SO \SO 4 REPUBLIC OF THE PHILIPPINES

o ACOMMISSION ON AUDIT* .OFFICE OF THE AUDITOR

DEPARTMENT OF PUBLIC WORKS AND HIGHWAYSOFTHS PORT AREA, METRO MANILA

F INDEPENDENT AUDITOR'S REPORT

L The SecretaryDepartment of Public Works and HighwaysBonifacio Drive, Port Area, Manila

We have audited the accompanying financial statements of the Second National RoadsImprovement and Management Program (NRIMP II) financed under the InternationalBank for Reconstruction and Development (IBRD), Loan No. 7552-PH, and implementedby the Department of Public Works and Highways, which comprise the Balance Sheet,Project Sources and Uses of Funds and Project Special Account Statement for the year thenended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financialstatements in accordance with Philippine Public Sector Accounting Standards (PPSAS), andfor such internal control as management determines is necessary to enable the preparation ofthe financial statements that are free from material misstatement, whether due to fraud orerror.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with Philippine Public Sector Standards on Auditing.Those standards require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free frommaterial misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosure in the financial statements. The procedures selected depend on the auditor'sjudgment, including the assessment of the' risks of material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the Department's preparation and fair presentation ofthe financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of theDepartment's internal control. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the financial statements.

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We believe that the audit evidence we have obtained are sufficient and appropriate toprovide a basis for our qualified audit opinion.

Bases for Qualified Opinion

Our audit disclosed the following observations which affected the fair presentation of the

U financial statements:

1. The reported year-end balance of the Cash in Bank - Foreign Currency Savings Accountamounting to P(2,171,021.29) was unreliable due to the non-recognition of severalreconciling items totaling R2,584,404.43;

I 2. The reported balance of the Advances to Contractors account as of December 31, 2016amounting to 4131,738,017.30 is unreliable due to unrecorded recoupment ofP631,728.00;

3. The Construction in Progress - Infrastructure Assets (CIP-IA) account amounting to43,456,744,139.53 disclosed that there are (a) completed infrastructure projects still notclassified to the appropriate asset accounts - P1,324,677,499.55; (b) erroneous entriesmade to transfer CIP balance to Accumulated Surplus amounting to P1,324,679,499.55;and (c) discrepancies in the reported CIP balance and e-NGAS balance ofP12,117,528,353.20; and

4. The reported balances of the Guaranty Deposits Payable account as of December 31,2016 disclosed discrepancies of P11,375,264.50 between the amounts generated from

I the Quickbooks and the eNGAS.

Qualified Opinion

In our opinion, except for the effects of the matters described in the Bases for Qualified

Opinion paragraph, the financial statements referred to above presents fairly, in all material

respects, the Balance Sheet of the Second National Roads Improvement and Management

Program (NRIMP II) financed under the International Bank for Reconstruction andDevelopment (IBRD), Loan No. 7552-PH as of December 31, 2016 and the Project Sourcesand Uses of Funds and Project Special Account Statement for the year then ended, in

accordance with PPSAS.

COMMISSION ON AUDIT

By:

RENA O O. R ALESU Su rvising Auditor

D WH Audit Group31 August 2017

1 2

IRepublic of the Philippines

DEPARTMENT OF PUBLIC WORKS AND HIGHWAYSCENTRAL OFFICE

Manila

I

STATEMENT OF MANAGEMENT'S RESPONSIBILITYFOR FINANCIAL STATEMENTS

The management of the Department of Public Works and Highways isresponsible for all information and representations contained in theaccompanying World Bank - Second National Roads Improvement andManagement Program, Loan No. 7552-PH, Balance Sheet as of December31, 2016. The financial statements have been prepared in conformity withthe generally accepted state accounting principles.

In this regard, management maintains a system of accounting andreporting which provides for the necessary internal controls to ensure thattransactions are properly authorized and recorded, assets are safeguardedagainst unauthorized use or disposition and liabilities are recognized.

MARICHU A. PALAFOX, CESO IIIDirector IV, FS

IEM . AI , ESCt

Unde cre for UPMO Operations

I-I-

02o117 Second National Roads Improvement and Management Program

Balance SheetASSETS As of December 31, 2016 Dec 31,'6

Current Assets

Checking/Savings

1000000 ' IBRD Special Account -2,171,021,29

Total Checking/Savings -2,171,021.29

Other Current Assets

1200000 - Advance Payment

1200220 - LM-2.1-AdvPay-NorthLuzon

120022a - LM-2.1-AdvPay-GOP Financed -0.01

Total 1200220' LM-2.1-AdvPay-NorthLuzon -0.01

I 1200250 -LM-2.4-AdvPay-PBdry-Caticin-Kal

120025a - LM-2.4-AdvPay-GOP Financed -0.01

Total 1200250 - LM-2.4-AdvPay-PBdry-Caticin-Kal -0.01

1200320 * CS-IC-02-AdvPaylnstNewPlanProce

120032b , CS-IC-02-AdvPay-IBRD Financed 0.02

Total 1200320 - CS-IC-02-AdvPayinstNewPlanProce 0.02

1200520 -CP-RI-2.7A-AdvPay-Dlgos-Cotabat

120052a - CP-RI-2.7A-AdvPay-GOP Financed -20.01

120052b * CP-Rl-2.7A-AdvPay-IBRD Financed -20.00

Total 1200520 - CP-RI-2.7A-AdvPay-D1gos-Cotabat -40.01

1200540 - CP-RI-2.10-AdvPayDigos-GenSan

120054b - CP-RI-2.10-AdvPay-IBRD Financed -0.01

Total 1200540 - CP-RI-2.10-AdvPayDlgos-GenSan -0.01

1200550 - PM 01-2011-AdvPay Pasuquin Sect

120055a - PM 01-2011-AdvPay-GOP Financed -0.01

I Total 1200550 - PM 01-2011-AdvPay Pasuquin Sect -0.01

1200570 * PM 07-2011AdvPay-Sayre kitaotao

120057a - PM 07-2011-AdvPay-GOP Financed -0.01

120057b - PM 07-2011-AdvPay-IBRD Financed 0.01

Total 1200570 ' PM 07-2011AdvPay-Sayre kltaotao 0.00

1200600 - PM 06-2011-AdvPay-Pagadian-Zamb

120060a * PM 06-2011-AdvPay-GOP Financed 2,054,793.02

120060b ' PM 06-2011-AdvPay-IBRD Financed 799.086.20

Total 1200600 - PM 06-2011-AdvPay-Pagadian-Zamb 2,853,879.22

1200610 - PM 04-2011-AdvPay-Tagaytay-Nasu

120061a - PM 04-2011-AdvPay-GOP Financed 2,924,841.02

I Page l of 6

0207117 Second National Roads Improvement and Management Program

Balance SheetAs of December 31, 2016 Dec 31, "16

120061b * PM 04-2011-AdvPay-IBRD Financed 1,137,438.16

Total 1200610 - PM 04-2011-AdvPay-Tagaytay-Nasu 4.062,279.18

1200650 - CS-RI-03A Adv.Pay. EMA & PIES

120065a * CS-RI-03A-Adv.Pay. GOP Finance 51,828.00

120065b - CS-RI-03A-Adv.Pay. IBRD Finance 579.900.00

Total 1200650 - CS-RI-03A Adv.Pay. EMA & PIES 831,728.00

1200690 - PM 03-2012-AdvPay Pagadian-Ozam

120069a - PM-03-2012-AdvPay-GOP Financed 4,317,914.15

120069b PM-03-2012-AdvPay.IBRO Financed 1.079,478.53-

Total 1200690 - PM 03-2012-AdvPay Pagadian-Ozam 5,397.392,68

1200740 -PM 03-07-Adv.Pay-Kauswagan Sect

120074a * PM 03-07-Adv.Pay-GOP Financed 11,177,026.09

120074b - PM 03-07-Adv.Pay-IBRD Financed 2,794,256.52

Total 1200740 - PM 03-07-Adv.Pay-Kauswagan Sect 13.971.282.61

1200750 - PM 03-05-Adv.Pay.Sta.Felomina-B

120075a - PM 03-05-Adv.Pay. GOP Financed 17,353,779.85

120075b - PM 03-05-Adv.Pay. IBRD Financed 4,338,444.97

Total 1200750- PM 03-05-Adv.Pay.Sta.Felomina-1 21.692,224.82

1200760 - PM 03-14-Adv.Pay.Gapan-SanFerna

120076a - PM 03-14-Adv.Pay, GOP-Financed 2,760,305.40

120076b * PM 03-14-Adv.Pay. IBRD Financed 6,757,989.08

Total 1200760 - PM 03-14-Adv.Pay.Gapan-SanFerna 9,518,294.48

1200790 PM 03-15-Adv.Pay.Arayat Section

120079a - PM-03-15-Adv.Pay-GOP Financed 6,383,387.92

120079b - PM-03-15-Adv.Pay-IBRD Financed 1,595,846.98

I Total 1200790 - PM 03-15-Ady.Pay.Arayat Section 7,979,234.90

1200800 - PM 03-10-Adv.Pay.Baybay-Plaride

120080a * PM 03-10-Adv.Pay. GOP Financed 2.946,622.00

120080b * PM 03-10-Adv.Pay. IBRD Financed 736,655.50

Total 1200800 * PM 03-10-Adv.Pay.Baybay-Plaride 3.683.277.50

1200810 - PM 03-11-Ady. Plaridel-Inop

120081a ' PM 03-11-Adv. Pay. GOP Financed 8.560,530.00

120081b - PM 03-11-Adv. Pay. IBRD Finance 2,140,132.50

Total 1200810 - PM 03-11-Adv. Pay.Plaridel-Inop 10,700,662.50

1200840 - PM 03-13-Adv.Pay.Bat'gas Ct Rd

120084a - PM 03-13-Adv.Pay-GOP Financed 8.890,275.36

Page 2 of 6

J02107/17 Second National Roads Improvement and Management Program

Balance SheetAs of December 31, 2016 Dec 31,16

120084b * PM 03-13-Adv.Pay-IBRD Financed 9.631,131.63

Total 1200840 - PM 03-13-Adv.Pay.Bat'gas Ct Rd 18,521,406.99

1200850 - PM 03-12-Adv.Pay.BaVgas-Lobo S

120085a - PM 03-12-Adv.Pay-GOP Financed 1,623,731.09

120085b - PM 03-12-Adv.Pay-IBRD Financed 11.907,361.36

Total 1200850 PM 03-12-Adv.Pay.Bat'gas-Lobo S 13.531,092.45

1200860 - PM 04-10-AdvPay-Oras-San-Poll.-

120086a - PM 04-10-AdvPay-GOP Financed 2.195,302.00

120086b - PM 04-10-AdvPay-IBRD Financed 17.000,000.00

Total 1200860 - PM 04-10-AdvPay-Oras-San-Poli.- 19,195,302.00

Total 1200000 - Advance Payment 131.738.017.30

Total Other Current Assets 131,738,017.30

Total Current Assets 129.566.996.01

Other Assets

1500000 ' Project Expenditures 15,574.272,492.82

1510000 * Government Provided 8.022,431,972.83

1520000 - IBRD Provided 7,551,811,177.05

1500000 - Project Expenditures - Others 29,342.94

Total 1500000 * Project Expenditures 15,574,272,492.82

Total Other Assets 15,574,272,492.82

U TOTAL ASSETS 15,703,839,488.83

* LIABILITIES & EQUITY

Liabilities

Current Liabilities

Other Current Liabilities

2000000 - Due to IRD 7,375,047,051.20

2100000 - Retention

2100160 * LM-2.3-RetPay-MindoroEastCoast

210016a - LM-2.3-RetPay-GOP Financed 9,076.277.14

210016b - LM-2.3-RetPay-iBRD Financed 10,110,370.47

Total 2100160 - LM-2.3-RetPay-MindoroEastCoast 19,186,647.61

2100170 ' LM-2.4-RetPay-PBdry-Caticin-Kal

210017a - LM-2.4-RetPay-GOP Financed 9,685,319.00

210017b * LM-2.4-RetPay-IBRD Financed 16.199,418.64

Page 3 of 6

02107/17 Second National Roads Improvement and Management Program

Balance SheetAs of December 31, 2016 Dec 31, 16

Total 2100170 *LM-2.4-RetPay-PBdry-Caticln-Kal 25,884,737.64

2100240 -PM-03-2011-RetPay-Cabanatuan an

210024a - PM-03-2011-RetPay-GOP Financed 1,044.457.15

210024b PM-03-2011-RetPay-IBRD Financed 797,618.95

Total 2100240 -PM-03-2011-RetPay-Cabanatuan an 1,842.076.10

2100280 -PM-06-201 1 -RetPay-Pagadian-Zamb

210028a -PM-06-2011-RetPay-GOP Financed 7,580,285.90

210028b * PM-06-2011-RetPay-iBRD Financed 2.947,888.97

Total 2100280 * PM-06-2011-RetPay-Pagadlan-Zamb 10,528,174.87

U 2100290 -PM-05-2011-RetPay-Legaspl-Sto.

210029a - PM-05-2011-RetPay-GOP Financed 7.230,571.76

210029b - PM-05-2011-RetPay-IBRD Financed 2,811,889,03

Total 2100290, PM-05-2011-RetPay-Legaspi-Sto. 10,042,460.79

2100320 * PM-08-2012-Ret.Pay-Bayugan-Pros

210032a * PM-08-2012-Ret.Pay-GOP Financed 5,339,618.03

Total 2100320 -PM-08-2012-Ret.Pay-Bayugan-Pros 5,339,618.03

2100330 - PM 06-2012-Ret.Pay.Marbel-Makar

210033a - PM 06-2012.Ret.Pay.GOP Finance 4,995,244.69

210033b -PM 06-2012-Ret.Pay.IBRD Finance 1,248,811.17

Total 2100330 * PM 06-2012-Ret.Pay.Marbei-Makar 6,244,055.86

2100370 -PM-01-2012-RetPay-Lanao-Pagadia

210037a -PM-01-2012-RetPay-GOP Financed 1,018.405.24

210037b -PM-01-2012-RetPay-IBRO Finance 4,073.620.98

Total 2100370 - PM-01-2012-RetPay-Lanao-Pagadia 5,092,026.22

1 2100380 - PM 07-2012-RetPay.Cotabato-Mar

210038a -PM 07-2012-Ret.Pay.GOP Financed 24,149.720.51

210038b -PM 07-2012-Ret.Pay.IBRD Finance 6,037,430.13

Total 2100380 * PM 07-2012-Ret.Pay.Cotabato-Mar 30,187,150.64

2100390 - PM 03-2012-Ret.Pay.Pagadian-Oza

210039a -PM 03-2012-RetPay.GOP Financed 2,240,969.76

210039b * PM 03-2012-ReLPay.IBRD Finance 560,242.44

Total 2100390 -PM 03-2012-Ret.Pay.Pagadian-Oza 2,801,212.19

1 2100410 * PM 03-06-Ret.Pay.Santander-Bari

210041a- PM 03-06-Ret.Pay.GOP Financed 679,304.94

Total 2100410 * PM 03-06-Ret.Pay.Santander-Bari 679,304.94

Page 4 of 6

02107117 Second National Roads Improvement and Management Program

Balance SheetAs of December 31, 2016 Dec 31, '16

2100450 - PM 03-02 RetPay-Dumaguete South

210045a * PM 03-02-RetPay-GOP Financed 12,143,453.04

Total 2100450 - PM 03-02 RetPay-Dumaguete South 12,143,453.04

2100460 PM 03-16 RetPay-Alegria Section

21DD46a ' PM 03-16-RetPay-GOP Financed 16.348,671.98

Total 2100460 - PM 03-16 RetPay-Alegria Section 16.348,671.98

2100470 * PM 03-14 RetPay-Sta.Ana-Arayat

210047a - PM 03-14-RetPay-GOP Financed 1,642,855.97

Total 2100470 * PM 03-14 RetPay-Sta,Ana-Arayat 1,642,855.97

2100480 - PM 03-07 RetPay-Kauswagan Secti

210048a - PM 03-07-RetPay-GOP Financed 4,434,602.07

Total 2100480 * PM 03-07 RetPay-Kauswagan Secti 4.434,602.07

2100490 - PM 03-05 RetPay-Sta.Felomina-Bo

210049a - PM 03-05-RetPay-GOP Financed 10,189.582.19

Total 2100490 - PM 03-05 RetPay-Sta.Felomina-Bo 10,189,582.19

2100500 - PM 03-10-RetPay-Baybay-Plaridel

210050a - PM 03-10-RetPay-GOP Financed 6,785.426.70

Total 2100500 - PM 03-10-RetPay-Baybay-Plaridel 6,785,426.70

2100510 - PM 03-01 Ret.Pay.Tagoloan Secti

210051a ' PM 03-01-RetPay-GOP Financed 13,738,428.97

Total 2100510 * PM 03-01 Ret.Pay.Tagoloan Sectl 13,738,428.97

1I 2100520 - PM 03-15-RetPay-Arayat Section

210052a PM 03-15-RetPay-GOP Financed 1,341,228.711 Total 2100520 - PM 03-15-RetPay-Arayat Section 1,341,228.71

2100530 - PM 03-11-RetPay-Plaridel-Inopac

210053a * PM 03-11-RetPay-GOP Financed 6,331,725.01

Total 2100530 ' PM 03-11-RetPay-Plaridel-Inopac 6,331,725.01

Total 2100000 - Retention 190,783.439.53

Total Other Current Liabilities 190,783,439.53

1 Total Current Liabilities 7,565,830,490.73

Total Liabilities 7,565,830.490.73

L -Page 5 of 6

02107117 Second National Roads Improvement and Management Program

Balance Sheet

As of December 31, 2016 Dec 31,'16

Equity

3000000 - Project Financing

3010000 - Government Financing 7,741,822,633.35

Total 3000000 - Project Financing 7,741,822,633.35

3900 - Retained Earnings 346,074,647.98

Net Income 50,111,716.77

Total Equity 8.138,008,998.10

TOTAL LIABILITIES & EQUITY 15,703,839,488.83

LI

As ~~~~ ~ Pg of Deeme 31606 De t

7.4182,3337,4,22633

34U7.679

5011L167

U

Page 6Sof 6

Department of Public Works and HighwaysDPWH Central Office

Condensed Statement of Financial PositionAs at December 31, 2016

International Bank for Reconstruction and Development (NRIMP Loan-7552 PH)1. (Amounts are stated in Philippine Peso Php)

2016 2015

ASSETSCurrent Assets

Cash in Bank-Foreign CurrencyCash in Bank-Foreign Currency, Savings Account Note 8 (2,171,021.29) 9,627,095.27

Other AssetsPrepayments

Advances to Contractors Note 9 131,738,017.30 259,273,371.83

Total Current Assets 129,566,996.01 268,900,467.10

Non-Current AssetsProperty, Plant and Equipment

Construction in ProgressConstruction in Progress-infrastructure Assets Note 10 15,574,272,492.82 13,434,668,747.64

Total Non-Current Assets 15,574,272,492.82 13,434,668,747.64

TOTAL ASSETS 15,703,839,488.83 13,703,569,214.74

LIABILITIESCurrent Liabilities

Accounts Payable 7,375,047,051.20 6,052,882,513.61

Total Current Liabilities 7,375,047,051.20 6,052,882,513.61

Non-Current LiabilitiesGuaranty/Security Deposits Payable Note 11 190,783,439.53 336,420,403.13

Total Non-Current Liabilities 190,783,439.53 336,420,403.13

TOTAL LIABILITIES 7,565,830,490.73 6,389,302,916.74

EQUITYNet Asset/ Equity

-Net Asset/ Equity 8,138,008,998.10 7,314,266,298.00Net Asset/ Equity __________

TOTAL NET ASSETS/EQUITY 15,703,839,488.83 13,703,569,214.74

Prepared by:

Certified Co

t

MARY AT NETTE 2. PUNODepartmen(/hief Accountant

1-It

Repubtc of the Philippinos

NATIONAL ROADS IMPROVEMENT AND MANAGEMENT PROGRAM, PHASE 11 (NRIMP2)Project Sourcos and Uses of Funds

For the Year January 1. 2010 to December 31, 2010U -_ _ _ _ LsoltCurrny UrnIs (PlxP)

Actual Planned I Variance Planned - ActualCurrent Cumulative Current Cumulative Current Cumulative

Year To-Dato Year To-Date Year To-Date

Opening Cash BalanceGovernment Funds GOPWorld Bank Funds FC 9.627,095.33Total 9,627,D95.33

Add: Sources of FundsGovernment Funds GOP 737,419,470.34 7,733.915,700.86World Bank Funds FC 1,352,785,087.l1 7,391,373,427.59Total 2,090,204,557.45 15,125,289,128.45

Loss: Uses of Funds

Goods CategorY (1) 166,666.554,77 982.768.617.91 255,396,937.12 1.095,764,254.69 88.730.382 112,976.637GOP 18,792.35.01 354.465.100.74 4,Mt8,734 02 347.083.57301 (14.173 61) (9.3a1.a07)

FC %47.874.199.7e 62e,323.437.17 250,778,19550 74086$0.68078 102.903999 122,3672L4

Consultants' Services 117.365,190.12 984,186,35332 245,705.000.00 1,065.432,084.68 128,339.810 81,245.731

GP 3.295,7.15 134.013,3172 10.11a,00000 13a.00020447 0.814.322 3,9W,047FC 114,0 0,511.07 850.173.830 0a 235.595.000 00 027.431.820 21 121'525.488 77,258,784

Trainings 7,117,652.90 27,650.036.77 9,246.078.14 20.532,383.87 2,128,425 (7,117,053)GOP - 395.929.30 305,929.30 0 0

1 FC 7.117.05200 27,254.107.4% 9.246.07$L14 20,130,454.51 2,12 ,425 (7.117.653)

Category (2)Part A.1 Civil Works 87.794,992.06 5,960,136,203.40 459,914,085.82 6,054,767,353.83 372,119,094 85.651,150

COP 3,034.34585 2,97803,860.25 1ss32$.$0o40 3.000216.047.85 134.291.155 71,42.785

FC Me.780.46.21 2.990.332.34S 15 29458W,585.33 3,054,570,70 5 5 237.827,00 64,238,383

Part A.2(b) Civil Works-LTPBM 782,414.333.51 3,793,856.6089.32 1.284,622,000.00 3.675.957,662.57 502,207,666 (117.89,.427)GOP 210M,.2200869 1.535.695.7*624 353,312.000.00 1,agt.417.540.90 142789,991 (44,238,145)

FC 571,092.32482 1.55.200.303 08 931,310,000.00 1.784.540.021.01 359,417.675 (73.680281)

Part A.2(c) Civil Works -PM 870,209,577.39 3,306,630,029.10 2,502,668,000,00 3,479,086.228.83 1,632,458.423 172,456,200GOP 500s600,74t.09 2,232,234,536.01 1,835.073.00o00 2,324,344,340.54 1.334.405259 92,109.504

FC 309.542.830.30 1.074.305,192.t 567,505.000.00 1.154.741.8520 208,052,154 80.340.096

Advance Payrnent.CW 73,316.147.60 1,704.415.973.12GOP 3D.35.95.34 o11.53o.94 83

FC 42,952,162.22 722.885.078.49

Release of Retention 254,628,342.74 885,873,3W4.52GOP 12.475 371.72 390,123,901.49FC 92.152,n71,02 205749483.021

Othersimplementing Unit Expenses 13,031,330.68 166.508,047.69 18,000,000.00 247,689,714.53 4,968,669 81,381,667

& Right of Way Acquisition GOP 13.031.330 66 15508,047.60 13.000.000.00 247.889.714 53 4,08669 e1,381.07

Total Uses 2.372,544.121.75 17.621,044,715.15 4.775,552.101.08 15.639.449,683.0D 590,281,380.57 354.136,632.51GOP 070.11,81455 D,175.731,754.57 2,380.435,239,11 7,4.344,11%.S2 131.900,5294.4 07.399.794.52

PC 1.402.362.30520 8,445.312.160.5 2.3ag.112.501.97 7.090.101.572.35 44.385.151.13 256.735.737.9

Less: Retention 108,963,119.14 878,108,364.32GDP 95,383,435.46 $37.599.870 55FC 13,571D.653.68 340,508,493.77

Less: Recoupment of Advance 192,198.878.03 1.631,802,577.37Payment GOP 137,378,010.75 904.215.183 5

PC 54.919.967.28 727,58.,394.21

Not Uses 2J 2,071,382,124.58 15,111,133,773.46GOP 737.4$9.47034 7.733,95,7008.

FC 1.333.562.554.24 7.377.21807200

AddForeign Currency Adjustment FC .30AN,5496 5 10.320,37.30Closing Cash Balance

Government Funds GOP -World Bank Funds 1 FC (2,171,021.31' 2.,11Total *2,f7f.021.31) (2172?31) -J

Prepared By: Certified Correct:

LILIBET4 . RICO MARY ANTOt E Z. PUNOProject Manager It Department Chief Accountant

NRIMP2, RMC(1.7PMO0 3

LLD LC-I F-? C= Cf CL=J

Republic of the PhilippinesSecond National Roads Improvement and Management Program

Uses of Funds by Project ActivityJanuary 1, 2016 to December 31, 2016

in Local Currency Units (PhP) 000's

ACTUAL EXPENDITURES BUDGET CURRENT BUDGET ORIGINAL BUDGET

PROJECT ACTIVITIES b c d e f=d-c f=cld h=e-c i=cfeCurrent Cumulative Current PAD Original $Amount Percentage $Amount PercentageYear to Date Budget Buget Variance Used Variance Used

R.I-2.1-Magapit-StaAnaRd 14,864 415,774 454,618 38,844 91.46% %

R.I-2.2-Mindoro East Coast Road 27,740 510,940 532,910 21,970 95.88% %

R.I -2.3-Zarraga-Ivisan Road 12,187 38,258 42,859 4,601 89.26% %

R.I-2.4-Bacolod-Kabankatan 16,732 325,992 331,049 5,057 98.47% %

R.l-2.6-Malalag-Malita-JAbadSantos 36,342 679,224 690,559 11,335 98.36% %

R.I-2.7A-Digos-KidapawanSection 10,544 746,016 751,137 5,121 99.32% %

R.1-2.7B-Kidapawan-PagalunganSection 426,419 431,810 5,391 98.75% %

R.1-2.7C-Pagalungan-CotabatoSection 2,718 1,142,642 1,142,642 - 100.00% %

R.I-2.9-Evangelista-MisinagSection 1,105,242 1,105,242 - 100.00% %

R.I-2.10-Digos GenSan-Davao-Cal 647 573,118 591,580 18,462 96.88% as

CS-RI-DE2.1-DE for Luzon-Visayas 120,928 179,363 58,435 67.42% %

CS-RI-DE2.2-DE for Mindanao 17,806 44,466 26,660 40.04% %

CS-RI-01-CS in Luzon-Visayas 76,057 96,473 20,416 78.84% %

CS-RI-01A-CS for CP R1.2.9 Marc 44,789 44,789 - 100.00% %

CS-RI-02-CS for RI in Mindanao 178,654 179,141 487 99.73% %

CS-RI-03 External Monitoring Agent 3,164 6,486 8,847 2,361 73.31% %

CS-AP-01-Asset Preservation Sup 12,591 81,244 139,123 57,879 58.40% %

LM-2.1 - North Luzon 197,339 1,159,913 1,609,370 449,457 72.07% %

LM 2.2- South Luzon 203,637 1,328,972 1,804,900 475,928 73.63% %

LM 2.3-Mindoro East Coast Road (Luzon) 161,743 528,347 1,124,330 595,983 46.99% %

Page l of 5

Republic of the PhilippinesSecond National Roads Improvement and Management Program

Uses of Funds by Project ActivityJanuary 1, 2016 to December 31, 2016

in Local Currency Units (PhP) 000s

ACTUAL EXPENDITURES BUDGET CURRENT BUDGET ORIGINAL BUDGET

PROJECT ACTIVITIES b d a_ f=d-c q=cid h=e-c i=c

Current Cumulative Current PAD Original $Amount Percentage $Amount Percentage

Year to Date Budget Buget Variance Used Variance Used

LM 2.4-Prov Bdry-Catician-Kalibo 188,118 758,663 1,202,428 443,765 63.09% %

PM-01-2011 AD Pasuquin Sect. 65,515 66,515 - 100.00% %

PM-02-2011 AD iguigAmulung Sec 153,001 153,001 - 100.00% %

PM-03-2011 AO Cabatauan & rosa 227,211 227,211 - - 100.00% %

PM-04-2011 AD Tagaytay- Nasugbu 127,308 150,327 23,019 84.69% %

PM-05-2011 AD Legaspi-Sto. Domi 90,382 111,588 21,206 81.00% %

PM-06-2011 AD Pagadian-Zambuanga 97,607 124,308 26,701 78.52% %

PM-07-2011 AD Kitaotao-Kibawe 5 78,611 78,611 - 100.00% %

PM-08-2011 AD Davao-Bukidnon Rd 5,395 56,124 56,124 - 100.00% %

PM-09-2011 AO 1497+880 Davao City 122,112 122,112 - 100.00% %

PM-01-2012 AD Lanao-Pagadian 76,616 91,209 14,593 84.00% %

PM-02-2012 AD Pagadian-Mirangan 79,968 89,431 9,453 89.42% %

PM-03-2012 AD Pagadian-Ozamiz 28,012 63,995 35,983 43.77% %

PM-04-2012 AD Lasang-Tibungco 64,540 64,540 - 100.00% %

PM-05-2012 AD Davao- Cotabato Road 15,219 86,728 86,728 - 100.00% %

PM-06-2012 AD Marbel-Makar Road 109,937 124,881 14,944 88.03% %

PM-07-2012 AO Cotabato-Marbel Road 301,872 335,129 33,257 90.08% %

PM-08-2012 AD Bayugan-Prosperiod 99,908 110,444 10,536 90.46% %

PM-09-2012 AD Pisaan-San Francisco 96,308 96,308 - 100.00% %,

PM3-01 AO Tagoloan Section 101,578 123,646 147,122 1 23,475 84.04% %

Page 2 of 5

I: LLJ CJ czj c:- L

Republic of the Philippines

Second National Roads Improvement and Management Program

Uses of Funds by Project ActivityJanuary 1, 2016 to December 31, 2016

in Local Currency Units (PhP) 000's

ACTUAL EXPENDITURES BUDGET CURRENT BUDGET ORIGINAL BUDGET

PROJECT ACTIVITIES b c d a f=d-c q=cl - h=e-c !=cle

Current Cumulative Current PAD Original $Amount Percentage $Amount Percentage

Year to Date Budget Buget Variance Used Variance Used

PM3-02 AO Dumaguete South Road 59,958 59,958 134,243 74,285 44.66% %

PM3-03 AO Siaton - Sta. Catalina 105,168 105,168 152,969 47,801 68,75% %

PM3-04 AO Angeles-Porac-Florida 7,845 107,928 107,928 - 100.00% %

PM3-05 AO Sta. Feiomena-Bonbo 91,706 91,705 246,511 154,805 37.20% %

PM 3-06 AO Santander-Barili-Toledo 17,688 148,528 155,937 7,409 95.25% %

PM3-07 AO Kauswagan Section 39,911 39,911 137,488 97,577 29.03%

PM3-08 AO Lanao-Zamboanga 86,558 163,316 177,513 14,197 92.00% %

PM3-09 AO Quimpo Blvd. Section 38,149 178,478 220,042 41,564 81.11% %

PM3-10 AO Baybay-Plaridel 5ection 40,167 40,167 92,409 52,242 43.47% %

PM3-11 AO Plaridel- Inopacan Section 56,986 56,986 134,655 77,669 42.32% %

PM3-12 AO Batangas-Tabangao-Lobo Road 90,207 90,207 0.00% %

PM3-13 AO Batangas-Tabangao-Lobo Road 123,476 123,476 0.00% %

PM3-14 AO Sta Ana - Arayat Section 14,785 14,786 79,884 65,098 18.51% %

PM3-15 AO Arayat - Magalang Section 12,071 12,071 66,607 54,536 18.12% %

PM3-16 AO Alegria Section 121,062 121,062 209,016 87,954 57.92% %

PM4-02 AO Dumaguete South Road, Sta Catalina 60,748 60,748 0.00% %

PM4-03 AO Durnaguete South Road, Bayawan 124,283 124,283 0.00% %

PM4-06AD loilo-Capiz Road (New Route) 178,800 178,800 0.00% %

PM4-07 AO Iloilo-Capiz Road (New Route) 159,001 159,001 0.00% %

PM4-09 AO Jct Taft-Oras-San Policarpio 96,580 96,580 0.00% % %

Page 3 of 5

Republic of the PhilippinesSecond National Roads Improvement and Management Program

Uses of Funds by Project ActivityJanuary 1, 2016 to December 31, 2016

in Local Currency Units (PhP) 000's

ACTUAL EXPENDITURES BUDGET CURRENT BUDGET ORIGINAL BUDGET

PROJECT ACTIVITIES b c d a f=d-c Q=cld h=e-c i=cle

Current Cumulative Current PAD Original $Amount Percentage $Amount Percentage

Year to Date Budget Buget Variance Used Variance Used

PM4-10 AO Ict Taft-Oras-San Policarpio 127,969 127,969 0.00% %

PM4-14 AO Aklan West Road 147,000 147,000 0.00% %

PM4-14 AO Aklan West Road 114,000 114,000 0.00% %

CSIC-01-Proi. Mngmt & Coordation 32,452 148,878 168,342 19,464 88.44% %

CS-IC-02-Inst New Plan Process 40,448 141,353 169,834 28,481 83.23% %

CS-IC-03-EnhancemntofEnggDesign 17,672 71,576 106,895 35,319 66.96% %

CS-IC-06R - Assessment of Maintenance 3,986 3,986 29,365 25,379 13.57% %

CS-IC-07 - Fiscal Accountability 11,754 11,754 13,993 2,239 84.00% %

CS-TA-01- TA for Post -Yolanda 2,326 2,326 75,007 72,681 3.10% %

G02-Special Road Serveys 30,066 32,843 2,777 91.54% %

G03A-BridgeinspUnita&ServiceMain 556 22,899 25,463 2,564 89.93% %

GO3B-TraffictClassifier&SrvcMain 306 18,857 24,178 5,321 77.99% %

G09-CONFIRM Software 5,066 58,124 88,556 30,432 65.64% %

GO5-IT Equipment and Software 278,314 278,314 - 100.00% 9

GO6-Communication Network Equip 27,342 254,526 262,039 7,513 97.13% %

G07-Database Management System 554 25,750 61,235 35,486 42.05% %

G08-GIS (ESR1) Software Upgrade 18,202 42,474 51,541 9,067 82.41% %6

04A-Materials Testing Equipment 13,365 13,365 - 100.00% %

G048-Materials Testing Equipment 16,365 16,365 - 100.00% %

G04RC-Materials Testing Equipment 1,192 1,192 - 100.00%1 9

Page 4 of 5

Republic of the PhilippinesSecond National Roads Improvement and Management Program

Uses of Funds by Project ActivityJanuary 1, 2016 to December 31, 2016

in Local Currency Units (PhP) 000'sy

ACTUAL EXPENDITURES BUDGET CURRENT BUDGET ORIGINAL BUDGET

PROJECT ACTIVITIES b c d e f-d-c q=cid h=e-c i=cle

Current Cumulative Current PAD Original $Amount Percentage $Amount PercentageYear to Date Budget Buget Variance Used Variance Used

G04RD-Materials Testing Equipment 13,363 13,363 - 100.00% %

G04RE-Materials Testing Equipment 5,214 5,214 - 100.00% %

GO4RF-Rd. Surface Profilometer 9,036 27,337 27,337 - 100.00% %

615 Autodesk Eng'g Design Software 105,605 105,605 223,072 117,467 47.34% %

B.4-LA.1- Interpersonal & Personal Dev 7,277 7,277 - 100.00% %

Training & Workshop 7,117 20,373 37,723 17,350 54.01% %

Right of Way 354 354 - 100.00% %

EAO-rmplementing Unit Expenses 13,031 166,155 180,000 1 13,845 92.31% %

Advance Payment 73,316 131,696 1 1 %

Total Project Expenditures 2,071,382 15,111,134 19,857,354 1 4,877,916 76.-10% %

Page 5 of 5

Republic of lhe PhilippinesNational Roads improvement and Management Program, Phase II (NRtMP2)

Project Cash Withdrawals (Disbursement)For the Year January 1. 2016 to December 31, 2016

D s in Local Currency Units (PhP) USD Cumulalive

Disbursement Project World Bank Eligible World Bank

Category Expenditures Expondituros FinancedTotal World Bank Current Paid fmm Paid through Paid from

Designated Direct DesignatedEligible (%) Quarter Account Payment Account

Category (1)Goods 166,666,554.77 147,874,199.76 147,874,199.76 13,555,172.12

WorldflSAnk Funds 147,174.109.70 100 147,874,199.75 147,874.199.76

Goverment Funds 18,792.355 0t

Consultants'Sorices 117.365,190.12 114.069,511.97 114,069,511.97 18.200,704.1

WorldBankFunds 114,069.511.97 toO 114,069,511.97 114.089.51197

Govenlmnnt Fund4 3,295,71.15

Trainings & Workshops 7,117,652.90 71117,652.90 7,117,652.90 608,738.43

VWd Bank Funds 7.1.90 tGO 7,117,52 90 7,117,652,00

Goveninni Funds

Category (2)PartA.1 Civil Works - RI 87,794,992.06 66,760,646.21 58.760,646.21 67,703,349.17

World Bark Funds - Local Currency 50,760,040 21 75 56.760.645 21 56,760,64 21

Government Funds 31,034,345.85 25

Part A.21b) Civil Works -LTP8M 782,414,333.51 571,892,324.82 571,892,324.82 42,202,143.06

World Bank Funds - Local Currency 571.852.224.82 75 571.892,324.82 571.892.324 82

Cavemmr,enrPunds 210,522.008to 25

Part A.2(c) Civil Works -PM 870,209,577.39 401,419,225.06 401,410,225.06 24,973,869.00

World Bank Funds - Local Currency 401.419,225.0G 100 401,419,225 DG 401.419,22500 Yearl 7.375.444 39

Govemment Funds 46.700.35233 Year2 0.227.0701)4Yoars 680,774.BaYear4 4,474,578.79

Advance Payment 73,316,147.60 42,952,162.22 42,952,162,22World Bank Funds - Local Currency 42,952,162 22 42,052,t62 22 42,957,16212

Govemment Funds 30,383,985 38

Release of Retention 254,628,342.74 92,152,971.02 92,152,971.02World Bank Funds - Local Currency 92,152,071 02 02,152,71.02 92,152,971.02

GovermentFunds 12,475,371.72

Others (Implementing Unit Expenses) 13,031,330.66kGovernmnl Funds 13,031,330.66

I Total 2,372.544.121.75 460,927,144,08 460.927.144.08 167,241,976.29

Prepared By: Certified Correct:

LILISEd RICO MARY AN INTYE 2. PUNOProject Manager 11 Dpe rtment Chief Accountant

NRIMP2. RMCII-UPMO

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I Republic of the PhilippinesDepartment of Public Works and Highways

NOTES TO THE FINANCIAL STATEMENTSInternational Bank for Reconstruction and Development (NRIMP Loan-7552 PH)

For the year ended December 31, 2016

I - General Information /Agency Profile

I

1.1 The Statement of Financial Position presented for the year ended December 31,

2016 is the financial statement for Fund 101151 - GOP Counterpart (Project

Cost and EAO), Fund 101163 IBRD-WorldBank and Fund 104358 MVUC underNational Roads Improvement and Management Program, Phase 11, Loan No. PH-] 7552, of the Department of Public Works and Highways.

1.2 Under Executive Order No. 710 dated July 27, 1981, the Ministries of Public

Works and Public Highways were merged for a more effective and sustained

implementation of infrastructure projects. Under the restructured set-up, the

agency was known as the Ministry of Public Works and Highways (MPWH) with

El _ 14 regional offices, 94 districts and 60 city engineering offices, 5 bureaus and 6service offices, in addition to corporations and councils attached to the Ministry

for administrative supervision.

1.3 By virtue of Executive Order No. 124, dated January 30, 1987, the agency was

known as the Department of Public Works and Highways (DPWH). The agency isEL headed by Honorable Mark A. Viilar, as the Secretary with all supervision andcontrol of the Department.

LI~ Department Order No. 227 series of 2016 amended the authorities and areas of

responsibilities of the DPWH undersecretaries and assistant secretaries as

p follows:

1.3.1 Rafael C. Y(abut - Senior Undersecretary. He serves as UndersecretaryLI~ for Regional Operations in Visayas and Mindanao, as such shall haveoverall supervision and control over the operations of all Regional

Offices in Visayas and Mindanao. He shall likewise have overall

LI- supervision and control over all infrastructure projects implemented bythis Department but funded under the budget of various line agencies,

i.e. school buildings, health centers and farm-to-market roads in his

areas of assignment.

1

1.3.2 Raul C. Asis- Undersecretary. He serves as Undersecretary for Technical

Services and as such shall have overall supervision and control over all

the Bureaus.

1.3.3 Ma. Catalina E. Cabral - Undersecretary. She serves as Undersecretary

for Planning Service and the Public-Private Partnership Service.

1.3.4 Karen Olivia V. Jimeno - Undersecretary. She serves as Undersecretary

for Legal Affairs and Priority Projects and as such shall have overall

supervision and control over the Legal Service and the Stakeholders

Relations Service (SRS). She shall likewise supervise and oversee

projects, programs and activities requiring focused and expeditious

execution, or which are considered priority, as may be assigned by the

Secretary.

1.3.5 Ardeliza R. Medenilla - Undersecretary. She serves as Undersecretary

for Support Services and as such shall have overall supervision and

control over the Human Resource and Administrative Service (HRAS),

Finance Service (FS), Information Management Service (IMS) and the

Procurement Service,

1.3.6 Romeo S. Momo - Undersecretary. He serves as Undersecretary for

IRegional Operations in Luzon and as such shall have overall supervision

and control over the operations of all Regional Offices in Luzon. He shall

likewise have overall supervision and control over all infrastructure

LI ___projects implemented by this Department hut funded under the budget

of various line agencies, i.e. school buildings, health centers and farm-

R~. to-market roads in his area of assignment.

1.3.7 Emil K. Sadain - Undersecretary. He serves as Undersecretary for

Unified Project Management Office (UPMO) operations and as such

shall handle overall administrative functions of the five (5) specialized

clusters under UPMO. The operations of the four (4) UPMO Clusters,

namely, Bridges Management Cluster, Roads Management Cluster 1,

Roads Management Cluster 2 and Buildings Management Cluster, shall

remain under his overall supervision.

1.3.8 Roberto R. Bernardo - Assistant Secretary. He serves as Assistant

Secretary for Regional Operations in the Visayas and as such shall assistrthe Undersecretary for Regional Operations in the overall supervision

and control over Regions VI, VII, Vill and NIR.

2

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I- 1.3.9 Eugenio R. Pipo, Jr. - Assistant Secretary. He serves as Assistant

Secretary for Regional Operations in Luzon. He shall assist the

Undersecretary for Regional Operations in the overall supervision and

control of Regions 1, II, Ill, IV-A, IV-B, V, CAR, and NCR.

1.3.10 Gilberto S. Reyes - Assistant Secretary. He serves as Assistant Secretary

for Technical Services. He shall assist the Undersecretary for Technical

Services in the overall supervision and control over all the Bureaus.

1.3.11 Dimas S. Soguilon - Assistant Secretary. He serves as Assistant Secretary

for Regional Operations in Mindanao. He shall assist the Undersecretary

for Regional Operations in the overall supervision and control over

Regions IX, X, XI, XII and XIII.

1.3.12 B. Elizabeth E. Yap - Assistant Secretary. She serves as Assistant

Secretary for Support Services. She shall assist the Undersecretary for

Support Services in the overall supervision and control over the Human

Resource and Administrative Service (HRAS), the Finance Service (FS),

the Information Management Service (IMS), and the Procurement

Service (PrS).

I. _The agency is composed of 9 services, 6 bureaus and 5 PMOs. It also has 17 Regional

Offices and 180 District Offices.

1.4 The Department of Public Works and Highways functions as the engineering and

construction arm of the Government tasked to continuously develop its

technology for the purpose of ensuring the safety of all infrastructure facilities

and securing for all public works and highways the highest efficiency and quality

in construction. DPWH is currently responsible for planning, design,

construction and maintenance of infrastructure, especially the national

highways, flood control and water resources development system, and other

public works in accordance with national development objectives.

1.5 Mission. To provide and manage quality infrastructure facilities and services

responsive to the needs of the Filipino people in the pursuit of national

development objectives.

1.6 Vision. By 2030, DPWH is an effective and efficient government agency,

improving the life the every Filipino through quality infrastructure.

1-3

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1.7 Mandate. The Department of Public Works and Highways (DPWH) is one of the

three departments of the government undertaking major infrastructure

projects. The DPWH is mandated to undertake (a) the planning of infrastructure,

such as roads and bridges, flood control, water resources projects and other

public works, and (b) the design, construction and maintenance of national

roads and bridges, and major flood control systems.

1.8 Sources of Funds

1.8.1 The DPWH maintains the following funds under Cluster 02 - Foreign

Assisted Project Fund.

Fund Code Fund Description

101151 NGA - GOP Counterpart Funds101152 NGA - Asian Development Bank101153 NGA - Australia101154 NGA - Austria101160 NGA-France101163 NGA - International Bank of Reconstruction and Development

101167 NGA -Japan101168 NGA-Korea101169 NGA-Millennium Challenge Corporation

101173 NGA - Saudi Arabia101174 NGA - Spain101176 NGA - United Kingdom

1.8.2 Fund 101151, 101163 and 104358 provides specific budgeting and

accounting guidelines necessary for the proper recording, accounting

and monitoring of foreign assisted projects (NRIMP-2) sourced from

I foreign loan proceeds accruing to the agency.

1.9 Loan Profile

1.9.1 The purpose of National Roads Improvement and Management Program

(NRIM-II) is to improve some national roads and set-up management

systems that will ensure the preservation of improved national roads

systems (NRS) in an environmentally, socially and financially sustainable

manner. This is divided into three phases, such as Design (NRIMP-1),

I- Initiation (NRIMP-1I) and Operation (NRIMP-lIl). Pursuant to the

Amendment to the Loan Agreement, the objective of the Project is to

4

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] improve the condition of the national roads network and managementeffectiveness of the DPWH at national and local level.

1.9.2 NRIM-11, which is the subject of the herein accompanying financial

statements is a $232 Million Loan granted by the World Bank that has

started on April 16, 2009 and will be effective until its closing date onDecember 31, 2012 extended up to December 31, 2014 as approved.

The project is divided into Civil Works and Institutional Strengthening.

Civil Works involves Road Upgrading, Preventive Maintenance and Long-

Term Performance-Based Maintenance, while Institutional] Strengthening covers Business Improvements implementation Projects,Policy and Institutional Reforms and the Support to Commercialization.

Pursuant to Amendment to the Loan Agreement, the closing date is

I

extended up to December 31, 2016.

2 Basis of Financial Statements Presentation

2.1 To ensure efficient and effective implementation of the Program as the

first Condition for loan effectiveness, Department Order No. 63, dated

EL December 11, 2008 was issued with the subject: ImplementationArrangements and Creation of a Program Management Office, known as

NRIM-PMO.

12.2 To satisfy another Condition for Loan Effectiveness, the Financial

Management (FM) Team was created under Special Order No. 138

11 dated December 8, 2008 to ensure that there is in place in the DPWHadequate financial management system.

2.3 A Financial Management (FM) assessment of the Department of Public

Works and Highways (DPWH) was undertaken with the objective of

ensuring that there is [n place an adequate financial management] system that satisfies the Bank's Financial Management and Reportingrequirements for the National Road Improvement and Management

Program, Second Phase (NRIMP-2). Accordingly, the borrower and the

1*~ project implementing entities should maintain financial managementsystems - including accounting, financial reporting, and auditing

systems - adequate to ensure that they can provide accurate and timely

I-

information regarding project resources and expenditures. The reviewwas carried out in accordance with the Bank's guidelines under Financial

Management Practices in WorldBank-Financed Investment Operations.

I

I5

Li2.4 The financial management system of DPWH is guided by the internal

control policies and procedures of the government, mainly in the e-

NGAS (developed and issued by COA) and GAM (Government

Accounting Manual).

2.5 The FM system of DPWH consists of a mainstream FM system, which isLi handled by the FS (Finance Services) and supported by a sub-system for

foreign-assisted projects (NRIMP-2). The main FM system (FS) is used to

maintain the books of accounts, monitor the Designated Account (DA)

and prepare the Project Financial Reports required by the Bank. Thesub-system under the PMO does initial screening of transactions,

] prepares disbursement vouchers, SOEs and Withdrawal Applications for

the DA, and manages DA and prepares other financial management

Li reports.

2.6 The DPWH utilizes similar Interim Financial Management System (IFMIS)

that was established in NRIMP-1. This system keeps track of financial

Li transactions specific to the project. The transactions are entered both in

the FS (e-NGAS) and in this system (Quickbooks) to produce quarterly

financial statements (statement of financial position) and reports

E required by the World Bank, pursuant to Loan Agreement, Schedule 1i,

Section fl-B.

Li2.7 The Project Balance Sheet and related Statement of Sources and Uses ofFunds presented for the year ended December 31, 2016 are the

financial statements solely for the NRIM-11 transactions of the

EL Department of Public Works and Highways prepared separately fromthe general agency books of the Department. The Balance Sheet is

generated from the computer-based IBRD Financial Management

I.

System (Quickbooks).

2.8 In 2015, the Financial Management Report was prepared based on

Li Quickhooks since preparation based on e-NGAS was not required.

Hence, the same basis, Quickbooks, is utilized this year for the Financial

Li. Management Report.

3 Significant Accounting Policies

3.1 The agency utilizes the IBRD Financial Management System

(Quickbooks) for the NRIMP-2 Financial Management Report. The

Quickbooks generally records the income when cash is received and

records expenses when cash is paid out.

6

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3.2 The agency implemented the electronic New Government Accounting

System (e-NGAS) during FY 2004 and utilizes the system for all Journal

Entry Vouchers (JEV), General Ledger, Subsidiary Ledgers, Inventory,

and Property, Plant and Equipment records. NRIMP-II transactions are

taken up both in the overall agency books using e-NGAS and in the

Quickbooks. While this is a duplicated process, maintaining Quickbooks

system is not eliminated in the DPWH that caters the need for the

Foreign Assisted Projects (NRIMP-2) PMR requirements pursuant to the

Loan Agreement for submission to the World Bank.

I3.4 Notice of Cash Allocation (NCA) is recorded in the Regular Agency (RA)

books as well as those income/receipts, which the agency is authorized

to use. NCA is also recorded in the IBRD Financial Management System

following the date it was received in the Bank Statement.

3.7 For assets under construction, all engineering and administrative

expenses incurred during construction of the project are expensed.

3.8 Payable accounts (e-NGAS) are recognized and recorded in the books of

accounts only upon acceptance of the goods/inventory/other assets and

rendition of services to the agency. The accounts payable of obligated

contracts is set-up during contractor's billings.

3.9 Fundamental errors of prior years are corrected by using the

Accumulated Surplus/Deficit account. Errors affecting current year's

operation are charged to the current year's accounts.

3.10 Accumulated Surplus/Deficit account is also used to record transactions,

not necessarily errors, affecting prior years' financial record and

information.

3.11 IBRD Financial Management System is currently an interim system that

would cater to the needs of IBRD Accounting as required by the World

Bank.

While all transactions are recorded using electronic New Government

Accounting System (e-NGAS), reports are still prepared using

Quickbooks and converted into the equivalent accounts in the e-NGAS

since e-NGAS cannot separate reporting per loan packages. We have

requested the COA-GAFMIS of the project module in order to facilitate

monitoring of projects however, according to COA-GAFMIS this module

is not yet available.

7

3.12 The Finance Services (FS) of the DPWH Central Office assumes the

responsibility of accounting, reporting, and other financial related

transactions.

3.13 The agency uses the Working Fund/Imprest Account Availment for this

project - whereby the World Bank provides the DPWH with seed money

from the loan grant for the payment of eligible expenditures, subject to

replenishment.

11- Financial Statements

4 Change in Accounting Treatment

4.1 Transactions in foreign currencies are recorded in Philippine peso based

on the BSP rate of exchange prevailing at the date of transactions. As

of balance sheet date, foreign currency denominated asset (Cash in

Bank - IBRD Special Account) and the Government Equity (Foreign

Portion) were restated based on the exchange rate indicated in the

ID Reference Exchange Rate Bulletin of the Bangko Sentral ng Pifipinas

(BSP) as of December 31, 2016.

4.2 The Accounting System uses the Philippine Peso as its currency and the

Special Account is denominated in US Dollar.

5 Notice of Cash Allocation

Total Advice of Notice of Cash Allocations (ANCAI) received for the CY2016 and

CY2015 sourced from the GOP Funds amounted to P 1,352,785,087.11 and

1,631,915,462.38 respectively. The ANCAl released by the Department of

Budget and Management (DBM) does not necessarily indicate as to what Loan is

it intended for, but DBM rather uses a common fund system. Hence, total NCA

received was arrived at computing the actual disbursements recorded for the

1L loan.

6 Foreign Currency Adjustment

1 As of December 31 2016 2016 2015 2015Philippine Peso Designated Philippine Peso Designated

Account in US Account In US1 dollar dollar

Unadjusted Ending P 16,739,759.52 $ 8,298.70 P(4,573,097.81) $ 206,103.45

balance IAdd: FCA *(16,326,376.381 14J294,173.13

Balance, Adj. 413.383,14 8,29-$,M %.21.07532 20103,4a5

*Bank Statement Column-Reconciliation Statement

8

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CY 2016BSP Exchange Rate as at close of the year = P 49.813/1$ (last working day 12/29/2016)Bank Statement balance as at Dec. 31, 2016 = US $8,298.70Restate in Philippine Peso: US$8,298.70 X P49.813 = P413,383.14

The Foreign Currency Adjustment for CY 2016 is P (16,326,376.38) and for CY

2015 is P 14,294,173.13, computed based on the ending balance between the

bank statement and the books of accounts, is due to the timing difference

between when the transactions are entered and paid, because of thefluctuations of the Peso, US Dollar, Euro Dollar and Great Britain Sterling

Exchange Rates. The Accounting System uses Philippine Peso as its currency andthe Special Account is denominated in US Dollar.

The reconciling item of Foreign Currency Adjustment is not recorded as a gain orloss in the e-NGAS but is shown as a reconciling item in the FinancialManagement Report (FMR). The transactions are recorded at contract amount

Land the FCA has been shown in detail as reconciling item in the FMR.

7 Interest Income

Interest Income 2016 2015US dollar US dollar

Interest Income $ 1,337.20 $ 4,036.93Less: Withholding Tax 100.28 302.77

Bank Charges 2,120.61 1792.68Net Interest Income Earned (88,f69) _.,91.4

The Net Interest Income for CY 2016 is $(883.69) and for CY 2015 is $1,941.48.There was no Interest Income remitted in CY 2016 because the total interestearned (net of withholding tax) is US$1,236.92 while the total bank charges isUS$2,120.61; thus, the net interest earned is US$(883.69).

The World Bank recognizes the accrual of interest and bank charges into theDesignated Account (DA); thereby allows the Borrower to arrange opening theDA at the interest-earning commercial bank to offset the charges pursuant tothe World Bank's Disbursement Handbook.

The bank charges, interest income earned and remittance of interest incomeearned are not recorded in the Quickbooks because there is no template or acorresponding entry to record the same in the Quickbooks compared to the e-1b NGAS. It is reflected as a reconciling item not recorded (reflected forreconciliation only) in the Bank Reconciliation.

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U 8 Cash

Cash Quickbooks e-NGASCY 2016 P (2,171,021.29) P31,033,932.65CY 2015 9,627,095.27 9,721,075.32

The Quickbooks balances of the Cash in Bank - Foreign Currency, SavingsAccount for CY 2016 is P (2,171,021.29) and for CY2015 is P 9,627,095.27,represent working fund and replenishment of special accounts less paymentfrom special account and Foreign Currency Adjustment. Under the e-NGAS,payment from special account is set up as payable first and liquidated based onbank statement, while the Quickbooks generally records the income when cashis received, and records the expenses when cash is paid out.

The balance in the Quickbooks as of CY 2016 is due to the FCA, overstated disbursementrecorded and recoupment through retention, not adjusted as of CY 2016. The

adjustment is made in the following year.

Balance per QuickBooks, As of December 31, 2016Cash Balance, unadjusted P28,449,528.22Overstatement adjusted in CY 2017 12,387.10Recoupment through retention adjusted in CY 2017 2,607,684.31Foreign Currency Adjustment CY 2016 *(30 620,549.51)Total 449,050.12Adjustment not reflected in CY 2016 (2.620,071.41)Balance P211,21,29)

The balance in the e-NGAS as of CY 2016 is P 31,033,932.65. The reconciliation is asfollows:

1 Quickbooks balance P (2,171,021.29)Interest Income (JEV-2016-03-004176, JEV-2016-06-004176,

JV-2016-09-006851,JV-2016-12-009213) 58,997.52Overstatement adjusted in CY 2017 12,387.10Recoupment through retention adjusted in CY 2017 2,607,684.31Net Interest earned (Accumufated2009-20151 799,705.22Bank Charges (Accumulated2009-2016) 483,436.95Remittance (JEV.2016-03-001815, Jv-zo1s-03-001705, 410,932.77

JEV-2014-03-012209, JEV.2012-03-008652,JEV-2011-01-006470i

Foreign Currency Adjustment CY 2016 *(30,620,549.51)Total 133,9i2J5

9 Advance Payment

Account Quickbooks e-NGAS Difference1 CY 2016 Advances to Contractors P131,738,017.30 P131,106,329.33 P631,687.94CY 2015 Advances to Contractors 259,273,371.83 249,462,350.63 9,811,021.20

(Schedule 2)

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1I The balances of Cash Advance Payment for CY2016 and CY2015 in the amounts of P131,738,017.30 and P 259,273,371.83 respectively, represent Advances made toContractors.

The difference in CY 2016 of P631,687.94 is adjusted in the Quickbooks in CY 2017.

The difference is accounted as follows:

LM 2.1 P -0.01LM 2.4 -0.01PM 01-2011 -0.01PM 07-2011 -0.01CP-Rl 2.10 -0.01CP-RI 2.7A -40.01CS-RI-03A 631,728.00Total _P Z

10 Property, Plant and Equipment

I Account Quickbooks e-NGAS DifferenceCY 2016 CIP-A P15,574,272,492.82 P6,419,324,941.56 P9,154,947,551.26CY 2015 CIP-IA P13,434,668,747.64 P9,653,541,340.33 P3,781,127,407.31

The Quickbooks balances of the Property, Plant and Equipment for CY2016 and CY2015in the amounts of P 15,574,272,492.82 and P 13,434,668,747.64 respectively, representConstruction in Progress - Infrastructure Assets account (CIP-IA).

The difference in CY 2016 is accounted as follows:

Transferred to RO/DEO(per DO 156,s.2015) P 5,661,797,727.44Disbursements classified under Training Workshop 11,874,528.48Expenses and Administrative Overhead 166,205,456.94Recoupment of Advances 1,619,296,378.71Retention 774,006,188.63Other CIP 921,767,271.06Total =L,5MA -2A.-

The balances of the Property, Plant and Equipment represent the Construction

in Progress - Infrastructure Assets. For Assets under construction, TheConstruction Period Theory is adopted for costing purposes.

The Construction in Progress - Infrastructure Assets account in the e-NGAS for

CY 2016 includes completed projects with balances still under the Construction

in Progress Account in the amount of P1,346,088,892.81 as at Financial Position

date (Schedule i) . As at Financial Position date, full recognition of the remainingunbilled balances by the contractors could not be recognized yet since no

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Certificates of Completion were submitted to duly support such recognition and

then the eventual transfer to the appropriate asset account.

11 Other Current Liabilities

I Account Quickbooks e-NGAS DifferenceCY 2016 Guaranty/ Security P190,783,439.53 P179,408,175.23 P11,375,264.30

Deposits Payable

CY 2015 Guaranty/ Security 336,420,403.13 320,393,636.45 16,026,766.68Deposits Payable

(Schedule 3)

The Quickbooks balances of the Other Current Liabilities for CY2016 and CY2015 in theamounts of P 190,783,439.53 and P 336,420,403.13 respectively - represent Guaranty

Deposits Payable. These were deducted from the payment to contractor's to assure

performance and quality of work. This amount will be released upon completion of the

infrastructure projects.

The difference in CY 2016 of P11,375,264.30 is adjusted in the Quickbooks in CY 2017.

The difference is accounted as folfows:

LM 2.3(JEV-2016-11.001612JEV-2016-11-001613JEV-2016-12-001716J P -6,107,806.77JEV-2016-11-008127)EV-2016-11-00B128,JEV-2016-12-008805)

PM 08-2012(JEV-2016-10-00134) 5,339,618.03

PM 03-02jJEV-2016-10-001337) 12,143,453.04

Total P 11,3Z526A3

12 Accounts Payable

Account Quickbooks e-NGAS(FO2101163)CY 2016 Accounts Payable P7,375,047,051.20 P263,868,742.68CY 2015 Accounts Payable P6,052,882,513.61 P152,385,108.37Increase/ (Decrease) P1,322,164,537.59 P111,483,634.31

The Accounts Payable reflected in the Quickbooks pertains to the accumulated

replenishment of the fund in the designated account. It is the total project

expenditures for the project adjusted by FCA.

On the other hand, the Accounts Payable in the e-NGAS pertains to the amounts

billed and set-up as due and demandable accounts payable after compliance

and approval of billing.

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The total amount withdrawn per Special Account Statement Summary in theamount of P 28,849,556.27 comprised the following:(Bank Statement Column-Reconciliation Statement)

Claims for CY 2016, net of BC $ 28,849,595.16Credit Advice (SA102160802003A) 0.71Included in the disbursement,not recorded as Bank Charge in eNGAS

SA102160501104A (38.89)

Bank Charge recorded in eNGASSA102160802003A $26.00

Bank Charge that should be recorded 25.29 (0,71)Total

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1 -The total amount withdrawn per Special Account Statement Summary in theamount of P 28,849,556.27 comprised the following:(Bank Statement Column-Reconciliation Statement)

Claims for CY 2016, net of BC $ 28,849,595.16Credit Advice (SA102160802003A) 0.71Included in the disbursement,not recorded as Bank Charge in eNGAS

SA102160501104A (38.89)

Bank Charge recorded in eNGASSA102160802003A $26.00

Bank Charge that should be recorded 25.29 (0.711Total M 27

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PM 03-10 03104358 2,946622.00 946,62i 0.00 108913405 089,134.05 aoaPM 03-10 02016 736,655.50 736,6>55.50 0.00 2,772,283.51 27228.1 00

PM 03-11 03104358 8.560.530.00 8,560.530.00 0,00 16,158,600.01 16,158,60001 0.00

PM 03-11 02101163 2,140,132.50 2,140,132.50 0.00 1,039,650.00 4.039,650.00 0.00PM 03-16 02104358 25,081.914.52 25,081,914,52 0.00

PM 03-16 02101163 8,270,478.63 6,270,478.63 0.00

PM 03-13 03104358 8,890,275.36 8,890,275.36 0.00

PM 03-13 02101163 9,631,131.63 9,631,131.63 0.00

PM 03-12 03104358 1,623,731.09 1,623,731.09 0.00

PM 03-12 02101163 11,907,361.36 11,907,361.36 0.00

PM 04-10 03104358 2.195.302.00 2.195.302.00 0.00

PM 04-10 02101163 17,000.000.00 17,000,000.00 0-00

Total 631,687.94 9,811,021.20

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Schedule 3

11L Other Current Liabilities

The other current liabilities refer to the guaranty/ security deposits payable (retention)Li and the schedule is as follows:

_______2016 2016 20125 2015 _ ___

Contract Fund Quickbooks e-NGAS Difference Quickboaks e-NGAS DifferencePackage _____

CP-Rl-2.1 02101151 7,432,039.59 -0.03 7.432,039.62LiCP-RI-2.1 2 116 7,432,039.64 7,432,039.64 0.00CP-RI-2. -1 3,99. 18673

CP-RI-2.2 02101163 13,869,798.31 13,869,798.31 0.00LiCP,RI-2.3 02101151 872,318.47 87,184 0.0

CP-RI-2.4 02101151 k.007.341.83 8,007,341.83 00

CP-RI-2.4 02101163 8,007,341.81 8,007,341,81 0.00

CP,RI-2.7B 02101151 11,122.172.71 13,122,172.71 O.06P-RI-2.78 02101163 11,122,172.68 11,122.172.68 0.00

CP-RI-2.10 02101151 12,925,660.95 12,925,660.95 0.00

CP-RI-2.10 02101163 12,925,660.89 12.925,660.89 0.00

LM 2.1 03104358 17,084,500.07 17,102,288.28 .17,788,21

LM 2.1 02101163 9,610,031.29 9,610,031.29 0.00

LM 2.2 03104358 34,102,036.11 33,061,832.24 1,040,203.87

LM 2.2 02101163 12,899.691.47 12,899.691.47 0.00

LM 2.3 03104358 9,076,277.14 10,603,228.83 -1,526.951,69 7,379,651.91 7.379,651L91 0.00

LM 2.3 02101163 10,110,370.47 14,691,225.55 -4,580,855.08 5,020,494.83 5,020,494.83 0.00

LM 2.4 03104358 9,685.3 19.00 9,685,319.0)0 0.00 6,871,631.31 6,874,771.31 -3.140.00

IM 2.4 02101163 16,199,428.64 16,199.418.64 0.00 7,758.355.56 7,767,775.56 -9,420.00

PM 01.2011 03104358 _______202,169.72 0.00 202,169.72PM Dl-2011 02101163 ______ 78,621.58 0.00 78,621.56

PM 02-2011 03104358 1.634,579.75 0.00 1,634,579.75

PM 02-2011 02101163 ______ 635,669.90 0.00 635,669.90

PM 03-2011 03104358 1,044,457.15 1,044,457.15 0.00 2,452,794.92 1,044.457.15 1,408,337.77

PM 03-2011 02101161 797,618.95 797,618.95 0.00 1,873.122.04 797,618.95 1,075,503.09

PM 09-2011 03104358 2,103,145.10 0.00 2.103.145.10

PM 09-2011 02101163 817,889.76 0.00 817,889.76

PM 06.2011 03104358 7.580,285.90 7,580.285.90 0.00 7,580,285.90 7,580,285.90 00

PM 06-2011 02101163 2,947.888.97 2,947,888.97 0.00 2,947.888.97 2,947,688.97 0.00L .PM 05.2011 03104358 7,230,571.76 7,230,571.76 0.00 7.230,571.76 7,230,571.76 0.00PM 05.2011 02101163 2.811,889.03 2,811,869.03 0.00 2,811,889.03 2,811,889.03 0.00

PM 04-2011 03104358 8,873.865.05 8.873,665.05 0.0

Pm 04-2011 02101163 3,450,869.75 3.450,869.75 0.00

PM 08-2012 03104358 5,319,618.0 0.00 5,339.618.03 5,339,618.03 5,339.618.03 0.00PM 06-2012 03104358 4,995,244,69 4.995,244,69 0.00 4,995,244.69 4,995,244.69 10.00

Pm 0s-201 02101163 1,248.811.17 1,24811.17 0.00 1,248,811.17 1,248,811.17 0.00

PM 01-2012 03104358 1,018,405,24 1,018,405.24 0.00 1,018,405.24 1.018.405.24 0.00

PM 01-2012 02101163 4,073,620.98 4,073.620.98 0.00 4,073,620.98 4,073,620.98 0.00

PM 07-2012 03104358 24,149,720.51 24.149,720.51 0.00 24,149,720.51 24,149,720.51 0.00

PM 07-2012 02101163 6,037.430.13 6,037,430.13 0.00 6,037,430.13 6,037,430.13 0.00

PM 03-2012 03104358 2,240.969.75 2,240,969.75 0.00 2,240,969.75 2,240,969.75 0.00

PM 03-2012 02101163 560,242 ..44 560,242.44 0.00 560,242.4 _ 560,242,44 0.00

PM 03-02 03104358 12,143.453,04 0.00 12.143,453.04 ______

PM 03-04 03104358 1,461,938.28 1,755,978.57 .294,040.29

PM 03-04 02101163 385,484.57 442,489.53 -77,004.96

PM 03-06 03104358 1679,304.94 679,304.94 0.00 11,607,918.13 11,607,918.13 0.00

PM 03-06 02101163 2,901,979.54 2,901,979.54 0.00

PM 03-09 03104358 8,692,018.35 8,692,018.35 0.00

PM 03-09 02101163 2,173,004.60 2,173,004.60 0.00

L -PM 03-08 03104358 3,837,888.64 3,837,888.64 0.00

LI

PM 03-08 02101163 3,837,888.64 3,837.88B.64 0.00PM 03-16 03104358 16,348,671.98 16,348,671.98 0.00PM 03-14 03104358 1,642,855.97 1,642,855.97 0.00

PM 03-07 03104358 4.434,602.07 4,434,602.67 0.00

PM 03-05 03104358 10.189,582.19 10,189,582.19 0.00

PM 03-10 03104358 6,785,426.70 6,785,426,0 0.00PM 03-0 03104358 13,738,428.97 13,738,428.91 0.00

PM03-15 03104358 1,341,228,71 1,341,228.71 0.00

PMn03-11 03104358 6,33,725.01 6,331.725.01 0.00

Total 11,375,264.30 1r6,02,766.68

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