changes on Cash and 145,200,012.37 (62,837,493.51 Cash Equivalents Total Cash Provided By (Used in) Operating, (764,178,798.51) 1,686,961,578.70 Investing and Financing Activities Add: Cash Balance, Beginning January 1, 2017 2,544,998,386.68 858,036,807.98 Cash Balance, Ending December 31, 2017 1,780,819,588.17 2,544,998,386.68 27 Department of Social Welfare and Development Annex F Statement of Changes in Net Assets/Equity -o Consolidated Central and Regional Offices NCDDP- WBIBRD (in Philippine Peso) For the period ending December 31, 2018 2018 2017 Balance at December 31, 2018/2017 3,632,803,612.87 Changes in Accounting Policy Prior Period Adjustments Restated Balance 3,632,803,612.87 2,226,142,567.89 Changes in Net Assets/Equity for CY Adjustment of net revenue recognized directly in net assets/equity (4,428,653.86) (1,709,507.29) Surplus/(Deficit) for the period 362,873,679.21 1,408,370,552.27 Total recognized revenue and expense for the period 358,445,025.35 1.406,661.044.98 Others Balance at December 31, 2018 3,991,248,368.22 3,632,803,612.87 28 ANNEX G NOTES TO FINANCIAL STATEMENTS KALAHI-CIDSS National Community Driven and Development (NCI))11) International Bank for Reconstruction and Development (IBRD) CY 2018 1. General Information/Agency Profile The financial statements of Department of Social Welfare and Development-Office of the Secretary were authorized for issue on February 09, 2019 as shown in the Statement of Management Responsibility for Financial Statements signed by Director Wayne C. Belizar, Director for Financial Management Service and Assistant Secretary Rodolfo M. Santos, Officer-in-Charge for General Administrative and Support Services. On 15 February 1915, upon creation of the Public Welfare Board during the American Regime, the government started to get involved in social welfare. The board was established to coordinate, regulate and supervise social services activities and other charitable works rendered by religious orders and organizations. Finally in 1917, the first government orphanage was established. As a result of several changes by the government in its bureaus and departments, the original Public Welfare Board of the year 1915 became the Department of Social Welfare and Development (DSWD). After which, The Social Welfare Administrator was formally created by virtue of Executive Order No. 396 dated 13 January 1951. Republic Act No. 5416 known as the Social Welfare Act was approved in 1968. It was made into a Department, whose responsibility was to provide comprehensive program of social welfare services designed to ameliorate the living conditions of distressed Filipinos, particularly those who are handicapped by reason of poverty, youth, physical and mental disability, illness and old age, or who are victims of natural calamities including assistance to members of the cultural minorities. With the provision of DSWD Mandate under Executive Order No. 15, DSWD was transformed from the rowing to steering role that usher in the new vision, mission and goals for the Department. The Department's vision is directed towards the attainment of "all Filipinos free from hunger and poverty, have equal access to opportunities, enabled by a fair, just and peaceful society". In the pursuit of its vision, the DSWD mission is to "lead in formulation, implementation, and coordination of social welfare and development policies and programs for and with the poor, vulnerable and disadvantaged". In coordinate social protection and poverty reduction solutions for and with the poor, vulnerable and disadvantaged". 29 1.1. Programs/Projects/Activities Foreign Assisted Program KALAHI-CIDSS National Community Driven Development Project (NCDDP) - a poverty alleviation program of the National Government implemented by the DSWD. It is supported by the Philippine Development Plan (2011-2016). Approved on 18 January 2013, it is the expansion into a national scale of the operations of community-driven development (CDD), a strategy that has been tried and proven effective in KALAHI-CIDSS (Kapit-Bisig. Laban sa Kahirapan-Comprehensive and Integrated Delivery of Social Services), the parent project of KC-NCDDP. The development objective of KC-NCDDP is to have barangays/communities of targeted municipalities become empowered to achieve improved access to services and to participate in more inclusive local planning, budgeting, and implementation. KC-NCDDP will also be aligned into a program to support community-driven post-disaster response and development in Typhoon Yolanda-affected municipalities within provinces covered by KC-NCDDP. DSWD Central Office registered office address is located in Constitution Hills, Batasan Pambansa Complex, Main Road, Quezon City, Philippines. 2. Statement of Compliance and Basis of Preparation of Financial Statements 2.1. The 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 financial statements are presented in Philippine Peso, which is the functional and reporting currency of the DSWD. 2.2. The 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 financial statements are prepared on an accrual basis in accordance with the Philippine Public Sector Accounting Standards (PPSAS). 30 3.2. 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 value through surplus or deficit, loans and receivables as appropriate. The Department of Social Welfare and Development determines the classification of its financial assets at initial recognition. The DSWD's financial assets include cash and other receivables. Subsequent measurement The subsequent measurement of financial assets depends on their classification. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest method, less impairment. 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. Losses arising from impairment are recognized in the surplus or deficit. Derecognition The DSWD derecognizes a financial asset or, where applicable, a part of a financial asset or part of DSWD of similar financial assets when: * The rights to receive cash flows from the asset have expired or is waived The DSWD has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party; and either: (a) the DSWD has transferred substantially all the risks and rewards of the asset; or (b) the DSWD has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Impairment offinancial assets The DSWD 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 31 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. The entity determines the classification of its financial liabilities at initial recognition. The DSWD's financial liabilities include other payables. Subsequent measurement The measurement of financial liabilities depends on their classification. 3.3. Cash and Cash Equivalent Cash and cash equivalents comprise cash on hand, cash in bank for local and foreign currencies, and treasury/agency account 3.4. 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 recognized 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 change, that class of 32 the 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 DSWD. 3.5. 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 33 * initial estimate of the costs of dismantling and removing the items 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 DSWD recognizes such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major 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 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. 34 The depreciation charge for each period is recognized as expense unless it is included in the cost of another asset. The straight line method of depreciation shall be adopted unless another method is more appropriate for agency operation. Estimated Useful Life The DSWD uses the Schedule on the Estimated Useful Life of PPE by classification prepared by COA. The DSWD 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 DSWD 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 as 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) in the surplus or deficit when the asset is derecognized. The depreciation policy for PPE are applied to similar assets leased by the entity. 3.6. Intangible Assets Recognition and Management Intangible assets are recognized when the items are identifiable non-monetary assets without physical substance; it is probable that the expected future economic benefits or service potential that are attributable to the assets will flow to the entity; and the cost or fair value of the assets can be measured reliably. Intangible assets acquired separately are initially recognized at cost. Intangible Assets Acquired through Non-Exchange Transactions The cost of intangible assets acquired in a non-exchange transaction is their fair value at the date these were acquired. 35 Internally Generated Intangible Assets Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in surplus or deficit in the period in which the expenditure is incurred. Recognition of an Expense Expenditure on an intangible item shall be recognized as an expense when it is incurred unless it forms part of the cost of an intangible asset that meets the recognition criteria of an intangible asset. Subsequent Measurement The useful life of the intangible asset is assessed as either finite or indefinite. Intangible asset with a finite life is amortized over the useful life. The straight line method is adopted in the amortization of the expected pattern of consumption of the expected future economic benefits or service potential. An intangible asset with a finite life is amortized over its useful life. Intangible asset with indefinite useful life or an intangible asset not yet available for use are assessed for impairment whenever there is an indication that the asset may be impaired. The amortization period and the amortization method, for an intangible asset with a finite useful life, are reviewed at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the assets are considered to modify the amortization period and method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on an intangible asset with a finite life is recognized in surplus or deficit as the expense category that is consistent with the nature of the intangible asset. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the surplus or deficit when the asset is derecognized. 3.7. Changes in accounting policies and estimates The DSWD recognizes the effects of changes in accounting policy retrospectively. The effects of changes in accounting policy are applied prospectively if retrospective application is impractical. 36 The DSWD recognizes the effects of changes in accounting estimates prospectively by including in surplus or deficit. The DSWD 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 Transaction in foreign currencies are initially recognized by applying the spot exchange rate between the function currency and the foreign currency at the transaction. At each reporting date: * Foreign currency monetary items are translated using the closing rate; * Nonmonetary items that are measured in terms of historical cost is a foreign currency shall be translated using the exchange rate at the date of the transaction; and * Nonmonetary items that are measured at fair value in a foreign currency shall be translated using the exchange rates at the date when the fair value was determined. 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 non-exchange transactions Recognition and Measurement ofAssets from Non-Exchange Transactions An inflow of resources from a non-exchange transaction, other than services in- kind, that meets the definition of an asset are recognized as an asset if the following criteria are met: * It is probable that the future economic benefits or service potential associated with the asset will flow to the entity; and 37 * The fair value of the asset can be measured reliably. An asset acquired through a non-exchange transaction is initially measured at its fair value as at the date of acquisition. Recognition Revenue from Non-Exchange Transactions An inflow of resources from a non-exchange transaction recognized as an asset is recognized as revenue, except to the extent that a liability is also recognized in respect of the same inflow. As DSWD satisfies a present obligation recognized as a liability in respect of an inflow of resources from a non-exchange transaction recognized as an asset, it reduces the carrying amount of the liability recognized and recognize an amount of revenue equal to that reduction. Measurement ofRevenue from Non-Exchange Transactions Revenue from non-exchange transactions is measured at the amount of the increase in net assets recognized by the entity, unless a corresponding liability is recognized. Measurement of Liabilities on Initial Recognition from Non-Exchange Transactions The amount recognized as a liability in a non-exchange transaction is the best estimate of the amount required to settle the present obligation at the reporting date. Fees and fines not related to taxes The DSWD recognizes revenues from fees and fines, except those related to taxes, when earned and the asset recognition criteria are met. Other non-exchange revenues were recognized when it is probable that the future economic benefits 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 and the related assets 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 Department of Social Welfare and Development and can be measured reliably. 38 3.10. Budget information The annual budget is prepared on a cash basis and is published in the government website. A separate Statement of Comparison of Budget and Actual Amounts (SCBAA) was prepared since the budget and financial statements were not prepared on comparable basis. The SCBAA was presented showing the original and final budget and the actual amounts on comparable basis to the budget. Explanatory comments are provided in the notes to the annual financial statements. 3.11. Impairment of Non-Financial Assets Impairment of non-cash-generating assets The DSWD 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 DSWD 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. 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. The DSWD classifies assets as cash-generating assets when those assets are held with the primary objective generating a commercial return. Therefore, non-cash generating assets would be those assets from which the DSWD does not intend (as its primary objective) to realize a commercial return. 3.12. Measurement uncertainty The preparation of financial statements in conformity with PPSAS, requires management to make estimates and assumptions that affect the reporting amounts of assets and liabilities, at the date of the financial statements and the reported amounts of the revenues and expenses during the period. Items requiring the use of significant estimates include the useful life of capital assets. Estimates were based on the best information available at the time of preparation of the financial statements and were reviewed annually to reflect new information as it becomes available. Measurement uncertainty exists in these financial statements. Actual results could differ from these estimates. 39 4. Changes in Accounting Policies DSWD has not adopted any change in Accounting Policies for CY 2015. The 25 PPSAS had been adopted beginning January 1, 2014 as per COA Resolution No. 2014- 003 datcd January 24, 2014. 5. Prior Period Adjustments The DSWD has determined transactions relating to the previous year which have cumulative effect on surplus/deficit of the prior year. The description of the prior period adjustments, including peso amount, its effect for each financial statement line item affected in current and prior year, and cumulative effect on opening accumulated surplus/(deficit) in current and prior year, and cumulative effect on surplus/deficit in prior year are shown on this notes to financial statements. 6. Cash and Cash Equivalents Account Name 2018 2017 Cash - Cash Collecting Officer 148,714.51 1,083,662.76 Petty Cash Fund 90.00 120,500.00 Cash in Bank - Local Currency, Current Account 1,250,362,272.69 1,617,877,346.20 Cash in Bank - Foreign Currency, Savings Account 530,305,510.97 925,916,877.72 Total 1,780,819,588.17 2,544,998,386.68 Cash in Bank- Local Currency, Current Account includes the funds that were deposited with Authorized Government Depository Bank (AGDB) in accordance with GAFMIS Circular Letter No. 2003-005 dated November 21, 2003: National Community Driven Development Project (Peso)-WB IBRD Cash in Bank-Foreign Currency, Savings Account includes the advances and replenishments to the Designated Account of the Project. National Community Driven Development Project (Dollar)-WB IBRD 7. Receivables 7.1. Inter-Agency Receivables 2018 Account Name 21 Current Non-Current Total Due from National Government Agencies 347,094.85 347,094.85 Total 347,094.85 347,094.85 40 7.2. Other Receivables Account Name 2018 2017 Due from Officers and Employees 770.00 40,483.80 Due from Other Funds 1,062,010.81 Du frmNnGvrmn 2,263,079,021.47 1,202,706,522.71 Organizations/People's Organizations Other Receivables 410,219.28 297,262.96 TOTALS 2,263,490,010.75 1,204,106,280.28 8. Inventories Inventory items of the Department include the following: Account Name 2018 2017 Inventories Held for Consumption Office Supplies Inventory 7,097,721.01 7,767,807.60 Accountable Forms, Plates and Stickers Inventory 548,745.00 548,395.00 Other Supplies and Materials Inventory 1,366,971.11 921,395.00 Other Supplies and Materials for Distribution 10,106.91 Sub-total 9,013,437.12 9,247,659.81 Semi-Expendable Inventories Semi-Expendable Machinery 0.00 23,200.00 Semi-Expendable Office Equipment 454,679.81 318,182.00 Semi-Expendable Information and Communications 1,891,455.01 947,658.38 Equipment Semi-Expendable Sports Equipment 4,100.00 4,100.00 Semi-Expendable Other Machinery and Equipment 19,768.00 19,768.00 Semi-Expendable Furniture and Fixtures 1,238,693.55 2,341,251.25 Sub-total 3,608,696.37 3,654,159.63 TOTAL 12,622,133.49 12,901,809.44 9. Property, Plant and Equipment Property, Plant and Equipment for CY 2018 are summarized as follows: .u Other Machinery and Transportation F 'iture, Property, Total PatcuasFixtures and Plantal Equipment Equipment Books Plant and Eqpt. Carrying Amount, Jan. 1, 52,079,113.08 13,657,050.11 2,712,853.11 188,843.62 68,637,859.92 2018 ' , , . 1 5 0 2 1 5 1, . 6 3 9 Additions/Acquisitions 9,224,909.63 - 332,756.06 26,801.04 9,584,466.73 Reclassification (2,908,122.70) (293,628.80) - - (3,201,751.50) Total 58,395,900.01 13,363,421.31 3,045,609.07 215,644.66 75,020,575.15 Disposals (,2658,492.00) - - - (2,658,492.00) 41 Furniture, Other Particulars Machinery and Transportation Fixtures and Property, Equipment Equipment Books Plant and Eqpt. Depreciation (As per Statement of Financial (13,542,184.37) (2,053,788.77) (520,005.68) (72,721017) (16,188,699.99 Performance Adjustments 350,384.41 (766,206.48) 195,691.52 (3,625.42) (223,755.97) Impairment Loss (As per Statement of Financial - - - Performance Carrying amount, Dec. 31, 2018 (As per 42,545,608.05 16,193,734.28 3,700,040.49 246,407.00 100,406,368.03 Statement of Financial Performance) Gross Cost (Asset Acct. Balance per Statement of 80,266,186.26 16,193,734.28 3,253,431.78 402,379.00 96,071,744.56 Financial Position Less: Accumulated (37,720,578.21) (5,650,308.22) (978,745.48) (107,108.93) (44,456,740.84) Depreciation Allowance for Impairment Carrying Amount Dec. 31, 2018 (As per Statement 42,545,608.05 10,543,426.06 2,721,295.01 139,298.07 55,949,627.19 of Financial Position) 10. Other Current Assets 10.1. Advances Account Name 2018 2017 Advances to Officers and Employees 6,329.28 221,288.00 Advances to Special Disbursing Officer 194,965.92 478,729.90 TOTAL 201,295.20 700,017.90 10.2. Prepayments Account Name 2018 2017 Prepaid Rent 310,620.00 310,620.00 Prepaid Insurance 90,692.36 Prepaid Registration 1,105.42 TOTAL 310,620.00 402,417.78 10.3. Deposits Account Name 2018 2017 Guaranty Deposits 100,000.00 TOTAL 100,000.00 42 11. Financial Liabilities 2018 2017 Current Non-Current Current Non-Current Accounts Payable 116,137,853.66 12,351.01 171,853,170.10 834,986.63 Due to Officers and Employees 1,472,439.00 1,700.00 13,902,663.09 6,973.19 Tax Refund Payable 381,279.66 0.00 347,529.45 0.00 I Total 117,891,572.32 14,051.01 186,103,362.64 841,959.82 12. Inter-Agency Payables 2018 2017 Account Name20801 Current Current Due to BIR 3,823,805.77 10,061,508.10 Due to Pag-IBIG 131,467.51 200,767.51 Due to PhillHealth 2,416.00 30,016.00 Due to GOCCs 0.00 45,760.00 Total 3,957.689.28 10,338,051.61 Due to BIR consists of income tax deducted from employees, consultant, specialist and suppliers and to be remitted to the Bureau of Internal Revenue during the first month of the ensuing year. 13. Other Payables Account Name 2018 2017 Current Current Due to Other Funds 800.00 765,785.36 Other Payables 627,618.82 1,344,894.55 Total 328,418.82 2,110.679.91 The Other Payables includes members' contribution and loans to SWEMC, SWEAP, MBA, Prosper and SSS deducted from members' salaries to be remitted in ensuing year. 14. Service and Business Income Account Name 2018 2017 Fines and Penalties - Service Income 105,163.84 5,545.87 Other Service Income 0.00 0.36 Interest Income 3,009,218.20 2,160,112.77 Total 3,114,382.04 2,165,659.00 The account Fines and Penalties - Service Income is the amount charged or being collected by the Department from various contractors/ suppliers for late delivery of goods and services as specified in the Purchase Order. 43 Interest Income represents income earned from various bank accounts of the Department which were remitted to the Bureau of Treasury. 15. Other Non-Operating Income Account Name 2018 2017 Miscellaneous Income 106,748.38 22,252.72 Proceeds from Insurancellndemnities 11,795.55 0.00 TOTAL 118,543.93 22,252.72 16. Maintenance and Other Operating Expenses 16.1. Traveling Expenses Particulars 2018 2017 Traveling Expenses - Local 4,186,276.50 231,439,221.71 Total Traveling Expenses 4,186,276.50 231,439,221.71 16.2. Training and Scholarship Expenses Particulars 2018 2017 Training Expenses 15,427,574.71 168,323,389.18 Total Training and Scholarship Expenses 15,427,574.71 168,323,389.18 Training Expenses consists of payment of honorarium of resource persons, board and lodging and or hotel accommodation of participants to various seminar, training - workshops. 16.3. Supplies and Materials Expenses Particulars 2018 2017 Office Supplies Expenses 8,360,681.03 29,640,158.81 Accountable Forms Expenses 350.00 58,396.00 Fuel, Oil and Lubricants Expenses 768,681.52 2,666,133.98 Semi-Expendable Machinery and Equipment Expenses 272,634.55 3,493,694.00 Semi-Expendable Furniture, Fixtures and Books Expenses 65,920.00 462,304.50 Other Supplies and Materials Expenses 661,778.24 37.357.61 Total Supplies and Materials Expenses 10,130,045.34 36,358,044.90 16.4. Utility Expenses Particulars 2018 2017 Water Expenses 10,535.00 663,208.81 Electricity Expenses |79,208.57 7,650,989.39 Total Utility Expenses I 89,743.57 8,314,198.20 44 16.5. Communication Expenses Particulars 2018 2017 Postage and Courier Services 8,111.00 589,033.74 Telephone Expenses 7,081,567.25 18,988,060.71 Internet Subscription Expenses 580,372.43 1,611,379.20 Total Communication Expenses 7,670,050.68 21,188,473.65 16.6. Awards/Rewards and Prizes Particulars 2019 2017 Prizes 78,000.00 623,000.001 Total Prices 78,000.00 623,000.00 | Prizes represent payments of the winners of the 4th National Bayani Ka! Awards held on October 14, 2018. 16.7. Professional Services Particulars 2018 2017 Auditing Services 0.00 31,160.00 Consultancy Services 5,082,026.23 92,944,235.93 Other Professional Services 43,618,335.77 869,050,124.02 Total Professional Services 48,700,362.00 962,025,519.95 Consultancy Expenses includes payment to service providers engaged in the development of systems and the program/project consultants. Other Professional Services are payments to DSWD hired workers under a Cost of Service Contracts. 16.8. General Services Particulars 2018 2017 Janitorial Services 0.00 4,696,836.18 Security Services 523,240.76 8,353,131.36 Total Professional Services 523,240.76 13,049,967.54 16.9. Repairs and Maintenance Particulars 2018 2017 Repairs and Maintenance - Buildings and Other 239,822.00 725,643.54 Structures Repairs and Maintenance - Machinery and 166,140.50 729,807.28 Equipment Repairs and Maintenance - Transportation 635,613.68 5,572,572.13 Equipment 45 Particulars 2018 2017 Repairs and Maintenance - Furniture and Fixtures 0.00 22,750.00 Total Repairs and Maintenance Expenses 1,041,576.18 7,150,772.95 16.10. Taxes, Insurance Premiums and Other Fees Particulars 2018 2017 Fidelity Bond Premiums 0.00 | 22,500.00 Taxes, Duties and Licenses 0.00 23,368.92 Insurance Expenses 91,797.78 363702.45 Total Taxes, Insurance Premiums and Other Fees _ _ 91,797.78 409,571.37 16.11. Labor and Wages Particulars 2018 2017 Labor and Wages - 46,000.00 Total Labor and Wages J - 46,000.00 16.12. Other Maintenance and Operating Expenses Particulars 2018 2017 Advertising Expenses 1,344,525.00 4,752,954.40 Printing and Publication Expenses 453,375.00 350,302.00 Representation Expenses 743,650.00 4,193,903.03 Transportation and Delivery Expenses 18,144.00 327,404.82 Rent/Lease Expenses 2,317,807.05 21,063,107.98 Other Maintenance and Operating Expenses 211,700.00 | 14,642,242.74 F Total Other Maintenance and Operating Expenses 5,089,211.05 45,311,914.97 17. Financial Expenses Account Name 2018 2017 Bank Charges 8,244.95 39,906.70 Total 8,224.95 39,906.70 18. Non-Cash Expenses 18.1. Depreciation Particulars 2018 2017 Depreciation - Machinery and Equipment 13,542,184.37 12,892,923.89 Depreciation - Transportation Equipment 2,053,788.77 1,990,523.79 Depreciation - Furniture, Fixtures and Books 520,005.68 456,629.05 Depreciation - Other Property, Plant and Equipment 72,721.17 98,805.32 Total Depreciation 16,188,699.99 15,438,882.05 46 The Depreciation for Machinery and Equipment, Transportation Equipment and Furniture, Fixtures, Other Property, Plant and Equipment are periodic cost allocation for the wear and tear the Department's PPE. 19. Net Financial Assistance/Subsidy Particulars 2018 2017 Financial Assistance/Subsidy from NGAs, LGUs, GOCCs Subsidy from National Government 2,040,563,460.72 6,972,023,178.19 Subsidy from Central Office 2,243,939,536.79 6,610,809,681.18 Total 4,284,502,997.51 13,033,832,859.37 Less: Financial Assistance/Subsidy to NGAs, LGUs, GOCCs, NGOs/POs Subsidies from Regional Offices (Staff Bureaus) 2,243,939,536.79 6,061,809,681.18 Subsidy - Others 1,716,958,270.35 3,993,311,656.46 Total 3,960,897,807.14 10,055,121,337.64 Net Financial Assistance/Subsidy 323,605,190.37 2,978,711,521.73 The account Subsidy from National Government is further broken down as follows: Particulars Amount Receipt of Notice of Allocation (NCA) 2,040,563,460.72 Tax Remittance Advice (TRA) 0.00 TOTAL 2,040,563,460.72 ADD/(DEDUCT): 0.00 NTA 0.00 Lapsed/Reversion of Lapsed NCA 2,040,563,460.72 Total 2,040,563,460.72 Total 2,040,563,460.72 The account Subsidies to Regional Offices (Staff Bureaus) pertains to transfer of funds through funding checks charged against Loan Proceeds and Other Trust Accounts to Field Offices for the implementation of various projects/programs/activities. 20. Non-operating Income, Gain, or Losses 20.1. Non-Operating Income/Gain Particulars 2018 2017 Gain on Foreign Exchange (FOREX) 217,836,250.06 2,815,621.28 Other Gains 75,555.43 11,775.50 Total Non-Operating Income/Gain 217,901,806.49 2,827,396.78 47 20.2. Non-Operating Losses Particulars 2018 2017 Loss on Foreign Exchange (FOREX) 72,626,238.69 65,637,114.79 Other Losses 15,181.42 0.00 Total Non-Operating Losses 72,641,420.11 65,637,114.79 Gains on Foreign Exchange results from the translation of foreign currency into the presentation currency which the Philippine peso was using the prevailing exchange rate at every end of the period. This is the excess of current exchange rate (closing rate) at the reporting date over the rate initially or previously recognized multiplied by the balance of the foreign currency account. Loss on Foreign Exchange (FOREX) are results from the translation of foreign currency into the presentation currency which was the Philippine peso using the prevailing exchange rate at every end of the period. This is the excess of the rate initially or previously recognized over current exchange rate (closing rate) at the reporting date multiplied by the balance of the foreign currency account. 21. Budget Information The original budget per General Appropriations Act of 2018 is P5,375,085,000.00 as well as the total allocated/released to the Department. 22. Prior Period Adjustment Liquidation of prior years' cash advances, other maintenance and operating expenses refunds and adjustments resulting to overstatement of Net Assets/Equity of 2017. The effect on the 2017 Statement of Financial Performance and Financial Position. Effect on 2017 Statement of Financial Performance Particulars Amount Net Increase in Income Accounts 173,994.53 Net Increase in Expense Accounts (1,821,883,283.18) Decrease in Surplus/Deficit (1,821,709,288.65) Effect on 2017 Statement of Financial Position Particulars Amount Net Decrease in Assets (1,324,642,549.07) Net Increase in Liabilities (101,147,792.35) Net Increase in Net Equity (Beg. Balance) (395,918,947.23) Decrease in Net/Assets/Equity (1,821,709,288.65) 48 23. Related Party Transactions 23.1. Key Management Personnel The key management personnel of the DSWD are the Head of the Agency, the members of the Executive Committee which consists of the Undersecretaries and the Assistant Secretaries, and the members of the Management Committee which consists of the Directors of the Offices, Bureaus, and Services. 49