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PILI WATER DISTRICT

STATEMENT OF INCOME AND EXPENSES For the year ended December 31, 2013

INCOME

Business Income Note 13 P 76,792,878.73

Less: Other Discounts

794,814.40

Income before Expenses Note 13 P 75,998,064.33

Less: Expenses

Personal Services Note 14 20,236,683.68 Maintenance and Other Operating Expenses Note 14 23,689,354.63

Financial Expenses Note 14 10,359,355.46

TOTAL EXPENSES

P 54,285,393.77

Income (Loss) from Operation

21,712,670.56

Add: Other General Income

Other General Income Note 15 834,892.18 Net Income (Loss) Before Income Tax

P 22,547,562.74

(See accompanying Notes to Financial Statements on page 3)

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PILI WATER DISTRICT

BALANCE SHEET As of December 31, 2013

ASSETS

CURRENT ASSETS

Cash and Cash Equivalents Note 2

37,655,039.58

Trade and Other Receivables-Net Note 3

11,017,527.81

Inventories Note 4

6,956,155.15

Prepayments Note 5

480,883.61

Total Current Assets

P 56,109,606.15

NON-CURRENT ASSETS Investment Note 6

9,199,080.10

Property, Plant and Equipment Note 7

178,311,158.79

Other Assets Note 8

1,343,741.44

Total Non-Current Assets

188,853,980.33

TOTAL ASSETS

P 244,963,586.48

LIABILITIES AND EQUITY

Current Liabilities Payable Accounts Note 9

8,609,231.27

Inter-Agency Payables Note 9

559,965.89

Other Liability Accounts Note 9

3,042,342.77

Total Current Liabilities

P 12,211,539.93

Non-Current Liabilities Loans Payable-Domestic-Long Term Debt Note 10

100,462,019.58

Deferred Credits Note 11

11,057,212.85

Total Non-Current Liabilities

111,519,232.43

TOTAL LIABILITIES

123,730,772.36

EQUITY Restricted Capital Note 12

23,380,787.96

Retained Earnings, End Note 12

97,852,026.16

Total Equity

121,232,814.12

TOTAL LIABILITES AND EQUITY

P 244,963,586.48

(See accompanying Notes to Financial Statements on page 3)

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PILI WATER DISTRICT

ACCOUNTING POLICIES AND EXPLANATORY NOTES

As of December 31, 2013

Agency Background

The Pili Water District (PIWAD) was formed on April 16, 1990 through Sangguniang Bayan Resolution

No. 56 and later maintained as a water district by virtue of Presidential Decree No. 198. The PIWAD

was granted Conditional Certificate of Conformance (CCC) No. 176 by virtue of Local Water Utilities

Administration (LWUA), after compliance with the legal requirements of the decree.

As a government owned and controlled corporation with original charter, it has the following

purposes:

Acquiring, installing, maintaining and operating a water supply and distribution systems for domestic, industrial, municipal, and agricultural uses for residential and lands within the

boundaries of such district; Providing, maintaining and operating wastewater collection, treatment, and disposal facilities;

Conducting such other functions and operations incidental to water resources development, utilization, and disposal within such district, as are necessary of incidental to said purpose.

The sources of water supply of the district are from two (2) wells, three (3) springs and one (1)

surface. To improve the water supply facilities and expansion of the water services area of the

district, it had availed a Level III loan from LWUA. The project was funded under the Small Town

Water Supply Sector Project (STWSSP) package.

All powers expressly granted by PD 198 as amended by PD 768, 1479 and RA 9286, necessary,

implied from or incidental to the powers and purposes abovementioned are exercised and performed

by the Board of Directors. It is composed of five (5) members representing sectors for professional,

civic, education, business and women. They are the policy making body of the agency.

1. Significant Accounting Policies and Corporate Procedures

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The accompanying financial statements have been prepared in conformity with applicable laws,

COA accounting policies, rules and regulations and International Accounting Standards (IAS).

Methods of Accounting

The corporation adopted the New Government Accounting System (NGAS) on a calendar year

basis and emphasized cost and revenue information under a responsible manager in a

responsibility center.

Modified accrual basis of accounting is adopted where all expenses shall be recognized when

incurred and reported in the financial statements in the period to which they relate while income

is on accrual basis except for transactions where accrual basis except for transactions where

accrual basis is impractical. Cash Flow Statement is strictly cash basis and prepared adopting the

Direct Method.

Asset method is used in recording disbursements when expenditures apply to more than one

accounting period. The expense is recorded upon utilization and consumption. Purchases are

directly recorded as assets.

Moving average method is used in recording supplies and materials for inventory.

Depreciation accounting is followed using the straight line method with 10% of the cost of fixed

assets as residual value in the computation of depreciation. Recording depreciation starts at the

month following the month of purchase or completion of construction.

Recognition

Liabilities are recognized only when goods are delivered and/or services rendered or when

supplier’s bills are received.

Deferred and accrued income and expenses are taken at the end of the year.

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Classification

Cash shortages and disallowed payments are directly recorded using appropriate accounts setting

aside the contingent accounts.

Equipment with serviceable life of more than one year are classified under Property, Plant and

Equipment and charged to capital outlay.

Financial expenses are separately classified from Maintenance and Other Operating Expenses.

Valuation

Supplies Inventories are valued at cost using the Moving Average method.

Receivables are recorded at net realizable value. Allowance for doubtful accounts is computed

based in the percentage provided for under the NGAS and Board Resolution No. 3 series of 2006

as follows: 6 months to 1 year at 1%; 1 to 2 years at 2%; 2 to 3 years at 3%; 3 to 4 years at

4% and 4 years and up at 5%.

Property, Plant and Equipment are recorded at cost plus other charges incidental to the

acquisition of such fixed assets.

Petty Cash Fund

Imprest System adopted for maintaining petty cash fund.

Replenishment of Petty Cash Fund shall be made when the fund balance reaches the minimum of

75% utilization or as the needs arise as determined by the General Manager.

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Billing of Receivables

All water sales and services rendered but not yet paid are properly billed.

2. Cash and Cash Equivalents P 37, 655,039.58

Particulars

Cash – Collecting Officer 297,509.78

Petty Cash Fund 27,000.00

Cash in Bank 37,330,529.80

Total 37,655,039.58

Cash comprised cash on hand and cash in bank. Cash equivalents are short-term highly liquid

investments that are readily convertible to known amounts of cash and which are subject to an

insignificant risk of changes in value.

Cash – Collecting Officer comprised the amount of collections with the Cashier pending deposit.

3. Receivables P 11, 017,527.81

Balances as of December 31, 2013 are as follows:

Accounts Receivable 10,777,368.09

Less: Allowance for Doubtful Accounts 335,142.81

Accounts Receivable, net 10,442,225.28

Due from Officers & Employees

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Receivables – Disallowances/Charges 172,533.40

Other Receivables 402769.13

Total 11,017,527.81

Accounts Receivable – Customers include all amounts due on open accounts arising from services

rendered to customers for water sales and incidental services. The customers are categorized as

domestic/government, semi-commercial, commercial/industrial and bulk sale/loading.

Due from Officers & Employees includes collectibles from the agency’s officers and employees.

Interest Receivable includes amount of interest earned and due from short/long term

investments.

Other Receivables includes amount due from other debtor not falling under any of the specific

receivable accounts.

The valuation of the account is carried at net realizable value. Allowance for doubtful accounts is

based on the percentage provided under the NGAS.

Assignment to DBP of Water District’s Billed Water or Accounts Receivable

Included in the covenant of the DBP refinancing is the assignment of the Billed Water or

Accounts Receivable of the district to the said bank and it shall be subject to inspection, audit,

checking and make extractions from the books, records and journals, orders, receipts and other

data relating to the assigned Accounts Receivable.

4. Inventories P6,956,155.15

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Accountable Forms Inventory 70,294.00

Office supplies Inventory 284,506.95

Other Supplies Inventory 34,742.37

Construction Materials Inventory 6,347,284.06

Chemicals & Filtering Materials Inventory 219,327.77

Total 6,956,155.15

Office Supplies Inventory includes the cost of office supplies purchased/received for use in office

operations.

Construction Materials Inventory consist of materials which are kept in stock by the water

districts for use for its new service connections, repairs and maintenance of its transmission and

distribution lines. This account includes water meters, pipes of different sizes, coupling and other

items.

Chemicals and Filtering Materials Inventory includes chlorine and DPD regents use for residual

testing.

5. Prepayments P 480,883.61

Prepaid Rent 55,084.00

Guaranty Deposits 15,300.00

Other Prepaid Expenses 222,347.38

Prepaid Insurance 188,152.23

Total 480,883.61

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Prepaid Rent amounting to P43, 000 includes two (2) months deposit for Office Space and P1,

000.00 for Special Deposit box rental at UCPB-Pili.

Prepaid Insurance represents the unamortized portion of insurance for service vehicle and the

unamortized portion of the insurance of the district’s properties as part of the loan term

agreement with Development Bank of the Philippines.

6. Investment P9,199,080.10

Sinking Fund 9,199,080.10

The Sinking Fund pertains to cash set aside in reserve for specific long-term purposes. It

includes, among others; an Operation and Maintenance Reserve for repairs of damaged Water

District’s facilities due to natural calamities, public disorders, and the like; and a Capital Reserve

for expansion of the Water District’s facilities. Five percent (5%) of monthly water sales is set

aside for this account.

7. Property, Plant and Equipment P178,311,158.70

Property, Plant & Equipment include properties of relatively permanent character that are used in

normal utility operations. It is carried at cost less accumulated depreciation. The initial cost of

PPE comprises its purchase price and other costs directly attributable in bringing the asset to its

working condition and location for its intended use. Expenditures incurred after the PPE have

been put into operation, such as repairs and maintenance are normally charged to income in the

year the costs are incurred. In situations where it can be closely demonstrated that expenditures

have resulted in an increase in the future economic benefits expected to be obtained from the

use of an item of beyond its originally assessed standard of performance, the expenditures are

capitalized as an additional cost of PPE.

Construction in Progress represents properties under construction and is stated at cost based on

construction period theory. This includes the cost of construction, equipment, and other direct

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costs. Construction in progress is not depreciated until such time that the relevant assets are

completed and put into operational use. The components of the account are the following:

Account Title

Per Books

Accumulated

Depreciation

Book Value

Land 3,761,790.61 3,761,790.61

Land Improvements 138,478.44 47,775.12 90,703.32

Electrification, Power & Energy

Structure

Irrigation & Water Systems

Structures

2,640,543.17

191,573,781.57

907,920.19

69,277,857.76

1,732,622.98

122,295,923.81

Office Building 26,144,386.12 1,135,841.30 25,008,544.82

Other Structures 11,746,941.37 2,495,025.99 9,251,915.38

Office Equipment 1,276,591.68 695,670.25 580,921.43

Furnitures & Fixtures 1,470,505.52 653,836.25 816,669.27

IT Equipment & Software 2,401,151.19 1,358,270.34 1,042,880.85

Machineries 12,737,991.16 5,625,713.09 7,112,278.07

Communications Equipment 549,265.88 288,686.61 260,579.27

Firefighting Equipment &

Accessories

17,374.60 7,177.14 10,197.46

Other Machineries & Equipment 1,111,409.68 501,743.09 609,666.59

Motor Vehicles 5,214,191.00 3,198,357.96 2,015,833.04

Other Transportation Equipment 51,000.00 36,562.50 14,437.50

Sports Equipment 46,812.30 5,342.76 41,469.54

Technical & Scientific Equipment 49,840.00 25,419.08 24,420.92

Total 260,932,054.29 86,261,199.43 174,670,854.86

Add: Construction in Progress 3,640,303.93

Property, Plant & Equipment-

net

178,311,158.79

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8. Other Assets P1,343,741.44

Other Assets 1, 343,741.44

Other Assets include serviceable assets not used in operations and unserviceable, fully

depreciated items awaiting disposal.

9. Current Liabilities P12,211,539.93

These are obligations maturing within one year from balance sheet date and composed of the

following;

Payable Accounts 8,609,231.27

Inter-Agency Payables 559,965.89

Other Liability Accounts 3,042,342.77

Total 12,211,539.93

Payable Accounts includes Loans Payable-Domestic amounting to P7, 955,405.72 which

represents the current portion of the long-term debt; Due to Officers and Employees amounting

to P9,257.34 for liabilities due to officers and employees of the agency arising from unpaid travel

expenses, benefits and other expenses; and Accounts Payable amounting to P 644,568.21 which

are the amount of indebtedness to entities arising from business.

Inter-Agency Payables consists of payables due to BIR, GSIS, HDMF, Philhealth and to other

GOCC broken down as follows:

Due to BIR P 135,421.29

Due to GSIS 301,796.78

Due to Pag-ibig 103,372.82

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Due to Philhealth 19,375.00

Total Inter-Agency Payable P 559,965.89

Due to BIR in the amount of P135, 421.29 pertain to amount of taxes due/amount withheld for

remittance to the Bureau of Internal Revenue (BIR).

Due to GSIS in the amount of P301, 796.78 pertain to contributions due/collections

received/amounts withheld for remittance to the Government Service Insurance System (GSIS).

Due to Pag-ibig in the amount of P103, 372.82 pertains to contributions due/collections

received/amounts withheld for remittance to the Home Mutual Development Fund (HDMF).

Due to Philhealth in the amount of P19,375.00 pertains to contributions due/collections

received/amounts withheld for remittance to the Philippine Health Insurance Corporation (PHIC).

Other Current Liability Accounts pertains to Guaranty Deposit Payable and Other Payables, as

follows:

Guaranty Deposits P 1,289,036.30

Other Payables 1,702,201.66

Performance/Bidders Payable 51,104.81

Total P 3,042,342.77

Guaranty Deposits in the amount of P1, 289,036.30 pertains to the deposits made by customer’s

normally before the extension of any service connections as a security for the payment of

subsequent bills, or as a meter deposit.

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10. Loans Payable-Domestic (Long Term Debt) P100,462,019.58

Loans Payable – Domestic (Long Term Debt) 100,462,019.58

This account pertains to loans contracted to finance various long term projects of the water

district for purposes of providing safe, reliable, sound and economically viable water supply and

waste water disposal system. The loan availments shall constitute a first lien on all properties of

the water district including those constructed or procured through the loan availments.

However, last March 18, 2008, said ADB-LWUA loan was refinanced by the Development Bank of

the Philippines at nine percent (9%) interest per annum.

11. Deferred Credits P 11, 057,212.85

Deferred Credits 11,057,212.85

This account includes all deferred credits not covered by other liability accounts including

advance payment of billings and receipts and amounts that cannot be entirely liquidated or

classified until additional information is received.

Grant received by Pili Water District amounting to Php 1,442,000.00.

A grant amounting to Php 1, 442,000.00 was received by the district from the Local Water

Utilities Administration (LWUA) last April 2007. At the time it was received, LWUA did not commit

as to whether it was a grant or a loan. It was recorded in the books as Other Deferred Credits.

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As of September 30, 2009, the said amount has been exhausted by the district in the various

improvements of the pumping stations. As of this time, no communication has been received as

to the treatment of the said amount.

12. Retained Earnings P97,852,026.16

This account consists of the accumulated earnings or losses of the water district and adjustments

thereto.

Appropriated Retained Earnings 23,380,787.96

Unappropriated Retained Earnings 97,852,026.16

A. Appropriated Retained Earnings P 23,380,787.96

B. Unappropriated Retained Earnings P 97,852,026.16

13. Income Before Expenses P75,998,064.33

This account includes the net revenues derived from the utility operation.

Business Income

Income from Waterworks system & Structures 72,121,365.21

Rent Income 638,207.50

Other Business Income 1,534,134.62

Fines and Penalties 2,499,171.40

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Total 76,792,878.73

Less: Discounts on Income from W/W System 794,814.40

Income before Expenses 75,998,064.33

14. Operating And Maintenance Expense P54,285,393.77

This account includes the operating expenses incurred by the water district in its utility operation

as follows;

Type of Operating Expenses

Personal Services 20,236,683.68

Maintenance & Other Operating Expenses 23,689,354.63

Financial Expenses 10,359,355.46

Total 54,285,393.77

15. Other General Income P834,892.18

Interest Income 396,794.39

Income from Grants and Donations 409,582.44

Other Fines and Penalties 28,515.35

Total 834,892.18