Annex A Republic of the Philippines COMMISSION ON AUDIT Commonwealth Avenue, Quezon City INDEPENDENT AUDITOR'S REPORT The Secretary Department of Social Welfare and Development Batasan Hills, Quezon City Unqualified Opinion We have audited the accompanying financial statements of Philippines Beneficiary FIRST Social Protection Project Component 2 - World Bank/International Bank for Reconstruction and Development (WB/IBRD), which comprise the Statement of Financial Position, as at December 31, 2021, and 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 other explanatory information. In our opinion, the accompanying financial statements presents fairly, in all material respects, the financial position of the Philippines Beneficiary FIRST Social Protection Project Component 2-WB/IBRD as at December 31, 2021, and of its financial performance, statement of cash flows and statement of net assets/equity, for the year then ended and Notes to Financial Statements, including a summary of significant accounting policies in accordance with the International Public Sector Accounting Standards (IPSAS). Basis for Opinion We conducted our audit in accordance with the International Standards of Supreme Audit Institutions (ISSAls). Our responsibilities under those standards are further 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. Other Information Management is responsible for the other information. The other information obtained at the date of this auditor's report is included in the Annual Report of the Agency, but does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. However, we have nothing to report in this regard. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the IPSAS, 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 ISSAIs, 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 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: ELEANOR G. OVES State Auditor IV OIC/Supervising Auditor June 28, 2022 YDSWD "i I)fpigtinuIn,t of So)cial Wolfrt lD veo int en DSWD-GF.0/0 I RT'00 / 12OCT 202/ Annex B STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS IBRD - Loan Agreement No. 9168-PH Beneficiary FIRST 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, 2021 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. RW ATTY. ADONIS P. SULIT Director IV, Finance and Management Service Undersecretary for General Administration and Support Services FEB 0 2022 FEB 0 2022 Date Signed Date Signed I'AGE I of I 1)SWI) Central Office, 01lt Road, lintasan tinhown m lev, C f1h1nt11im I tills, QIcon (City, Philippines 1126 Website: III Ip://www &l%wdgov 1) Id Nos.: (632) 8 931-8101 to 07 Tlefox: (632) 8 931-8191 Annex C DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT CONDENSED STATEMENT OF FINANCIAL POSITION Fund Cluster 2 - Foreign Assisted Project Fund IBRD - LA No. 9168-PH Beneficiary FIRST As of December 31, 2021 Notes ASSETS Current Assets Cash and Cash Equivalents 6 75,563,000.00 Receivables Total Current Assets 75,563,000.00 Property, Plant and Equipment Total Non-Current Assets TOTAL ASSETS 75,563,000.00 LIABILITIES AND NET ASSETS/EQUITY LIABILITIES Current Liabilities Financial Liabilities . Inter-Agency Payables _ Other Payables . Total Current Liabilities . TOTAL LIABILITIES _ NET ASSETS/EQUITY Net AssetlEquity 75,563.000.00 Net Asset/Equity Accumulated Surplus/(Deficit) 75,563,000.00 TOTAL NET ASSETS/EQUITY 75,563,000.00 TOTAL LIABILITIES AND NET ASSETS/EQUITY 75,563,000.00 This statement should be read in conjunction with the accompanying notes. Annex D DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT CONDENSED STATEMENT OF FINANCIAL PERFORMANCE Fund Cluster 2 - Foreign Assisted Project Fund IBRD - LA No. 9168-PH Beneficiary FIRST As of December 31, 2021 Notes Revenue Service and Business Income Total Revenue Less: Current Operating Expenses Maintenance and Other Operating Expenses Total Non-Cash Expenses Total Current Operating Expenses Surplus/(Deficit) from Current Operations - Financial Assistance/Subsidy Net Financial Assistance/Subsidies 7 75,563,000.00 Surplus(Deficit) for the period 75,563,000.00 This statement should be read in conjunction with the accompanying notes. Annex E DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT CONDENSED STATEMENT OF CASH FLOW Fund Cluster 2 - Foreign Assisted Project Fund IBRD - LA No. 9168-PH Beneficiary FIRST As of December 31, 2021 Notes Cash Flows From Operating Activities Cash Inflows Receipt of Notice of Cash Allocation 9 75,563,000.00 Collection of Income/Revenues Other Receipts Total Cash Inflows 75,563,000.00 Cash Outflows Remittance to National Treasury Payment of operating expenses Payment of Prior Year's Accounts Payable Remittance of Personnel Benefit Contributions and Mandatory Deductions Release of intra-agency fund transfers Other Disbursements Adjustments Total Cash Outflows Cash Provided by (Used in) Operating Activities 75,563,000.00 Cash Provided by (Used in) Financing Activities Effects of Exchange Rate Changes on Cash and Cash Equivalents Total Cash Provided by (Used in) Operating, Investing and Financing Activities 75,563,000.00 Add: Cash Balance, Beginning January 1, 2021 Cash Balance, Ending December 31, 2021 6 75,563,000.00 This statement should be read in conjunction with the accompanying notes. Annex F mu= DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT STATEMENT OF CHANGES IN NET ASSETS/EQUITY Fund Cluster 2 - Foreign Assisted Project Fund IBRD - LA No. 9168-PH Beneficiary FIRST As of December 31, 2021 Notes Balance at December 31, 2020 Carried Forward Changes in Accounting Policy Prior Period Adjustments/Unrecorded Income and Expenses Balances Changes in Net Assets/Equity for Calendar Year Adjustment of Net Revenue recognized directly in Net Assets/Equity Closing of Cash - Treasury/Agency Deposit - Regular Surplus/(Deficit) for the Period 75,563,000.00 Total Recognized Revenue and Expenses for the Period 75,563,000.00 Others Balance at December 31, 2021 6 75,563,000.00 This statement should be read in conjunction with the accompanying notes. Annex G DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT Central Office Notes to Financial Statements for the Year Ended December 31, 2021 Fund Cluster 02 - Foreign Assisted Projects IBRD No. 9168-PH: Philippines Beneficiary FIRST Social Protection Project 1. General Information/Agency Profile IPSAS 1 The financial statements of Department of Social Welfare and Development Office of the Secretary were authorized for issue on February 08, 2022 as shown in the Statement of Management Responsibility for Financial Statements signed by Director Wayne C. Belizar, Director for Finance and Management Service and Undersecretary Atty. Adonis P. Sulit, Office of the Undersecretary for General IPSAS Administration and Support Services Group. 1.63(b) IPSAS On 15 February 1915, upon creation of the Public Welfare Board during the American 14.26 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 IPSAS first government orphanage was established. As a result of several changes by the 1.150 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 (EO) No. 396 dated 13 January 1951. Republic Act (RA) 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 the formulation, implementation, and coordination of social welfare and development policies and programs for and with the poor, vulnerable and disadvantaged". 1.1 Programs/Projects/Activities + Foreign Assisted Projects * Philippines Beneficiary FIRST (Fast, Innovative, and Responsive Service Transformation) Social Protection Project is a project of the Department which aims to mitigate the impacts of COVID-19 on the welfare of low-income households and strengthen DSWD's social protection delivery systems to be adaptive and efficient. 1 Annex G DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT Central Office Notes to Financial Statements for the Year Ended December 31, 2021 Fund Cluster 02 - Foreign Assisted Projects IBRD No. 9168-PH: Philippines Beneficiary FIRST Social Protection Project 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 IPSAS with the International Public Sector Accounting Standards (IPSAS) issued by 1.129 the Commission on Audit per COA Resolution No. 2014-003 dated January 24, IPSAS 2 2014. The financial statements are presented in Philippine Peso, which is the IPSAS 6 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 International Public Sector Accounting Standards (IPSAS). 3.2 Financial instruments a. Financial assets Initial recognition and measurement Financial assets within the scope of IPSAS 29 Financial Instruments: Recognition and Measurement are classified as financial assets at fair value through surplus or deficit, loans and receivables as appropriate. The IPSAS Department of Social Welfare and Development determines the classification 29.10 of its financial assets at initial recognition. IPSAS 30.31 The DSWD's financial assets include cash and other receivables. Subsequent measurement The subsequent measurement of financial assets depends on their I classification. 2 Annex G DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT Central Office Notes to Financial Statements for the Year Ended December 31, 2021 Fund Cluster 02 - Foreign Assisted Projects IBRD No. 9168-PH: Philippines Beneficiary FIRST Social Protection Project 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 IPSAS amortized cost using the effective interest method, less impairment. 29.10 Amortized cost is calculated by taking into account any discount or premium IPSAS on acquisition and fees or costs that are an integral part of the effective 29.48(a) interest rate. Losses arising from impairment are recognized in the surplus IPSAS or deficit. 29.65 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 IPSAS without material delay to a third party; and either: (a) the DSWD has 29.19 transferred substantially all the risks and rewards of the asset; or (b) the IPSAS DSWD has neither transferred nor retained substantially all the risks and 29.20-22 rewards of the asset, but has transferred control of the asset. Impairment of financial assets The DSWD assesses at each reporting date whether there is objective IPSAS evidence that a financial asset or a group of financial assets is impaired. A 29.67-68 financial asset or a group of financial assets is deemed to be impaired if, and IPSAS only if, there is objective evidence of impairment as a result of one or more 30.PAG5 events that has occurred after the initial recognition of the asset (an incurred (f) "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). 3 Annex G DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT Central Office Notes to Financial Statements for the Year Ended December 31, 2021 Fund Cluster 02 - Foreign Assisted Projects IBRD No. 9168-PH: Philippines Beneficiary FIRST Social Protection Project b. Financial liabilities Initial recognition and measurement Financial liabilities within the scope of IPSAS 29 are classified as financial IPSAS liabilities at fair value through surplus or deficit. The entity determines the 29.10 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. Derecognition A financial liability is derecognized when the obligation under the liability is IPSAS discharged or cancelled or expires. 29.41 When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are IPSAS substantially modified, such an exchange or modification is treated as a 29.43 derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in surplus or deficit. 3.3 Cash and cash equivalents Cash and cash equivalents comprise cash on hand, cash in bank for local and IPSAS foreign currencies. 2.8 IPSAS 2.9 IPSAS 2.56 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. IPSAS After initial recognition, inventory is measured at the lower of cost and net 12.15 realizable value. However, to the extent that a class of inventory is distributed or IPSAS deployed at no charge or for a nominal charge, that class of inventory is 12.17(a) measured at the lower cost and current replacement cost. Net realizable value is the estimated selling price in the ordinary course of IPSAS operations, less the estimated costs of completion and the estimated costs 12.35 necessary to make the sale, exchange, or distribution. IPSAS 12.20 4 Annex G DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT Central Office Notes to Financial Statements for the Year Ended December 31, 2021 Fund Cluster 02 - Foreign Assisted Projects IBRD No. 9168-PH: Philippines Beneficiary FIRST Social Protection Project Inventories are recognized as an expense when deployed for utilization or IPSAS consumption in the ordinary course of operations of the DSWD. 12.21 IPSAS 12.9 3.5 Property, Plant and Equipment Recognition An item is recognized as property, plant, and equipment (PPE) if it meets the i IPSAS characteristics and recognition criteria as a PPE. 17.13 The characteristics of PPE are as follows: * tangible items; * held for use in the production or supply of goods or services, for rental to IPSAS others, or for administrative purposes; and 17.14 * 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. IPSAS 17.26 A PPE acquired through a non-exchange transaction is measured at its fair value as at the date of acquisition. IPSAS 17.27 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. IPSAS Cost includes the following: 17.37 * Its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates; IPSAS * Expenditure that is directly attributable to the acquisition of the items; and 17.30 * Initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired, or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period. Measurement After Recognition IPSAS 17.43 After recognition, all property, plant and equipment are stated at cost less PAG2 of accumulated depreciation and impairment losses. IPSAS 17 5 Annex G DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT Central Office Notes to Financial Statements for the Year Ended December 31, 2021 Fund Cluster 02 - Foreign Assisted Projects IBRD No. 9168-PH: Philippines Beneficiary FIRST Social Protection Project When significant parts of property, plant and equipment are required to be IPSAS replaced at intervals, the DSWD recognizes such parts as individual assets with 17.24 specific useful lives and depreciates them accordingly. Likewise, when a major IPSAS repair/replacement is done, its cost is recognized in the carrying amount of the 17.25 plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized as expenses in surplus or deficit as incurred. IPSAS 17.23 Depreciation Each part of an item of property, plant, and equipment with a cost that is IPSAS significant in relation to the total cost of the item is depreciated separately. 17.59 The depreciation charge for each period is recognized as expense unless it is I included in the cost of another asset. IPSAS 17.64 Initial Recognition of Depreciation Depreciation of an asset begins when it is available for use such as when it is in PAG3 of the location and condition necessary for it to be capable of operating in the IPSAS manner intended by management. 17 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 PAG4 of significant in relation to the total cost of the item is depreciated separately. IPSAS 17 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 i PAG5 of classification prepared by COA. IPSAS 17 The DSWD uses a residual value equivalent to at least five percent (5%) of the PAG6 of cost of the PPE. IPSAS 17 6 Annex G DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT Central Office Notes to Financial Statements for the Year Ended December 31, 2021 Fund Cluster 02 - Foreign Assisted Projects IBRD No. 9168-PH: Philippines Beneficiary FIRST Social Protection Project 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 IPSAS significant part of an asset upon disposal or when no future economic benefits 17.82 or service potential is expected from its continuing use. Any gain or loss arising IPSAS on derecognition of the asset (calculated as the difference between the net 17.83 disposal proceeds and the carrying amount of the asset) is included in the IPSAS surplus or deficit when the asset is derecognized. 17.86 The depreciation policy for PPE is applied to similar assets leased by the entity. IPSAS 13.42 IPSAS 13.13 IPSAS 13.63 IPSAS 13.66 3.6 Intangible Assets Recognition and Measurement Intangible assets are recognized when the items are identifiable non-monetary IPSAS assets without physical substance; it is probable that the expected future 31.26 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. IPSAS 31.31 Intangible Assets Acquired through Non-Exchange Transactions The cost of intangible assets acquired in a non-exchange transaction is their fair IPSAS value at the date these were acquired. 31.42-43 Internally Generated Intangible Assets Internally generated intangible assets, excluding capitalized development costs, IPSAS are not capitalized and expenditure is reflected in surplus or deficit in the period 31.49 in which the expenditure is incurred. IPSAS 31.55 7 Annex G DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT Central Office Notes to Financial Statements for the Year Ended December 31, 2021 Fund Cluster 02 - Foreign Assisted Projects IBRD No. 9168-PH: Philippines Beneficiary FIRST Social Protection Project 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 assets is assessed as either finite or indefinite. IPSAS Intangible assets with a finite life is amortized over its useful life: 31.87 IPSAS 31.96 IPSAS 26.22 The straight line method is adopted in the amortization of the expected pattern PAG3 of of consumption of the expected future economic benefits or service potential. IPSAS 31 IPSAS 31.117 An intangible asset with indefinite useful lives shall not be amortized. IPSAS 31.106 Intangible assets with an indefinite useful life or an intangible asset not yet IPSAS available for use are assessed for impairment whenever there is an indication 31.107 that the asset may be impaired. The amortization period and the amortization method, for an intangible asset with IPSAS a finite useful life, are reviewed at the end of each reporting period. Changes in 31.103 the expected useful life or the expected pattern of consumption of future IPSAS economic benefits embodied in the asset are considered to modify the 31.108 amortization period or 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 IPSAS as the difference between the net disposal proceeds and the carrying amount of 31.112 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 IPSAS retrospectively. The effects of changes in accounting policy are applied 3.27 prospectively if retrospective application is impractical. IPSAS 3.30 The DSWD recognizes the effects of changes in accounting estimates prospectively by including in surplus or deficit. 8 Annex G DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT Central Office Notes to Financial Statements for the Year Ended December 31, 2021 Fund Cluster 02 - Foreign Assisted Projects IBRD No. 9168-PH: Philippines Beneficiary FIRST Social Protection Project The DSWD correct material prior period errors retrospectively in the first set of IPSAS financial statements authorized for issue after their discovery by: 3.41 * Restating the comparative amounts for prior period(s) presented in which the error occurred; or IPSAS * If the error occurred before the earliest prior period presented, restating the 3.47 opening balances of assets, liabilities and net assets/equity for the earliest prior period presented. 3.8 Foreign currency transactions Transactions in foreign currencies are initially recognized by applying the spot IPSAS exchange rate between the function currency and the foreign currency at the 4.24 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 in a foreign IPSAS currency shall be translated using the exchange rate at the date of the 4.27 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. IPSAS 4.32 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 of Assets 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 IPSAS following criteria are met: 23.31 * 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. 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 IPSAS 23.42 9 Annex G DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT Central Office Notes to Financial Statements for the Year Ended December 31, 2021 Fund Cluster 02 - Foreign Assisted Projects IBRD No. 9168-PH: Philippines Beneficiary FIRST Social Protection Project 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. IPSAS 23.44 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 recognizes an amount of revenue equal to that reduction. IPSAS 23.45 Measurement of Revenue 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 IPSAS Transactions 23.48- 49 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 IPSAS taxes, when earned and the asset recognition criteria are met. 23.57 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. IPSAS 23.89 Transfers from other government entities Revenues from non-exchange transactions with other government entities and IPSAS the related assets are measured at fair value and recognized on obtaining control 23.95 of the asset (cash, goods, services and property) if the transfer is free from IPSAS conditions and it is probable that the economic benefits or service potential 23.96 related to the asset will flow to the [Name of Entity] and can be measured reliably. IPSAS 23.97 IPSAS 23.96 IPSAS 23.98 PAG3 of IPSAS 23 IPSAS 23.42 IPSAS 23.44 10 Annex G DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT Central Office Notes to Financial Statements for the Year Ended December 31, 2021 Fund Cluster 02 - Foreign Assisted Projects IBRD No. 9168-PH: Philippines Beneficiary FIRST Social Protection Project 3.10 Budget information The annual budget is prepared on a cash basis and is published on the IPSAS government website. 24 A separate Statement of Comparison of Budget and Actual Amounts (SCBAA) was prepared since the budget and financial statements were not prepared on a comparable basis. The SCBAA was presented showing the original and final budget and the actual amounts on a comparable basis to the budget. Explanatory comments are provided in the notes to the annual financial statements. 3.11 Impairment of Non-Financial Assets IPSAS 21.26 Impairment of non-cash-generating assets The DSWD assesses at each reporting date whether there is an indication that IPSAS a non-cash-generating asset may be impaired. If any indication exists, or when 26.14 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. IPSAS 26.14 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 IPSAS, 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. 4. Changes in Accounting Policies DSWD has not adopted any change in Accounting Policies for CY 2015. The 25 IPSAS had been adopted beginning January 1, 2014 as per COA Resolution No. 2014-003 dated January 24, 2014. 11 Annex G DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT Central Office Notes to Financial Statements for the Year Ended December 31, 2021 Fund Cluster 02 - Foreign Assisted Projects IBRD No. 9168-PH: Philippines Beneficiary FIRST Social Protection Project 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 2021 Cash in Bank - Local Currency, Current Account - 75,563,000.00 Land Bank of the Philippines Total 75,563,000.00 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 as follows: o IBRD No. 9168 - Beneficiary FIRST 7. Net Financial Assistance/Subsidy Financial Assistance/Subsidy from NGAs, LGUs, GOCCs Particulars 2021 Subsidy fromn National Government 75,563,000.00 Total Financial Assistance/Subsidy from NGAs, LGUs 75,563,000.00 Less: Financial Assistance/Subsidy to NGAs, LGUs, GOCCs, NGOs/POs Particulars 2021 Subsidy to Regional Offices (Staff Bureaus) Total Financial Assistance/Subsidy to NGAs, LGUs. Net Financial Assistance/Subsidy 75,563,000.00 8. Loan Availments in 2021 IBRD Loan No. 9168-PH: Philippines Beneficiary FIRST (Fast, Innovative, and Responsive Service Transformation) Social Protection Project This Loan Agreement is a combination of a program and project loan with a total loan amount of US$600,000,000.00, entered by the Republic of the Philippines and International Bank for Reconstruction and Development (IBRD) last November 10, 2020 and becomes effective on January 14, 2021. The objective of the Project is to mitigate the impacts of 12 Annex G DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT Central Office Notes to Financial Statements for the Year Ended December 31, 2021 Fund Cluster 02 - Foreign Assisted Projects IBRD No. 9168-PH: Philippines Beneficiary FIRST Social Protection Project COVID-19 on the welfare of low-income households and strengthen DSWD's social protection delivery systems to be adaptive and efficient. For the Program Loan Component, the DSWD has submitted to the Department of Finance (DOF) on January 20, 2021 the Statement of Expenditures (SOE) - Statement of Cash Grants Payments Made with a total amount of P14,880,308,950.00 for the purposes of submitting the Withdrawal Application (WA) No. 01 for Reimbursement to the IBRD/World Bank (WB). Accordingly, the WA with a total amount of US$298,500,000.00 was submitted by the DOF to the IBRD/WB on February 8, 2021. Consequently, on February 11, 2021, the amount of US$298,500,000.00 with a peso equivalent of P14,339,940,000.00 representing Loan Application No. 1 of Loan No. 9168-PH (Program Loan Component) was received from IBRD/WB and credited to the Treasurer of the Philippines Foreign Currency Deposit - Dollar Account. In addition, the DSWD has submitted to the IBRD/WB on June 24, 2021 the Withdrawal Application No. 1 for the Project Loan Component with a total amount of US$1,505,226.00 for Advance to Designated Account. Consequently, on July 19, 2021, the amount of US$1,505,226.00 with a peso equivalent of P75,566,860.88 was received from IBRD/WB and credited to the Treasurer of the Philippines Foreign Currency Deposit - Dollar Account. Moreover, the DSWD received the allotment to cover the loan proceeds and corresponding cash requirement through Special Allotment Release Order (SARO) No. BMB-B-21- 0009512 and Notice of Cash Allocation (NCA) No.: NCA-BMB-B-21-0012747, respectively, dated October 13, 2021 in the amount of P75,563,000.00, as requested. 9. Budget Information The corresponding allotment and cash allocation of WA No. 1 for the Project Loan Component were issued by the Department of Budget and Management (DBM) through Special Allotment Release Order (SARO) No.: SARO-BMB-B-21-0009512 and Notice of Cash Allocation (NCA) No.: NCA-BMB-B-21-0012747 dated October 13, 2021 with an amount of 4 75,563,000.00 to cover the cash requirements for the implementation of the Foreign Assisted Project under Loan Agreement No. 9168-PH: Beneficiary FIRST. 10. Related Party Transactions 10.1 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. For the implementation of the Beneficiary FIRST, the Executive Committee was chaired by the Secretary (with all Undersecretaries and Assistant Secretaries as members) who have an oversight responsibility for the project. The Undersecretary of the Operations Group plays the role of Project Director and the 4Ps' National Program Management Office (NPMO) acts as the project's secretariat. At the regional level, the DSWD Regional and Field Directors assumes overall responsibility for implementing the project with technical support from the Project Management Unit. 13