Audited FS 2017 PDF

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AUTHORITY
Republic of the Philippines :

116*0.0.224.0317
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City June 29. 201S bfi:3f>:IT
CORPORATE GOVERNMENT SECTOR

Cluster 4 - Industrial and Area Development
June 29, 2018 PHILIPPINE RECLAMATION AUTHORITY

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ATTY. JANILO E. RUBIATO
General Manager/CEO J U L 02 2018
Philippine Reclamation Authority
Makati City 1 OFFICE OF THE GM & CEO
BY: ______TIME: i
Dear Atty. Rubiato:
Pursuant to Section 2, Article IX-D of the Philippine Constitution and Section 43 of

Presidential Decree No. 1445, otherwise known as the Government Auditing Code of the
Philippines, we transmit herewith our report on the results of the audit of the accounts and
transactions of the Philippine Reclamation Authority (PRA) for the year ended December 31,
2017.
We expressed a qualified opinion on the fairness of presentation of the financial statements ;

of PRA because we were not able to establish the correctness of the ten per cent share of j
the Authority from the project income of the Manila Cavite Toll Expressway Project (MCTEP)
covering the years 1998 to 2006 amounting to P222.644 million due to the absence of |
monitoring reports supposedly prepared by the Authority and duly validated by the Toll i
Regulatory Board (TRB) for the determination of the applicable sharing ratio between the j
Authority and the Malaysian parties, now Cavitex Infrastructure Corporation (CIC). Based on |
the revenue sharing clause of the Joint Venture Agreement !(JVA), project income shall be ;
shared by the parties in 10-90 sharing ratio, in favor of CICJ Upon repayment in full of the ;
loans and interest cost, cost advances, capital investments of CIC and PRA, and return of j
equity to each of the parties, the revenue sharing shall be shifted to 60-40, in favor of PRA.
The other significant observations and recommendations that need immediate action are as ;
follows:
1. The accuracy and completeness of the 9 per cent share from ancillary income in the I
MCTEP, amounting to P4.296 million, were not ascertained as contracting for ancillary ;
services and collection of related income were unilaterally! undertaken by CIC.
We recommended that Management:

i
a. Consider making a representation with CIC for the application of Section 3.4 of the I
JVA, on the co-operation provision, and that all collections of income in the MCTEP ;
and the remittance of shares be undertaken by PEATG;
b. Monitor the activities in the MCTEP to ensure that; the share of the PRA in the :
Project/ancillary income is complete and at correct amounts to protect the interest of !
the Government; and
c. Determine the bases of agreed-upon advertising rates^ !

2. Some provisions of the Operations and Maintenance Agreement (OMA) entered into
between PRA, CIC and TRB relative to the MCTEP appear to be disadvantageous to the
Govemment/PRA. I
: I
We recommended that Management study the options available to protect the interest of j
government/PRA in the MCTEP because of the adverse effects of the arrangement |
under the OMA, and the deletion of several control measures under the Toll Operating I
Certificate (TOC), Toll Operations Agreement (TOA) and the JVA to enable !
Management to effectively monitor the conditions for the; realization of the 60 per cent j
PRA share on the tollrevenue. j
The other audit observations together with the recommended courses of action which were ;
discussed by the Audit Team with concerned Management officials and staff during the exit !
conference conducted on May 28, 2018 are presented in detail in Part I! of the AAR.
We request that appropriate actions be taken on the observations and recommendations I

contained in the report and that we be informed on the actions taken thereon by submitting j
the duly accomplished Agency Action Plan and Status of Implementation form (copy j
attached) within 60 days from the date of receipt.
! i
: |
We acknowledge the supportand cooperation that the Management extended to the Audit :
Team, thus facilitating the completion of the report. j
Very truly yours,
COMMISSION ON AUDIT
By:
ELSIELlN C. MASAN
Director IV
Copy furnished:
The President of the Republic of the Philippines j

The Vice President
The Speaker of the House of Representatives
The Chairperson- Senate Finance Committee
The Chairperson- Appropriations Committee
The Secretary of the Department of Budget and Management |
The Governance Commission of Government-Owned or Controlled Corporations
The Presidential Management Staff, Office of the President
The UP Law Center
The National Library
Annex A
PHILIPPINE RECLAMATION AUTHORITY

MAKATI CITY
AGENCY ACTION PLAN and

STATUS of IMPLEMENTATION
Audit Observations and Recommendations
For the Calendar Year 2017
As o f_________
Agency Action Plan

Reason for
Target
Partial/
Ref. Person/ Implemen Status of Action Taken/
Audit Delay/ Non-
Audit Recommendations Action Dept. tation Implementa Action to be
Observations Implementa
Plan Respon Date tion taken
tion, If
sible
applicable
From To
Agency sign-off:
Name and Position of Agency Officer Date
Note: Status of Implementation may either be (a) Fully implemented, (b) Ongoing, (c) Not implemented, (d) Partially implemented,
or (e) delayed
EXECUTIVE SUMMARY
Introduction
The Philippine Reclamation Authority (PRA), formerly Public Estates Authority (PEA), was
created on^February 4, 1977 by virtue of Presidential Decree No. 1084. It serves primarily
as a clearing House of all reclamation projects in the country and is mandated to be self-
sustaining. It has also created assets for the government by converting under-utilized land
into valuable and income-generating real estate properties. In addition, PEA is involved in a
wide range of projects and delivery of services related to land development and urban
renewal, infrastructure projects, as well as financing and construction of buildings,
particularly for other government agencies. By virtue of Executive Order (EO) No. 380
issued on October 24, 2004, PEA was renamed Philippine Reclamation Authority.
On June 24, 2006, under EO 543, the power of the President of ;the Philippines to approve
reclamation projects was delegated to PRA through its governing board, subject to
compliance with existing laws and rules and subject to the condition that reclamation
contracts to be executed with any person or entity shall go through public bidding.
th e corporate powers and functions of PRA are vested in and exercised by a Board of
Directors composed of a Chairman, the General Manager/Chief Executive Officer of the
Authority and five members, all appointed by the President.
PRA has 143 permanent employees as of December 31, 2017.
Scope and Objectives of Audit
The audit covered the accounts, transactions and operations of PRA for calendar years
2017 and 2016. It was aimed at expressing an opinion as; to whether the financial
statements present fairly the Authority’s financial position, results of operations and cash
flows, and at determining the Authority’s compliance with pertinent laws, rules and
regulations, as well as the efficiency and effectiveness of operations.
Financial Highlights
Comparative Financial Position

2017 2016 Increase
(As Restated) (Decrease)
Total Assets 31,613,692,473 33,406,287,696 (1,792,595,223)
Total Liabilities
(including Deferred Credits) 11,649,863,307 13,042,734,006 (1,392,870,699)
Total Equity 19,963,829,166 20,363,553,690 (3,185,465,922)
Comparative Results of Operations
2017 2016 Increase
(As Restated) (Decrease)
Operating income 607,370,424 502,008,230 105,362,194
Operating Expenses 483,743,577 402,532,555 81,211,022
Income from Operations 123,626,847 99,475,675 24,151,172
Other Income 118,199,326 61,106,793 57,092,533
Net Profit Before Tax 241,826,173 160,582,468 81,243,705
Income Tax Expense/Benefit (124,857,811) 24,623,392 (149,481,203)
Net Profit 366,683,984 135,959,076 230,724,906
Independent A u d ito r’s Report of the Financial Statements
We rendered a qualified opinion on the fairness of the presentation of the financial

statements of the Authority for the years ended December 31, 2017 and 2016 because we
were not able to establish the correctness of the ten per cent share of the Authority from the
project income of the Manila Cavite Toll Expressway Project (MCTEP) covering the years
1998 to 2006 amounting to P222.644 million due to the absence of monitoring reports
supposedly prepared by the Authority and duly validated by the Toll Regulatory Board
(TRB), for the determination of the applicable sharing ratio between the Authority and the
Malaysian parties, now Cavitex Infrastructure Corporation (CIC). |
Based on the revenue sharing clause of the Joint Venture Agreement (JVA), project income
shall be shared by the parties in 10-90 sharing ratio, in favor of CIC. Upon repayment in full
of the loans and interest cost, cost advances, capital investments of CIC and PRA, and
return of equity to each of the parties, the revenue sharing shall be shifted to 60-40, in favor
of PRA. There was no other alternative procedure that we could; adopt to obtain sufficient
evidence to determine whether the repayment condition was already met and subsequently
determine the correctness of the share of PRA in the project income of M€€CTEP.
Summary o f S ignificant Observations and Recommendations
1. Ten per cent share from the project income of the MCTEP covering the years 1998 to
2006 amounting to P222.644 million is doubtful.
We recommended that Management take the necessary actions to determine whether

the repayment condition was already met to commence the Project Income sharing ratio
of 60-40 in R-1 Expressway in favor of PRA and to collect the amount rightfully due to it
under the JVA.
2. The accuracy and completeness of the 9 per cent share from ancillary income in the
MCTEP, amounting to P4.296 million, were not ascertained ajs contracting for ancillary
services and collection of related income were unilaterally undertaken by CIC.
a. Consider making a representation with CIC for the application of Section 3.4 of the
JVA, on the co-operation provision, and that ail collections of income in the MCTEP
and the remittance of shares be undertaken by PEATC; i
b. Monitor the activities in the MCTEP to ensure that the; share of the PRA in the
Project/anciliary income is complete and at correct amounts to protect the. interest of
the Government; and
c. Determine the bases of agreed-upon advertising rates.
3. Some provisions of the Operations and Maintenance Agreement (OMA) entered into by
PRA with CIC and TRB relative to the MCTEP appear to be disadvantageous to the
Government/PRA.
We recommended that Management study the options available to protect the interest of
government/PRA in the MCTEP because of the adverse effects of the arrangement
under the OMA, and the deletion of several control measures! under the TOC, TOA and
the JVA to enable Management to effectively monitor the conditions for the realization of
the 60 per cent PRA share on the toll revenue.
Audit Suspensions, Disallowances and Charges
As of December 31, 2017, the unsettled balance of audit suspensions/disallowances and

charges is P2.002 billion. No Notice of Suspension/Disalfowance and Charges were issued
in CY 2017.
Status of Implementation of Prior Year’s Audit Recommendations
Of the sixteen (16) audit recommendations embodied in prior year’s Annual Audit Report,
seven (7) were implemented, eight (8) were partially implemented and one (1) was not
implemented.
TABLE OF CONTENTS
Page
PART I AUDITED FINANCIAL STATEMENTS
Independent Auditor’s Report 1
Statement of Management’s Responsibility for Financial

Statements 5
Statements of Financial Position 6
Statements of Profit or Loss 7
Statements of Changes in Equity 8
Statements of Cash Flows 9
Notes to Financial Statements 10
PART II AUDIT OBSERVATIONS AND RECOMMENDATIONS 48
PART III STATUS OF IMPLEMENTATION OF PRIOR YEAR’S

AUDIT RECOMMENDATIONS 69
PART I
AUDITED FINANCIAL STATEMENTS
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C O M M IS S IO N ON A U D IT
Quezon City
INDEPENDENT AUDITOR’S REPORT
THE BOARD OF DIRECTORS

Philippine Reclamation Authority
Makati City
Report on the Audit of the Financial Statements
Qualified Opinion
We have audited the accompanying financial statements of the Philippine Reclamation

Authority (PRA), which comprise the statements of financial position as at December 31,
2017 and 2016, and the statements of profit or loss, statements of changes in equity and
statements of cash flows for the years then ended, and notes to financial statements,
including a summary of significant accounting policies. -
In our opinion, except for the possible effects of the matter discussed in the Basis for
Qualified Opinion section of our report, the accompanying financial statements present
fairly, in all material respects, the financial position of PRA as at December 31, 2017 and
2016, and its financial performance and its cash flows for the years then ended in
accordance with Philippine Financial Reporting Standards (PFRSs);
Basis for Qualified Opinion
We were not able to establish the correctness of the ten per cent share of PRA from the
project income of the Manila Cavite Toil Expressway Project (MCTEP) covering the years
1998 to 2006 amounting to P222.644 million due to the absence of monitoring reports
supposedly prepared by PRA and duly validated by the Toll Regulatory Board (TRB) for the
determination of the applicable sharing ratio between PRA and the Malaysian parties, now
Cavitex Infrastructure Corporation (CIC).
Based on the revenue sharing clause of the Joint Venture Agreement (JVA), project income
shall be shared by the parties in 10-90 sharing ratio, in favor of CIC. Upon repayment in full
of the loans and interest cost, cost advances, capital investments of CIC and PRA, and
return of equity to each of the parties, the revenue sharing shall be shifted to 60-40, in favor
of PRA. There was no other alternative procedure that we could adopt to obtain sufficient
evidence to determine whether the repayment condition was already met and subquently
determine the correctness of.the share of PRA in the project income of MCTEP.
We conducted our audit in accordance with International Standards of Supreme Audit

Institutions (ISSAIs). 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 PRA in accordance with the Code of Ethics for Government Auditors
(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 Matters
In our report dated March 31, 2017, we expressed a qualified opinion on the fairness of
presentation of the financial position of PRA as at December 31, 2016, and its financial
performance and its cash flows for the years then ended in accordance with state
accounting principles generally accepted in the Philippines on the. ground that we were not
able to establish the correctness of the National Government (NGj share in the total amount
of P2.694 billion from 1996 to 2016 on the proceeds of Alabang Stock Farm (ASF) Joint
Venture (JV) Project and PRA’s management fee of P227.924 million for the same period
computed based on such proceeds because the JV financial statements were not
completely examined/validated by PRA as the NG-authorized representative in the Project.
Consequently, we were not able to determine whether any adjustments were necessary on
the Assets Held-in-Trust - Department of Environment and Natural Resources (DENR)
account and its corollary account, the Trust Agreement account, both with balances of
P3.416 billion and P3.366 billion as of December 31, 2016 and 2015 (as restated),
respectively, and on the management fee account for the year ended December 31, 2016 of
P4.400 million and prior years’ (1996-2015) of P223.524 million.
The Assets Held-in-Trust - (DENR) account and its corollary accounts were no longer
presented as part of the CY 2017 financial statements of PRA in view of the disengagement
of PRA on the Project effective April 2016 and consequently restated the 2016 financial
statements. Accordingly, our present opinion on the 2016 financial statements, as presented
herein, is no longer modified concerning this matter.
Responsibilities of Management and Those Charged with

Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with PFRSs, 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.
In preparing the financial statements, management is responsible for assessing PRA’s

ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends
to liquidate PRA or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing PRA’s financial reporting
process.
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 ISSAI will
always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material-if, individually or in 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 judgment and

maintain professional skepticism throughout the audit. We also:
• Identify and asses 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 the 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 PRA’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of

accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on PRA’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to'the date of our auditor’s
report. However, future events or conditions may cause PRA to cease to continue as a
going concern.
• 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 findings^ 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.
Report on Other Legal and Regulatory Requirements
Our audits were conducted for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplementary information in Note 34 to the financial
statements is presented for purposes of additional analysis and is not a required part of the
basic financial statements prepared in accordance with PFRS. Such supplementary
information is the responsibility of management. The information has been subjected to the
auditing procedures applied in our audit of the basic financial statements. In our opinion, the
information is fairly stated, in all material respects, in relation to the basic financial
statements taken as a whole.
COMMISSION ON AUDIT
C E C IL IA N. C H A N
OIC - Supervising A uditor
May 28, 2018

Jxrpublic of tljf ipijtltpptnes ;
PHILIPPINE RECLAMATION AUTHORITY f: i
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7 - floor. Leaaspi Towers 200 Bldg.. 107 Passo de Roxas St.. Legaspi Vliage. 1226 City of Makati
Tel. No.: (02) 45S-5000 • Facsimile No.; (02) 315-2662
Website: www.pea.gov.ph * Email: info@pea.gov.ph 2O40 *
STATEMENT OF MANAGEMENT’S RESPONSIBILITY

FOR FINANCIAL STATEMENTS
The Management of PHILIPPINE RECLAMATION AUTHORITY is responsible for the

preparation of the financial statements as at December 31, 2017, including the additional
components attached thereto in accordance with the prescribed financial reporting framework
indicated therein. The responsibility includes designing and implementing internal controls
relevant to the preparation and fair presentation of financial statements that are free from material
statement whether due to fraud or error, selecting and applying appropriate accounting policies
and making accounting estimates that are reasonable in the circumstances.
The Board of Directors reviews and approves the financial statements before such statements are
issued to the regulators, creditors and other users.
The Commission on Audit has audited the financial statements of the Philippine Reclamation
Authority in accordance with the Philippine Public Sector Standards on Auditing and has
expressed its opinion on the fairness of presentation upon completion of such audit, in its report
to the Board of Directors.
c i
ATTY. ALBERTO C. AGRA
Chairman of the Board
UPM TO
Date Signed
DELFIN c T T O M S ^ S S t b j R .
Asst. General Manager - Finance
Date Signed Date Signed

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STATEMENTS OF FINANCIAL POSITION
December 31, 2017 and 2016
(In Philippine Peso)
Note 2017 \ 2016 January 2016

(As restated) (As restated)
|
ASSETS -------------------- ■
j
Current Assets ]
[
Cash and cash equivalents 4 3,580,248,216 4,739,641,590 3,129,344,620
Short-term investments 5 5,667,881,365 2,96C),088,499 5,370,356,056
Trade and other receivables 6 3,717,693,634 4,495,573,313 3,718,691,384
Inventories 7 885,624,231 885,624,231 881,475,391
Other current assets 8 77,118,635 46,581,702 77,756,726
Total current assets 13,928,566,081 13,127,509,335 13,177,624,177
i
Non-Current Assets
Investment property 9 9,369,578,945 9,369,578,945 9,088,342,945
Service concession asset 10 7,393,556,176 7,663;,883,496 7,675,990,061
Other financial assets 11 9,225,680 9-225,680 528,112,008
Property and equipment-net 12 102,342,623 146;, 100,258 ■ 152,782,369
Other non-current assets 13 810,422,968 3,089-989,982 4,822,547,670
Total non-current assets 17,685,126,392 20,2781778,361 22,267,775,053
31,613,692,473 33,406|287,696 35,445,399,230

I
LIABILITIES AND EQUITY i
C urrent Lia b ilitie s j

Trade and other payables 14 1,348,599,763 755j833,753 1,293,620,003
Dividends payable 15 1,255,501,642 812;853,918 1,579,811,229
Inter-agency payables 16 124,395,750 617,'009,927 758,581,653
Trust liabilities 17 16,027,900 15;977,800 15,812,930
Income tax payable 18 84,433,163 149,1358,518 289,504,437
Other current payables 19 27,521,411 17,-546,578 150,321,741
Total current liabilities 2,856,479,629 2,368)580,494 4,087,651,993
Non-Current L ia b ilitie s [
Deferred service concession revenue 20 6,920,010,931 7,172,1003,974 7,215,840,124
Deferred credits 21 1,496,428,375 2,380,701,839 2,248,071,411
Deferred tax liabilities 30 376,944,372 1,121,1447,699 1,342,480,304
Total non-current liabilities 8,793,383,678 10,674,1153,512 10,806,391:839
Total Lia b ilitie s 11,649,863,307 13,042,[734,006 14,894,043,832
Equity 23 19,963,829,166 20,363,^53,690 20,551,355,398
31,613,692,473 33,406,287,696 35,445,399,230

i
See accompanying Notes to Financial Statements.
ii
.i
STATEMENTS OF PROFIT OR LOSS
For the Years Ended December 31, 2017 and 2016
Note ■2017 2016

(As Restated)
■i---------- —
REVENUE
Business income 24 597,548,968 420,566,318
Service income 25 5,114,569 79,122,344
Miscellaneous income 26 4,706,887 2,319,568
607,370,424 502,008,230
OPERATING EXPENSES
Personnel services 27 106,080,203 112,829,459
Maintenance and other operating expenses 28 97,447,511 139,956,715
Non-cash expenses 280,215,863 149,746,381
INCOME FROM OPERATIONS 123,626,847 99,475,675
OTHER INCOME (EXPENSES)
Interest income on savings & short-term investments 132,771,309 78,504,495
Gain on disposal of assets 113,068 146,857
Financial expenses 29 (14,685,051) (17,544,559)
118,199,326 61,106,793
NET PROFIT BEFORE TAX 241,826,173 160,582,468
INCOME TAX EXPENSE/BENEFIT 30 124,857,811 (24,623,392)
NET PROFIT 366,683,984 135,959,076
See accompanying Notes to Financial Statements,
7
STATEMENTS OF CHANGES IN EQUITY
Note Government Retained Total Equity

Equity Earnings
(Note 23)
Balances, December 31, 2015 3,248,276,057' 15,G25r7-76rG79-- 1 8r2-74;e52r136..
Correction of prior years' errors 22 2,277,303,262 2,277,303,262
Balances, December 31, 2015, as restated 3,248,276,057 17,303,079,341 20,551,355,398
Changes in Equity fo r 2016

Net profit for the year 12(5,959,076 135,959,076
Dividends (32'3,760,784) (323,760,784)
Balances, December 31, 2016 3,248,276,057 17,11:5,277,633 20,363,553,690
i
Changes in Equity fo r 2017

Net profit for the year 366,683,984 366,683,984’
Dividends (766,408,508) (766,408,508)
Balance as o f December 31, 2017 3,248,276,057 16,715,553,109 19,963,829,166

8
STATEMENTS OF CASH FLOWS
(In Philippine Peso) ---------- - ■■
Note 2017 ' “ 2016
CASH FLOWS FROM OPERATING ACTIVITIES

Collection of receivables 2,830,238,234 857,509,538
Collection of income 268,804,234 195,798,176
Reclassification from Restricted Fund 8,248,564 0
Miscellaneous receipts 1,719,860 2,699,144
Receipt of guaranty and tender deposits, performance bond 2,658 272,858
Payment of corporate income tax (1,009,360,323) (384,010,379)
Payment of operating expenses (182,653,204) (212,466,656)
Remittance to GSIS/Pag-IBIG/BIR (168,425,638) (92,332,600)
Payment of payables (30,084,809) (59,646,131)
Payment of real property tax (5,532,081) (47,456,964)
Remittances to PEMPCO and insurance companies (5,092,636) (3,751,804)
Net cash provided by operating activities 1,707,864,859 256,615,182
CASH FLOWS FROM INVESTING ACTIVITIES

Interest on short-term investments 118,225,530 81,761,294
Proceeds from/(placement of) short-term investments (2,658,663,222) 2,410,267,556
Advances to PRA employees ' (1,660,888) (35,185,335)
Purchase of property and equipment (1,398,869) (3,569,603)
Proceeds from-disposal of assets 0 165,600
Disbursement to projects i o (9,039,629)
Net cash provided by (used in) investing activities (2,543,497,449) 2,444,399,883
CASH FLOWS FROM FINANCING ACTIVITIES

Remittance of dividends to the BTr (323,760,784) (1,090,718,095)
Net cash used in financing activities (323,760,784) (1,090,718,095)
NET INCREASE IN CASH AND CASH EQUIVALENTS (1,159^393,374) 1,610,296,970

CASH AND CASH EQUIVALENTS AT BEGINNING OF
THE YEAR 4,739,641,590 3,129,344,620
CASH AND CASH EQUIVALENTS AT END OF THE YEAR 4 3,580;248,216 4,739,641,590
9
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2017
1. GENERAL INFORMATION
The Philippine Reclamation Authority (PRA), formerly Public Estates Authority (PEA),
was created on February 04, 1977 by virtue of Presidential-Decree ■NoH-084rlt-serves“
primarily as a clearing house of all reclamation projects in the country and is mandated
to be self-sustaining. It has also created assets for the government by converting under
utilized land into valuable and income-generating real estate properties. In addition, PEA
is involved in a wide range of projects and delivery of | services related to land
development and urban renewal, infrastructure projects, as well as financing and
construction of buildings, particularly for other government agencies. By virtue of
Executive Order (EO) No. 380 issued on October 24, 2004, PEA was renamed
Philippine Reclamation Authority.
On June 24, 2006, under EO 543, the power of the President of the Philippines to
approve reclamation projects was delegated to PRA through its governing board, subject
to compliance with existing laws and rules, and subject to the condition that reclamation
contracts to be executed with any person or entity shall go through public bidding.
On October 19, 2007, EO 672 was issued defining and clarifying the responsibilities of
the Department of Environment and Natural Resources (DENR) and PRA in the
approval and implementation of reclamation projects nationwide.
On May 14, 2009, EO 798 was issued transferring the jurisdiction of PRA from the
Department of Public Works and Highways to the DENR.
The registered office address of PRA is at 7th Floor Legaspi Towers 200 Bldg. 107
Paseo de Roxas St., Legaspi Village, City of Makati, Metro Manila.
2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS AND SIGNIFICANT

ACCOUNTING POLICIES
2.1 Presentation of Financial Statements
The financial statements of the Authority have been prepared using the historical
cost basis. The financial statements are presented in Philippine peso, which is the
Authority’s functional currency. All amounts are rounded off to the nearest peso
except when otherwise indicated.
2.2 Statement of Compliance with the Philippine Financial Reporting Standards
The financial statements of the Authority have been prepared in accordance with
Philippine Financial Reporting Standards (PFRSs). PFRSs are adopted by the
Financial Reporting Standards Council (FRSC) from the: pronouncements issued
by the International Accounting Standards Board (lASB), and approved by the
Philippine Board of Accountancy. ;
10
The accounting policies have been applied starting CY 2017. The 2017 financial
statements are the first financial statements which comply with the requirements of
PFRS.
The financial statements of the Authority as at December 31, 2017 were presented
and approved by the Board of Directors on February 21, 2018. ......... .......... "
2.3- Adoption of New and Amended PFRSs --------1_________ — ---------------
The accounting policies adopted are consistent with those of the previous financial
year, except for the adoption of the following new and amended PFRS which the
Authority adopted effective for annual periods beginning on or after January 1,
2017:
• Amendments to PAS 7, Statement of Cash Flows - Disclosure Initiative - The

amendments require entities to provide information that enable the users of
financial statements to evaluate changes in liabilities arising from financing
activities.
• Amendments to PAS 12, Income Taxes - Recognition of Deferred Tax Assets

for Unrealized Losses - The amendments clarify the accounting for deferred
tax where an asset is measured at fair value and the fair value is below the
asset's tax base (e.g. deferred tax asset related to unrealized losses on debt
instruments measured at fair value), as well as certain other aspects of
accounting for deferred tax assets.
The adoption of the foregoing new and amended PFRS did not have any material
effect on the financial statements. Additional disclosures have been included in the
notes to financial statements, as applicable. ;
2.4 New and Amended PFRSs in Issue But Not Yet Effective
There are new PFRSs and amendments to existing standards effective for annual
periods subsequent to 2017, which are adopted by theiFRSC. Management will
adopt the following relevant pronouncements in accordance with their transitional
provisions; and, unless otherwise stated, none of these are expected to have
significant impact on the Authority’s financial statements; j
Effective for annual periods beginning on or after January/!, 2018:
• PFRS 9, Financial Instruments - This standard will replace PAS 39, Financial
Instruments: Recognition and Measurement (and all fhe previous versions of
PFRS 9). It contains requirements for the classification and measurement of
financial assets and financial liabilities, impairment, hedge accounting,
recognition and derecognition.
o PFRS 9 requires all recognized financial assets to be subsequently

measured at amortized cost or fair value (through; profit or loss or through
other comprehensive income), depending on the classification by reference
to the business model within which these are held;and its contractual cash
flow characteristics.
11
o For financial liabilities, the most significant effect of PFRS 9 relates to cases
where the fair value option is taken: the amount:of change in fair value of a
financial liability designated as at fair value through profit or loss that is
attributable to changes in the credit risk of that liability is recognized in other
comprehensive income (rather than in profit or loss), unless this creates an
accounting mismatch. ■
o For the impairment of financial assets,. PFRSiUntr.oduces__anJ!expected......

credit loss” model based on the concept of providing for expected losses at
inception of a contract; recognition of a credit loss should no longer wait for
there to be objective evidence of impairment. !
o For hedge accounting, PFRS 9 introduces a substantial overhaul allowing

financial statements to better reflect how risk management activities are
undertaken when hedging financial and non-financial risk exposures.
o The derecognition provisions are carried over almost unchanged from

PAS 39.
The Authority has performed a preliminary assessment of the impact of

PFRS 9 on the financial statements based on an analysis of the financial
assets and liabilities and the facts and circumstances that exist as at
December 31,2017.
• Apart from equity investments classified currently as availabie-for-sale and

measured at fair value through other comprehensive income that should be
measured at fair value through profit or loss under PFRS 9, all the other
financial assets and financial liabilities should continue to be measured on
the same bases as currently under PAS 39.
• Concerning impairment, the Authority expects to apply th e . simplified

approach to recognize lifetime expected credit loss for the Authority’s trade
receivables. Although the Authority is currently assessing the extent of this
impact, it is anticipated that the application of j the expected credit loss
model of PFRS 9 will result in earlier recognition Of credit losses. However,
it is not practicable to provide a reasonable estimate of that effect until the
detailed review that is in progress has been completed. In particular, the
implementation of the new expected credit loss model proves to be
challenging and might involve significant modifications to the Authority’s
credit management systems.•
• Amendments to PFRS 2, Share-based Payment - Classification and

Measurement of Share-based Payment Transactions - The amendments
clarify the effects of vesting and non-vesting conditions on the
measurement of cash-settled share-based payment transactions, the
accounting for share-based payment transactions with a net settlement
feature for withholding tax obligations, and the effect of a modification to the
terms and condition of a share-based payment that changes the
classification of the transaction from cash-settled to equity settled.
12
s-
• Amendments to PFRS 4, Insurance Contracts - Applying PFRS 9, Financial

Instruments with PFRS 4, Insurance Contracts 4 The amendments give all
insurers the option to recognize in other comprehensive income, rather than
profit or loss, the volatility that could arise when: PFRS 9 is applied before
implementing PFRS 17, Insurance Contracts (‘the overlay approach’). Also,
entities whose activities are predominantly connected with insurance are
given an optional temporary exemption (until 2021) from applying PFRS 9,
r thus continuing to apply PAS 39 instead (tthe■'deferraral^pToach,)':
ir..
• PFRS 15, Revenue from Contract with Customers - The new standard
replaces PAS 11, Construction Contracts, PAS ] 18, Revenue and related
interpretations. It establishes a single comprehensive framework for
revenue recognition to apply consistently across transactions, industries
and capital markets, with a core principle (based ;on a five-step model to be
applied to all contracts with customers), enhanced disclosures, and new or
improved guidance (e.g. the point at which j revenue is recognized,
accounting for variable considerations, costs of- fulfilling and obtaining a
contract, etc.). j
The Authority intends to use the full retrospective method of transition to the
new standard. Based on the current accounting treatment of the Authority’s
major sources of revenue, the Authority does not anticipate that the
application of PFRS 15 will have a significant impact on its financial position
and/or financial performance, apart from providing more extensive
disclosures on the Authority’s revenue transactions. However, as the
Authority is still in the process of assessing the full impact of the application
of PFRS 15 on the financial statements, it is not practicable to provide a
reasonable financial estimate of the effect until tfje Authority complete the
detailed review. ' j
• Amendment to PFRS 15, Revenue from Contract with Customers -

Clarification to PFRS 15 - The amendments prqvide clarifications on the
following topics: (a) identifying performance obligations; (b) principal versus
agent considerations; and (c) licensing. The amendments also provide
some transition relief for modified contracts and completed contracts.
i
Effective for annual periods beginning on or after January 1, 2019:
PFRS 16, Leases - This standard replaces PAS 1;7, Leases and its related
interpretations. The most significant change introduced by the new
standard is that almost all leases will be brought onto lessees’ statement of
financial position under a single model (except j leases of less than 12
months and leases of low-value assets), eliminating the distinction between
operating and finance leases. Lessor accounting, however, remains largely
unchanged and the distinction between operating and finance lease is
retained. j•
• For the Authority’s non-cancellable operating lease commitments as at

December 31, 2017, a preliminary assessment indicates that these
■arrangements will continue to meet the definition of; a lease under PFRS 16.
j
£
Thus, the Authority will have to recognize a- right-of-use asset and a

corresponding liability in respect of all these leases - unless these qualify
for low value or short-term leases upon the application of PFRS -16 - which
might have a significant impact on the amounts recognized in the
Authority’s financial statements. However, it is not practicable to provide-a
reasonable estimate of that effect until the Authority complete the review.
Under prevailing circumstances, the adoption'"of the foregoing new and

amended PFRS is not expected to have any material effect on the financial
statements of the Authority except for PFRS 9, and PFRS 16.
COA Circular 2016-006 requires all government business entities to adopt the
Philippine Financial Reporting Standards (PFRS) when; presenting their financial
statements. The adoption of the PFRS has significaritly affected the financial
statements of the PRA. The following are the most significant impact of this reporting
standard:
1. Under the old reporting framework, PRA was allowed to use the installment
method of accounting for revenue recognition. However, the PFRS requires that
revenues be recognized strictly using the accrual basis. Under the accrual basis,
revenue should be recognized when the real estate inventories are sold and not
when cash is received.
Since a major portion of PRA's revenue comes from collection of installment

sales, the PRA’s revenue significantly decreased which caused a huge reduction
in the amount of reported net profit for 2017.
2. The old reporting framework does not require PRA to recognize deferred income
tax. PFRS requires that deferred taxes be recognized in order to have proper
matching of tax expense against revenue. As a result, the amount of income tax
expense will be reduced which will cause the reported net profit in 2017 to
increase.
It is to be emphasized, that the decline in net profit is just for financial reporting
purposes and does not affect the taxable income nor the amount of dividends
payable to the National Government.
2.5 Financial Assets
Initial Recognition
Financial assets are recognized in the Authority’s financial statements when the
Authority becomes a party to the contractual provisions of the instrument.
Financial assets are recognized initially at fair value. : Transaction costs are
included in the initial measurement of the Authority’s financial assets, except for
investments classified at fair value through profit or loss (FVTPL).
Classification and Subsequent Measurement
Financial assets are classified into the following specified categories: financial
assets at fair value and financial assets at amortized cost. Financial assets at fair
14
value include both equity securities and debt securities. Financial assets a*
amortized cost include only debt securities. Under the Application Guidance of
PFRS 9, at initial recognition, the Authority measure a financial asset at its fair
value plus or minus, in the case of a financial asset not at fair value through profit
or loss, transaction costs that are directly attributable to-the acquisition or issue of
the financial asset. The Authority classifies financial' asset as subsequently
measured at fair value or amortized cost depending on the entity’s business model
for managing financial assets. ..... — ;---------------------------- ---
Financial Assets at Fair Value
The following financial assets are measured at "fair value through profit or loss”
(FVTPL):
• Financial assets held for trading or popularly known as "trading securities".

• Financial assets that are designated on initial recognition as at fair value
through profit or loss.
• All other investments in quoted equity instruments.
Impairment of Financial Assets at Fair Value
For financial assets measured at fair value, all gains and losses are either
presented in profit or loss-or in other comprehensive income depending on whether
the election to present gains and losses on equity investments in other
comprehensive income is taken or not. Therefore, it is:not necessary to assess
financial assets measured at fair value for impairment
As of the reporting date, the Authority does not have ifinancial assets that are
classified as fair value through profit or loss.
Financial Assets at Amortized Cost
Financial assets are measured at amortized cost if both of the following conditions
are met:
• The business model is to hold the financial asset in order to collect contractual
cash flows on specified dates,
• The contractual cash flows are solely payments of principal and interest on the
principal amount outstanding.
Impairment of Financial Assets at Amortized Cost
If there is objective evidence that an impairment loss on financial assets measured

at amortized cost has been incurred, the amount of the loss is measured as the
difference between the carrying amount and the present value of estimated future
cash flows discounted at the original effective interest rate. The carrying amount of
the asset shall be reduced either directly or through the use of an allowance
account. The amount of the loss shall be recognized in profit or loss.
15
2.6 Financial Liabilities and Equity instruments
Classification as Debt or Equity .................... ...
Debt and equity instruments issued by the Authority are classified-as-either

financial liabilities or as equity in accordance with the substance of the contractual
arrangements and the definitions of a financial liability.an.d_arLequityJnstrument,___
Financial Liabilities
Initial recognition
Financial liabilities are recognized in the Authority's financial statements when the
Authority becomes a party to the contractual provisions of the instrument.
Financial liabilities are initially recognized at fair value. Transaction costs are
included in the initial measurement of the Authority’s financial liabilities except for
debt instruments classified at FVTPL. in a regular way purchase or sale, financial
liabilities are recognized and derecognized, as applicable, using settlement date
accounting.
Classification and Subsequent Measurement
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or 'other
financial liabilities’.
Financial Liabilities at FVTPL
Financial liabilities are classified at FVTPL when the financial liability is held for
trading; designated upon initial recognition; either held for trading or designated
upon initial recognition.
A financial liability is classified as held for trading if:
• it has been acquired principally for the purpose of repurchasing it in the near
term; or
• on initial recognition it is part of a portfolio of identified financial instruments that
the Authority manages together and has a recent actual pattern of short-term
profit-taking; or
• it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated
as at FVTPL upon initial recognition if;•
• such designation eliminates or significantly reduces a measurement or

recognition inconsistency that would otherwise arise; or
• the financial liability forms part of financial assets or financial liabilities or both,
which is managed and its performance is evaluated on a fair value basis, in
accordance with the Authority’s documented risk management or investment
strategy, and information about the Authority is provided internally on that
basis; or
16
• it forms part of a contract containing one or more embedded derivatives, and
PAS 39 Financial Instruments: Recognition and Measurement permits ■the
entire combined contract (asset or liability) to be designated as at FVTPL.— '
Financial liabilities at FVTPL are stated at fair value,: with any gains or losses
arising on remeasurement recognized in profit or lobs. The net gain or loss
recognized in profit or loss incorporates any interest..paidjoji_tb.e_fioapciaUiability-
and is included in the ‘other gains and losses' line!item in the statement of
comprehensive income.
Other Financial Liabilities
Other financial liabilities (including borrowings) are subsequently measured at

amortized cost using the effective interest method.
The effective interest method is a method of calculating the amortized cost of a

financial liability and of allocating interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts estimated future cash
payments through the expected life of the financial liability, or (where appropriate)
a shorter period, to the net carrying amount on initial recognition.
Offsetting Financial Instruments
Financial assets and liabilities are offset and the net: amount reported in the
statements of financial position when there is a legally enforceable right to offset
the recognized amounts and there is an intention to settle on a net basis or realize
the asset and settle the liability simultaneously.
A right to offset must be available today rather being contigent on a future event
and must be exercisable by any of the counterparties, both' in the normal course of
business and in the event of default, insolvency or bankruptcy.
Derecognition of Financial Liabilities
The Authority derecognizes financial liabilities when, and only when, the Authority’s
obligations are discharged, cancelled or they expire. Thd difference between the
carrying amount of the financial liability- derecognized and the consideration paid
and payable is recognized in profit or loss.
Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets
of an entity after deducting all of its liabilities. Equity instruments issued by the
Authority are recognized at the proceeds received, net of direct issue costs.
2.7 Retained Earnings
Retained earnings represent accumulated profit attributable to equity holders of the .

Authority after deducting dividends declared. Retained earnings may also include
effect of changes in accounting policy and prior period adjustments.
17
2.8 Inventories
nven ones include reclaimed lands, inventories under development and completed
urn s. ese are initially measured at cost Subsequently, inventories are-stated at ■
e ower of cost and net realizable value. The costs of inventories are calculated
usmg the specific identification method. - ■ -.... -....-....
When the net realizable value of the inventories-is-lower-than—'c a s L J h e .

Authority recognizes an impairment loss for the decline in the value of the
inventory. The amount of any reversal of any write-down of inventories, arising
from an increase in net realizable value, is recognized in profit or loss in the period
in which the reversal occurs.
When inventories are consumed, the carrying amount of those inventories is

recognized in profit or loss.
2.9 Investment Properties
Investment properties are properties held either to earn rental income or for capital
appreciation or both, but not for sale in the ordinary course of business or for
administrative purposes.
Investment properties, except land, are measured at cost less accumulated

depreciation and any impairment in value. Land is stated at cost less any
impairment in value. The carrying amount includes the cost of replacing part of an
existing investment property at the time that cost is incurred if the recognition
criteria are met and excludes the costs of day-to-day servicina of an investment
property. a
Depreciation and amortization are calculated on a straiqht-line basis over the

estimated useful lives. ;
The estimated useful lives and depreciation method are; reviewed periodically to
ensure that these are consistent with the expected pattern of economic benefit
from items of .investment properties.
Investment properties are derecognized when either they have been disposed of or
when the investment property is permanently withdrawn from use and no future
economic benefit is expected from its disposal. Any gains or losses on the
retirement or disposal of an investment property are recoqnized in profit or loss in
the year of retirement or disposal.
Transfers are made to investment property when, and only when, there is a change
in use, evidenced by the ending of owner-occupationj commencement of an
operating lease to another party or ending of the construction or development.
Transfers are made from investment property when, and only when, there is a
change in use,, evidenced by the commencement of owner occupation or
commencement of development with a view to sale.
18
2.10 Property and Equipment
Property and equipment are initially measured at cost. The cost of an item of
property and equipment comprises:
its purchase price, including import duties and non-refundable purchase taxes,
after deducting trade discounts and rebates;
any costs directly attributable to bringing the assef tp'the location ^nd condition
necessary for it to be capable of operating in ! the manner intended by
management; and
the initial estimate of the future costs of dismantling .and removinQ ^ em anc*
restoring the site on which it is located, the obligation for which a n en^ y incurs
either when the item is acquired or as a consequence of having used
during a particular period for purposes other than to produce inventories during
that period.
Property and equipment, except land, are stated in the financial statem ents at cost
less accumulated depreciation, amortization and any impairment in value. Land is
stated at cost less any impairment in value.
Expenditures incurred after the property and equipment have been Put into
operation, such as repairs, maintenance and overhaul costs, are normally
recognized in profit or loss in the year the costs are incurred. In situations where it
can be clearly demonstrated that the expenditures have1resulted in an increase in
the future economic benefits expected to be obtained from the us® o f an item of
property and equipment beyond its originally assessed standard o f performance,
the expenditures are capitalized as additional costs of; property a n d equipment.
The cost of replacing a component of an item of property and equipment is
recognized if it is probable that the future economic benefits em bodied within the
component wifi flow to the Group, and its cost can be measured reliably. The
carrying amount of the replaced component is derecognized.
When parts of an item of property and equipment have different u se fu l lives, these
are accounted for as separate items (major components) of property a n d equipment.
Depreciation and amortization are calculated on a straiqht-line io^sis over the

estimated useful lives of the property and equipment.
2.11 Intangible Asset
a®sf t fs an identifiable non-monetary asset without physical substance,

e Authoritys intangible assets include computer software. T h is is initially
measured at cost and is subsequently measured at I cost less accumulated
rtizatfon and any accumulated impairment loss. This is am ortized over
estimated useful life using the straight-line method. If there is an indication that
ere has been a significant change in amortization rate useful I if® or residual
value of an intangible asset, the amortization is revised prospectively to reflect the
new expectations. H. H ^
19
2.12 Impairment of Non-financial Assets
At each reporting date, non-financial assets are reviewed to determine whether

there is any indication that those assets have suffered an impairment loss. If there
is an indication of possible impairment, the recoverable amount of any affected
asset (or group of related assets) is estimated and compared with its carrying
amount If estimated recoverable amount is lower.T..the-caFpying-amount-isTeducea~
to its estimated recoverable amount, and an impairment loss is recognized
immediately in profit and loss.
If an impairment loss subsequently reverses, the carrying amount of the asset is

increased to the revised estimate of its recoverable amount, but not in excess of
the amount that would have been determined had no impairment loss been
recognized for the asset in prior years. A reversal of an impairment loss is
recognized immediately in profit or loss.
2.13 Derecognition of Non-financial Assets
"Non-financial assets are derecognized when the assets are disposed of or when'
no future economic benefits are expected from these 'assets. Any difference
between the carrying value of the asset derecognized and the net proceeds from
derecognition is recognized in profit or loss.
2.14 Service Concession
The Authority has adopted PPSAS 32 "Service Concession Arrangements -

Grantor” and has reclassified certain assets from Property and Equipment to
Service Concession Assets.
Service concession assets and deferred service concession revenue are

recognized to comply with the Philippine Public Sector Accounting Standards No.
32 “Service Concession".
The Authority adopted the said PPSAS in relation to PAS 8 on Policies, Changes in
Accounting Estimates and Errors which provides that in the'absence of applicable
PFRS that specifically applies to a transaction, other event or condition,
management shall use its judgment in developing and applying an accounting
policy that results in a financial statement that is reliable and relevant to the
economic decision making needs of users.
In making the above-mentioned judgment, Management is encouraged to consider

the most recent pronouncements of other standard-setting bodies that use a similar-
conceptual framework to develop accounting standards, other accounting literature
and accepted industry practices, in so far as they do not conflict with the
requirements in PFRS dealing with similar and related issues. Management shall
also consider the definitions, recognition criteria and measurement concepts for
assets, liabilities, income and expenses in the Conceptual Framework for Financial
Reporting.
Because the fair value of assets previously transferred-under Service Concession
Arrangements is not reliably available the Authority has chosen to adopt the
standard prospectively.
Service Concession Assets
Service Concession Assets are operated by third parties under the.terms, of

Service Concession. Arrangements. Service, concessioniasset-is initially-measured -
at its fair value and any difference between its fair value and its book value is
recognized in the Statement of Comprehensive income. Subsequent to initial
recognition, service concession assets are depreciated on a straight-line basis over
their estimated useful lives.
Service Concession Liabilities
When the Authority recognizes a Service Concession Arrangement asset it also

recognizes a liability of an equal amount. The liability recognized is initially
measured at the same amount as the service concession asset, adjusted by the
amount of any other consideration from the Authority to the operator, or from the
operator to the Authority.
Where the Authority does not have an unconditional obligation to pay cash or
another financial asset to the operator, and grants the operator the right to earn
revenue from third-party users, the Authority accounts for the liability recognized as
the deferred service concession revenue. The Authority recognizes revenue and
reduces the liability recognized according to the economic substance of the service
concession arrangement.
2.15 Related Parties
Related party relationship exists when one party has the: ability to control, directly,
or indirectly through one or more intermediaries, the Other party or exercises
significant influence over the other party in making; financial and operating
decisions. Such relationships also exist between and/or Omong entities which are
under common control with the reporting enterprise, or between, and/or among the
reporting enterprise and its key management personnel, directors, or its
shareholders. In considering each possible related party relationship, attention is
directed to the substance of the relationship, and not merely the legal form.
2.16 Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits
will flow to the Authority and the revenue can be measured reliably. Revenue is
measured at the fair value of the consideration received or receivable and
represents amounts receivable for goods and services provided in the normal
course of business.
Revenue from sale of completed units inventories are recognized when risks and
rewards of ownership are transferred to the customers.
21
Revenues from management and regulatory fees derived from administrative and
property management, are recognized when the relatediservices are rendered.
Interest Income — ■— ....
Interest income is accrued on a time proportion basis, by referenced the principal

outstanding and at the effective interest rate applicable, which is the rate that
exactly discounts estimated future cash receipts-through -the-expeeted-life-of the ■
financial asset to that asset’s net carrying amount.
Rental Revenue
Revenue from rental is recognized in the statement of comprehensive income on a

straight-line basis over the term of the lease.
2.17 Expense Recognition
Expenses are recognized in profit or loss when decrease in future economic

benefit related to a decrease in an asset or an increase in a liability has arisen that
can be measured reliably. Expenses are recognized in profit or loss; on the basis
of a direct association between the costs incurred and the earning of specific items
of income; on the basis of systematic and rational allocation procedures when
economic benefits are expected to arise over several accounting periods and the
association with income can only be broadly or indirectly determined; or
immediately when an expenditure produces no future economic benefits or when,
and to the extent that, future economic benefits do not qualify, or cease to qualify,
for recognition in the statements of financial position as an asset.
Expenses in the statement of comprehensive income ■are presented using the

function of expense method. Direct costs are expenses incurred that are
associated directly with a particular revenue. Operating expenses are costs
attributable to personal services, maintenance and other operating expenses of the
Authority.
2.18 Leases
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership of, the leased asset to the
lessee.
All other leases are classified as operating leases. Rental payments under
operating leases are recognized in profit or loss on a straight-line basis over the
term of the relevant lease.
Authority as Lessee.
Leases which transfer to the Authority substantially all risks and benefits incidental
to ownership of the leased item are classified as finance leases and are recognized
as assets and liabilities in the statement of financial position at amounts equal at
the inception of the lease to the fair value of the leased property or, if lower, at the
present value of minimum lease payments. Lease payments are apportioned
between the finance costs and reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance of the liability. Finance costs are
directly charged against income. Capitalized leased assets are depreciated over
the shorter of the estimated useful life of the asset or the [ease term.
Leases which do not transfer to the Authority substantially ail the risks and benefits
of ownership of the asset are classified as operating: leases. Operating lease
payments are recognized as expense in the statement, of profit or. loss, on a
straight-line .basis over t.hejease term. Associated costs, such as. maintenance and
insurance, are expensed as incurred.
Authority as Lessor
Leases wherein the Authority substantially transfers to: the lessee all risks and
benefits incidental to ownership of the leased items are classified as finance leases
and are presented as receivable at an amount equal to the Authority’s net
investment in the lease. Finance income is recognized based on the pattern
reflecting a constant periodic rate of return on the Authority’s net investment
outstanding in respect of the finance lease.
Leases which do not transfer to the lessee substantially all the risks and benefits of
ownership of the asset are classified as operating leases. Lease income from
operating leases is recognized as income in the statement of profit or loss on a
straight-line basis over the lease term.
The Authority determines whether an arrangement is, or contains a lease based on

the substance of the arrangement. It makes an assessment of whether the
fulfillment of the arrangement is dependent on the use of:a specific asset or assets
and the arrangement conveys a right to use the asset.
2.19 Employee Benefits
Short-term Benefits
Short term benefits include salaries, bonuses, compensated absences and other
forms of employee benefits that are expected to be settled within one year from the
reporting date. Short-term employee benefits are recognized as expense in the
period the related services are provided.
2.20 Income Tax
Income tax expense represents the sum of the current tax and deferred tax
expense.
Current Tax
The current tax expense is the amount of tax due which is computed based on the
taxable profit for the year. Taxable profit differs from net profit as reported in the
statements of profit or loss because it excludes items of income or expense that
are taxable or deductible in other years and it further excludes items that are never
taxable or deductible.
23
\i, Deferred Tax
K f
\ ; Deferred tax is recognized on temporary differences between the carrying, amounts

|U of assets and liabilities in the financial statements and the corresponding tax bases
used in the computation of taxable profit. Deferred tax liabilities are generally
recognized for all taxable temporary differences. Deferred tax assets are generally
recognized for all deductible temporary differences to the extent that it is probable
that-taxable profits-will be available against which those^deductible'Tem po rary
differences can be utilized. Such deferred tax assets and liabilities are not
; recognized if the temporary difference arises from the initial recognition of assets
: and liabilities in a transaction that affects neither the taxable profit nor the
accounting profit.
The carrying amount of deferred tax assets is reviewed at the end of each
reporting period and reduced to the extent that it \d no longer probable that
sufficient taxable profits will be available to allow all or part of the asset to be
! recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected
to apply in the period in which the liability is settled or the asset realized, based on
tax rates (and tax laws) that have been enacted or substantively enacted by the
end of the reporting period.
The .measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Authority expects, at
the end of the reporting period, to recover or settle the carrying amount of its
assets and liabilities.
Current and Deferred Tax for the Year
Current and deferred tax shall be recognized as income or an expense and

included in profit or loss for the period, except to the extent that the tax arises from
a transaction or event which is recognized, in the same or a different period,
outside profit or loss, either in other comprehensive income or directly in equity.
2.21 Events after Reporting Date
Subsequent events that provide additional information about conditions existing at

period end (adjusting events) are recognized in the financial statements.
Subsequent events that provide additional information about conditions existing
after period end (non-adjusting events) are disclosed in the notes to the financial
statements.
2.22 Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement
date, regardless of whether that price is directly observable or estimated using
another valuation technique. In estimating the fair value bf an asset or a liability,
the Authority takes into account the characteristics of the asset or liability if market
participants would take those characteristics into account when pricing the asset or
liability at the measurement date.
For financial reporting purposes, fair value measurements are categorized into
Level 1, 2 or 3 based on the degree to which the inputs to the fair value
measurements are observable and the significance of Ithe inputs to the fair value
measurement in its entirety which are described as follows:
• Level 1 inputs are' quoted prices (unadjusted) in active markets for identical
assets or liabilities that the entity can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices iricluded w ith in T iv e fT that
are observable for the asset or liability, either directly dr indirectly; and
• Level 3 inputs are unobservable inputs the asset or liability.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of financial statements requires judgments, estimates and assumptions

that affect the application of policies and reported amounts of assets and liabilities,
income and expenses. The key judgement management has made in preparing the
financial statements are as follows: I
The lives of intangible assets and property and equipment: l
Description___________________Useful Lives j
Building and improvements 20 years j
Transportation equipment 7 years j
IT equipment 5 years j
Office equipment 5 years j
Computer software 3 years j
Key estimates and underlying assumptions are continually; reviewed. Revisions to

accounting estimates are recognized in the period in which thej estimate is revised, if the
revision affects only that period, or in the period of the revision and future periods if the
revision affects both the period of revision and future periods, j
4. CASH AND CASH EQUIVALENTS
This account consists of:
2.017 2016
Cash on hand and in banks 442,345 227,891
Cash equivalents 3,579,805,^71 4,739,413,699
3,580,248,216 4,739,641,590
Cash in banks earn interest at fixed rates based on the prevailing bank deposit rates.
Cash equivalents are short-term investments which are made for varying periods of up
to 90 days depending on the immediate cash requirements, and earn interest at the
prevailing short-term rates.
25
w [
r --
5. SHORT-TERM INVESTMENTS
This account consists of investments which are made for varying periods of over 90 days
but not more than one year depending on the immediate cas h requirements, and earn
interest at the prevailing short-term rates.
Interests earned on savings and short-term investments amounted to P132.771 million

and P78.504 million in 2017 and 2016, respectively.
6. TRADE AND OTHER RECEIVABLES
This account consists of the following:
2017 2016
iI
Trade receivables |
Accounts receivable 183,8071187 184,646,019
Loans receivables 45,546[007 56,172,714
Due from NGAs 2,776,924^262 2,810,880,705
Due from GOCCs 611,465j944 1,356,696,085
Due from LGU 66,3691249 66,369,249
Due from subsidiary and affiliate 6,527[261 6,192,102
3,690,639;910 4.480,956,874
Non-trade receivables |
Interest receivable 24,533j053 10,315,245
Others 2,520j671 4.301.194
27,053j724 14,616.439
3,717,693*634 4,495,573,313
Accounts receivable account includes collectibles from the buyers of Coastal Plaza
Condominium Project (CPCP). Likewise, included under this account are amounts due
from various entities representing accrued supervision/regulatpry fees equivalent to 2.5
per cent of the development costs of various reclamation projects.
I
Loans receivable substantially consists of collectibles from PRA managers and officers
who availed of the Modified Car Loan Program.
i
i
26
Due from National Government Agencies (NGAs) pertains to the current portion of
receivables from the following:
2017 2016
Department of Public Works and
Highways (DPWH) 2,349,092)032 2,349,092,032
Department of Transportation (DOTr) 371,768j000 371,768,000
Bureau of the Treasury.. 35,000|000. -35,0.00,0.00
Bureau of Internal Revenue (BIR) 20,241)030 49,216,229
Department of Environment and
Natural Resources (DENR) 823|200 0
Bureau of Internal Revenue (BIR) -
Revenue Computer Center ! o 5,804,444
2,776,924^262 2,810,880,705
• Receivable from DPWH represents the amount due from the sale of lot located at
CBP-1 and CBP-2 pursuant to the Memorandum of Agreement between PRA and
DPWH dated December 23, 2014. j
• Receivable from DOTr pertains to the 20 per cent balance] on the sale of a 46,471-
square meter lot located at CBP-1 A pending the transfer of title in DOTr’s name.
Due from Government Owned and/or Controlled Corporations \(GOCCs) pertains to the
receivable from the Philippine Amusement and Gaming Corporation for the installment
sale of lot at CBP-lslands B & C. !
I
Due from LGU represents Value-Added Tax (VAT) due from! the City Government of
Pasay for the property conveyed as payment for PRA’s real] property tax obligations
pursuant to the Compromise Agreement between PRA and the] City of Pasay dated July
25, 2003. Under the Agreement, the City will shoulder all costs and expenses including
documentary stamp tax and VAT. Deeds of Conveyance were Executed in 2004 to 2010
wherein a total of 12,661.19 square meters were conveyed to the City. In 2011, PRA
conveyed 1,153.39 square meters to Pasay City Government! in payment of the 2011
real property tax. !
Due from subsidiary and affiliate pertains to the share of PRAifrom the earnings of the
PEA Tollway Corporation under the new arrangement of nine per cent of the latter's
gross receipts, and the 70 per cent share in the net revejnue of the Port Center
Development Corporation, PRA's former affiliate. j
Non-trade receivables - others account pertains to the current portion of the contractual
mortgage loans for Pabahay 2000 housing units, motor vehiclejs and computers availed
of by PRA officers and employees. j
27
I
7. INVENTORIES
2017 2016
Reclaimed lands
Central Business Park (CBP) IA 492,487,600 492,487,600
inventories under development "" -
BASECO Reclamation Project 216,488,975 216,488,975
Completed units inventory I
Ii
Coastal Plaza Lots and Condominium 176,647,656 176,647,656
Units
885,624,231 885,624,231
Reclaimed lands - CBP IA represents PRA’s share in its Joint Venture Agreement with
Shoemart, Inc. recorded at assigned cost.
Inventories under development - BASECO Reclamation \Project represents the

disbursements relative to the reclamation, borehole testing, processing of Environmental
Compliance Certificate (ECC) of the project and other related expenses.
Completed units inventory - Coastal Plaza Lots and Condominium Units pertains to the
value of lots with an area of 15,364 square meters. These properties were appraised by
independent appraisers in June 2008. Fair market values range from P3,000 to P6,000
[
per square meter. It also includes the condominium units returned/repossessed and
reverted back to available for sale inventory.
8. OTHER CURRENT ASSETS
2017 2016
Prepayments 76,796,405 46,176,008
Advances 165,391 183,203
Deposits 156,839 222,491
77,118,635 46,581,702
Prepayments account pertains to the following:
2017 2016
Input VAT 59,258,013 855,320
Creditable withholding VAT 15,607,749 44,176,193
Advances to contractors 901,536 464,695
Other prepayments 393,245 392,651
Withholding tax at source 366,056 0
Prepaid insurance 228,870 246,213
Prepaid rent 40,936 40,936
76,796,405 46,176,008
28
Advances account represents advance payments to officers and employees and to
special disbursing officers.
Deposits account substantially pertains to the guaranty deposits with MERALCO for
power services connection.
9. INVESTMENT PROPERTY
Investment property represents lands and other assets held for undetermined future use.
This account includes the following:
2017 2016
Three Islands 6,704,979,000 6,704,979,000
Esplanade 1,161,851,864 1,161,851,864
R-1 Landstrips 641,103,970 641,103,970
R-1 Waste Transfer Station 15,822,760 15,822,760
Bacolod Reclamation 816,084,000 816,084,000
Libertad Channel 29,737,351 29,737,351
9,369,578,945 9,369,578,945
Three Islands consists of the 157.844-hectare reclaimed land at various elevation in

Parahaque City recorded at June 2008 appraisal conducted1by Cal-Fil Appraisal and
Management, Inc. and Asian Appraisal Co., Inc. The islands; were valued at P4.000 -
P4,500 per square meter or P6,704,979,000. The last appraisal was made in September
2013 by three reputable appraisal companies, namely; (1) Cal-Fil Appraisal and
Management Co., In c - submerged and unsubmerged areas- P9,391,056,300; (2)
Topconsult, Inc.- submerged areas- P6,990,826,747; :and (3) Royal A sia-
unsubmerged areas- P2,690,360,000. if PRA will adopt the lowest appraisal value from
the latest appraisal reports (submerged and unsubmerged),: the value of the Three
Islands will still be higher than the value per books (or a gain of P285,847,747) as of
September 2013. However, if submerged areas shall not be valued, there would be a
loss on valuation even if the highest value is used for unsubmerged areas. Based on
the latest appraisal reports, PRA opted to retain the value of the said properties as
recorded per books considering that the three independent appraisers do not have the
same opinions in their respective reports on whether or not;to value the submerged
areas. However, PRA will record the value of the properties at their current appraised
value upon their final disposition.
Esplanade refers to a green belt along the bay edge of Boulevard 2000 located at the
coastal strips of Centra! Business Park (CBP) 1A, CBP 1 Islands B & C and CBP II with
a 50-meter wide open space. The area is registered under the name of PRA.
R1 Landstrips pertains to the 154,272-square meter lot in Parahaque City along the
Coastal Road area recorded in June 2007 and June 2008; appraisals ranging from
P2,200 to P15,000 per square meter with a total value of P632.820 million. It also
includes the transfer cost of a 9,770-square meter lot at Manila-Cavite Toll
Expressway/Coastal Road and Reclamation Project of P8.284 million.
29
R-1 Waste Transfer Station (WTS) represents the value of the WTS property owned by
PRA located at Barangay Ilaya, Las Pinas City and is being leased to the City
Government of Las Pinas.
Bacolod Reclamation represents PRA!s land share from the Bacolod Reclamation
Project in Bacolod City with a total area of 90,676 square meters recorded at appraised
value of P9,000 per square meter representing share conveyed-to-PRA-as-of-Becernber-
31,2016. '
Libertad Channel represents the transfer cost of the 19,199-square meter property in
Pasay City from Pasay Hongkong Realty Development Corp. of P29.737 million
inclusive of the cost of relocating informal settlers from the area,
10. SERVICE CONCESSION ASSET
This account consists of the following;
(Amounts stated in thousand pesos)
Road R-1 R-1 : C5 Link Total

N etw ork Expressw ay Extension
A t D ecem ber 31, 2016
Cost/Appraised Value 591,109 614,792 7,028,337 32,860 8,267,098
Accum. Depreciation (99,229) (64,715) (439,271) 0 (603,215)
C arrying Value, 2016 491,880 550,077 6,589,066 32,860 7,663,883
Year Ended December 31, 2016 491,880 550,077 6,589,066 32,860 7,663,883
2017 Amortization (18,334) (32,357) (219,636) 0 (270,327)
C lo sin g C a rryin g Value 473,546 517,720 6,369,430 32,860 7,393,556
A t D ecem ber 31, 2017

Cost/Appraised Value 591,109 614,792 7,028,337 32,860 8,267,098
Accum. Depreciation (117,563) (97,072) (658,907) 0 (873,542)
C arrying Value, 2017 473,546 517,720 6,369,430 32,860 7,393,556
Service concession asset Road Network pertains to PRA’s investment in the road
network of the Manila Cavite Toll Expressway Project (MCTEP) which includes the initial
development costs incurred under the 1981 construction contract with the Philippine
National Construction Corporation and the subsequent completion and upgrading costs
under the 1989 R-1 Consortium contract. The total cost incurred is amortized over a
period of 35 years.
Service concession asset R-1 Expressway; R-1 Extension & C5 Link provided by the
Cavitex Infrastructure Corporation under Toll Operation Agreement dated July 26,1996
refers to the upgrading of the Road Network. As of December 31, 2017, the remaining
amortization period of the R-1 Expressway and Extension is ;at 17 and 30 years,
respectively. The C-5 Link has not commenced yet, thus, no amortization was
recognized.
30
In 1990, a Toll Operation Certificate was issued to PRA by the Republic of the
Philippines (RP), through the Toll Regulatory Board (TRB), for the construction,
operation and maintenance of R-1 Expressway and R-1 Expressway Extension as toll
facilities for 25 years. Subsequently, in 1994, PRA and the Malaysian corporations,
Majlis Amana Rakyat (MARA) and Renong Berhad (RENO'NG) entered into a Joint
Venture Agreement (JVA) where they agreed to develop the Manila Cavite Toil
Expressway (MCTE), which now includes the C5 Link Expressway, and to operate the
same for 35 years. In consideration of their respective obligations-the-parties agreed-
that their proportionate share in the project income shall initially be 10 per cent - 90 per
cent in favor of the Malaysian parties and (Malaysia) Berhad (UEM). The Malaysian
parties, UEM and MARA, then incorporated and assigned their rights and obligations to
UEM-MARA Philippines Corporation (UMPC), which represented them in the Toil
Operation Agreement (TOA) executed with the RP and PRA. In 1999, UEM divested its
entire equity interest in UMPC to the Coastal Road Corporation (CRC), officially
relinquishing all of UEM’s obligations and liabilities in the JVA and TOA.
On August 25, 2006, UMPC entered into a P3.5 billion Omnibus Loan Agreement with a
syndicate of lenders for the construction of Segment 4 of R-1 Êxpressway Extension of
the MCTE Project. One of the conditions of the lenders is that the Project must have a
strategic partner which is an Equity Contractor. Thus, the No. 14th Metallurgical
Construction Company of China Nonferrous Metal Industry ;signed an agreement to
purchase 40 per cent of UMPC for a P1.5 billion equity.
On November 14, 2006, an Operations and Maintenance; Agreement (OMA) was

executed between PRA, UMPC and TRB. Under the OMA, the revenue sharing was
amended/modified temporarily wherein PRA shall receive 8J5 per cent of gross toll
revenue while UMPC shall receive 91.5 per cent of the gross toll revenue absorbing all
Operating and Maintenance costs and expenses. PRA’s share;shall be increased by 0.5
per cent every periodic Toll Rate Adjustment under the TOA but not to exceed 10 per
cent of gross toll revenue.
The amended revenue sharing arrangement shall be implemented during the period of
the existence of the loan, which is payable for a period of eight years under the Omnibus
Loan Agreement of August 25, 2006, and the repayment of; the equity of the Equity
Contractor, which shall be converted into subordinated debt pari passu with the Lenders
for a period which shall not exceed an additional three years after the period of eight
years.
On May 20, 2010, the PRA Board of Directors approved the extension of the effectivity
of the OMA for a period of four years from August 25, 2017 to August 25, 2021, or upon
full settlement of the funding obtained, whichever comes first,-subject to compliance of
several terms and conditions.
On March 5, 2012, the Securities and Exchange Commission approved the application
of UMPC for change of corporate name to Cavitex Infrastructure Corporation (CIC). On
December 19, 2012, CIC advised PRA that Cavitex Holdings Inb. (CHI), formerly Coastal
Road Corporation, entered into a financing and cooperation agreement with Metro
Pacific Tollways Corporation (MPTC), a wholly-owned subsidiary of Metro Pacific
Investments Corporation. The agreement involves the issuance of a P6.7 billion bond
convertible into non-voting redeemable preferred shares of CHI. Under the said
31
agreement, MPTC will provide management assistance to CIC effective January 2
2013.
11. OTHER FINANCIAL ASSETS
;2017 2016
Investment in subsidiaries and associates 7,000,000 7,000,000
Investment in stocks 2,225,680 2,225,680
9,225,680 9,225,680
investment in subsidiaries and associates includes PRA's investment in stocks in the

following which are accounted for under the cost method:
2017 2016
PEA Tollway Corporation 2,000,000 2,000,000
Bay Dredging Corporation 5,000,000 5,000,000
7,000,000 7,000,000
PEA Tollway Corporation (PEATC) is a wholly-owned subsidiary of PRA incorporated in

1997 to manage, operate, maintain the MCTEP and to collect toll fees therefrom. Its
authorized capital stock consists of 50,000 shares with a par value of P100 per share, of
which 20,000 shares had been subscribed and fully paid by PRA.
Bay Dredging, Inc. (BDl) is a subsidiary where PRA has 40 per cent equity interest. It
was incorporated in 1998 to (a) own, lease, or hire dredging equipment suitable for
dredging and reclamation under Philippine condition; (b) train and acquire modern,
scientific, efficient, and environment-friendly dredging and reclamation technology from
experts all over the world; (c) participate in dredging contracts in the Philippines; (d)
enter into contracts to reclaim areas planned for reclamation; and (e) enter into contracts
to supply dredge fill materials to all reclamation projects. Its; authorized capital stock
consists of 500,000 shares with a par value of P100 per share, of which 50,000 shares
had been subscribed and fully paid by PRA.
Investment in stocks - pertains to investment in shares of stocks with Manila Electric

Company and Philippine Long Distance Telephone Company, i
12. PROPERTY AND EQUIPMENT
(Amounts stated in thousand pesos)

Building & Motor Furniture & Other Total
Structures Vehicles Equipment
A t December 31, 2016
Cost/Apprajsed Value 155,596 14,211 19,015 188,822
Accumulated Depreciation (19,227) (10,973) (12,522) (42,722)
Carrying value, as restated 136,369 3,238 6,493 146,100
32
(Amounts staled in thousand pesos)
Building & Motor Furniture & Other Total
Structures Vehicles i Equipment
Year Ended December 31, 2017

Cost/Appraised Value 155,596 14,211 19,015 188,822'
Disposais/Adjustments (35,719) (847) (40,227)
(3 ,6 6 1 )-
Purchases 0 0.. l 640 -------- 640-
119,877 13,364 15,994 149,235
Accumulated Depreciation (19,227) (10,973) (12,522) (42,722)
Additions/Adjustment 0 829 3,719 4,548
Depreciation for the year (6 ,4 1 0 ) (501) (1,808) (8,719)
(25,637) (10,645) (10,611) (46,893)
Closing Carrying Value 9 4 ,2 4 0 2 ,7 1 9 5 ,3 8 3 1 0 2 ,3 4 2
A t December 31, 2017

Cost/Appraised Value 119,877 13,364 15,994 149,235
Accumulated Depreciation (25,637) (10,645) ; (10,611) (46,893)
Carrying value 9 4 ,2 4 0 2 ,7 1 9 5 ,3 8 3 1 0 2 ,3 4 2
13. OTHER NON-CURRENT ASSETS
2017 2016
Non-current receivables 8 0 9 ,5 4 0 ,8 4 2 3,088,978,067
Intangible assets 7 6 4 ,7 9 0 894,579
Others 1 1 7 ,3 3 6 117,336
8 1 0 ,4 2 2 ,9 6 8 3,089,989,982
Non-current receivables include the non-current portion of accounts receivables from

trade and non-trade receivables due from the following: ■
;
• Trade receivables - Due from Government Owned and/or Controlled Corporation

(GOCC) represents receivable arising from the installment sale of lots to the
Philippine Amusement and Gaming Corporation amounting‘to P762.353 million and
P3.022.929 million as of December 31, 2017 and 2016, respectively.•
• Trade receivables - Due from National Government Agencies (NGAs) pertains to the
non-current portion of receivables from BIR Valenzuela with regards to the Lease
with Option to Purchase Agreements for the completed ‘ buildings financed and
constructed by PRA for these agencies.
33
Intangible assets pertain to computer software that is being amortized over the
subscription period of two years or five years whichever is shorter.
Cost
December 31, 2016 1,471,496
Additions 2,459,843
December 31,2017 3,931,339
Accumulated am ortization
December 31, 2016 (576,918)
Amortization expense (2,589,631)
December 31,2017 (3,166,549)
Carrying amount, December 31, 2017 764,790
I
TRADE AND OTHER PAYABLES
Accounts payable comprises of amounts due to the following: :
2017 2016
AMARI Coastal Bay Development Corporation 589,499,084 589,499,084
R-1 Consortium 548,272,778 8,431,532
Shoemart, Inc. 85,000,000 85,000,000
Accrued expenses 68,397,412 15,805,706
Manila Bay Development Corporation 57,097,431 57,097,431
Stern Real Estate and Development Corporation 333,058 0
1,348,599,763 755,833,753
Due to AMARI Coastal Bay Development Corporation includes the P300 million initial
reimbursement made by AMARI on PRA’s partially reclaimed land valued at P1.894
billion in accordance with the Joint Venture Agreement dated April 26, 1995. With the
final declaration by the Supreme Court in 2003 that the Amended Joint Venture
Agreement is null and void, the P300 million initial reimbursement was set up as a
liability to AMARI. The account also includes the P289.499 million estimated advances
by AMARI for relocation expenses in the Three Islands and jCBP-1 Projects of PRA,
subject to adjustment upon validation of documents related thereto (see Note 30).
Due to R-1 Consortium refers to the claim for the Implementing Agreement (IA) Nos. 5, 6
& 7 with R-1 Consortium. IA No. 5 pertains to the design and construction of Roxas
Canal West Bridge, IA No. 6 is the construction of Central Boulevard Road, CBP-1,
Islands B & C segment and IA No. 7 is the horizontal development works.
Due to Shoemart, Inc. refers to the loan availed by PRA from Shoemart, Inc., the
proceeds of which were used to pay the relocation expenses incurred in clearing the
CBP-1A area and is payable in land.
Due to Manila Bay Development Corporation (MBDC) pertains to the difference

amounting to P52.175 million between MBDC’s claim from PRA for reimbursement of
the relocation expenses as against regulatory fee due to PRA pursuant to the
Memorandum of Agreement executed between PRA and MBDC dated October 21,
34
I
1999. The account also includes the P4.922 million documentary stamp taxes advanced
by MBDC.
15. DIVIDENDS PAYABLE
Dividends payable represents dividends due to National Government (NG) out'of PRA’s
operations for the following periods: "‘
2017 2016
Current year 766,408,508 323,760,784
Previous years 489,093,134 489,093,134
1,255,501,642 812,853,918
For CY 2017, PRA declared dividends of P766 million. In the same year, PRA remitted
P324 million to the BTr representing dividends declared in CY 2016.
On September 27, 2007, PRA and Light Rail Transit Authority (LRTA) signed a MOA for
the Grant of Right-of-Way by PRA to LRTA over a 27,355-square meter lot located in the
City of Parahaque and the Municipality of Bacoor, Cavite for the implementation of the
LRT Line 1 South Extension Project. The value of the PRA property for the right-of-way
in the amount of P571 million was then proposed to be charged against PRA’s dividends
payable to NG in prior years of P489 million.
To date, non-remittance of the dividends of previous years amounting to P489 million to

the NG was due to the pending request dated February 16, 2007 by then GM & CEO
Andrea D. Domingo to the Office of the President of the Philippines that PRA may be
compensated on the PRA property with estimated value of P571 million to be used by
LRTA for the Road Right of Way for the LRT Line 1 South Extension Project. The value
of the PRA property was proposed to be reimbursed by the NGlby crediting the same as
PRA’s dividend payment under RA 7656. As per meeting with LRTA, DOTr and DOF on
September 07, 2017, DOF preferred cash payment instead of property.
PRA will settle the amount due upon execution of the amended Memorandum of
Agreement and propose for cash as compensation by LRTA for PRA over the property
or affected areas.
16. INTER-AGENCY PAYABLES
This account consists of the following;
2017 2016
Due to BTr 113,990,250 114,820,089
Due to BIR 6,127,546 500,787,586
Due to GSIS 4,072,119 1,225,173
Due to PhilHealth 110,338 86,013
Due to Pag-IBIG 95,497 91,066
124,395,750 617,009,927
35
Due to BIR represents taxes withheld from employees, supptiers/contractors and
corporate income tax due. The substantial decrease is mainly to the payment of
corporate income tax in 2017.
17. TRUST LIABILITIES

2017 2016
Customers’ deposits payable 12,163^369 12,219,269
Guaranty deposits payable 3,864^531 3,758,531
16,027^900 15,977,800
The account balance as of December 31, 2017 and 2016; of P16.027 million and
P15.977 million, respectively, pertains to guaranty deposits and bidders’ bonds.
18. INCOME TAX PAYABLE
The income tax payable pertains to the balance of income tax due at end of reporting
date.
19. OTHER CURRENT PAYABLES
2017 2016
Due to officers and employees 122,440 128,728
Other payables 27,398,971 17,417,850
27,521,411 17,546,578
Other payables substantially consists of retention from contracts with security service
provider, Pabahay housing loan amortizations deducted fromjpayroll for remittance to
the DENR.
20. DEFERRED SERVICE CONCESSION REVENUE
This account refers to the upgrading of the R-1 Expressway land construction of R-1
Extension and C-5 Link by CIC which is being amortized as income over 35 years:
2017 2016
R-1 Extension 6,369,430,765 6,589,066,309
R-1 Expressway 517,719,996 550,077,495
C-5 Link 32,860,170 32,860,170
6,920,010,931 7,172,003,974
36
As of December 31, 2017, the remaining concession terms for R-1 Expressway and R-1
Extension are 16 years and 29 years, respectively. Franchise term for C-5 Link has not
yet commenced as of December 31,2017.
21. DEFERRED CREDITS/UNEARNED INCOME
This account consists-of the deferred income on the loliowing:1;
2017 2016
Receivables on installment sales
Lots and Condominium Units 1,350,915,142 2,212,775,168
PRA Housing Program 68,390 68,390
Deferred output tax 124,947,909 115,698,015
Unearned income 20,496,934 52,160,266
1,496,428,375 2,380,701,839
Receivables on installment sales refers to the balance of the future income from sale of
PRA’s condominium units at Coastal Plaza Condominium,- CBP-1A lot and PRA’s
Pabahay 2000 Housing Program.
Deferred output tax refers to Value-Added Tax (VAT) recognized at the time of income
recognition and to be remitted upon collection of corresponding receivables.
22. INITIAL ADOPTION OF PHILIPPINE FINANCIAL REPORTING STANDARDS
The PRA’s financial statements for the year ended December 31, 2017 are its first
annual financial statements prepared under accounting policies that comply with the
Philippine Financial Reporting Standards (PFRS). The Authority prepared its opening
PFRS statement of financial position on January 1, 2016.
Reconciliation
A reconciliation of government equity based on old financial reporting framework and

PFRS follows:
December 31, 2015

Government equity based on old financial reporting framework j 18,274,052,136
1. Change in accounting for sale of real estate inventory 3,086,661,753
2. Recognition of deferred tax liabilities from income tax
reconciliation (213,203,386)
3. Recognition of accrual expenses (549,379,592)
4. Recognition of inter-agency payable (485,776,005)
5. Change in accounting for PPE classify as semi-expendabie;
expenses (1,033, 302)
6. Derecognition of receivables (400,372)
7. Change in accounting for inventory (19,716,772)
8. Change in accounting for investment in joint venture 460,149,938
Government equity based on PFRS 20,551,355,398
Reconciliation of Net Income
A reconciliation of Net income on old financial reporting framework and PFRS is as

follows:
December 31, 2016

Net income based on old reporting framework 647,517,636
1. Change in accounting for sale of real estate . | . ______ ____________
inventory (723,326,765)
2. Accrual of terminal leave benefits (9,264,400)
3. Recognition of deferred tax benefit 221,032,605
Net income based on PFRS 135,959,076
Examples of the effects of transition

1. The Authority used to recognize revenue on sale of real estate inventory using the
installment sales method. PFRS requires accrual basis of revenue recognition.
2. The old reporting framework did not require entities to recognize liability for terminal
leave benefits. PFRS requires recognition of such liabilities when all the criteria for
recognition of liabilities are met.
3. The old reporting framework did not recognize deferred income tax. PFRS requires
-that deferred taxes on temporary differences be recognized in the financial
statements.
23. GOVERNMENT EQUITY
The details of this account are shown below:
2017 2016
Initial cash releases 4,645,933 4,645,933
Equity releases in payment of notes
payable to PNCC 545,116,700 545,116,700
Equity releases for the Mindanao
Railway System Project 5,000,000 5,000,000
Conversion into equity of the balance
of notes payable to PNCC 43,592,980 43,592,980
Conversion into equity of PRA’s
assumed obligation with PNB
inclusive of interests and charges 2,649,920,444 2,649,920,444
3,248,276,057 3,248,276,057
PRA has an authorized capital stock divided into three million no par value shares
pursuant to PD 1084 and 1085 both dated February 4, 1977. Two million shares were
subscribed by the NG at a stated value of P734.139 million, payable by the transfer of all
its rights and interests in the Manila-Cavite Coastal Road and Reclamation 'Project
(MCCRRP) with a fair value of P729.139 million and the payment of P5 million in cash.
By virtue of PD No. 1085, PRA subrogated to the rights of the RP in respect to the 1973
contract entered by the latter with the Philippine National Construction Corporation
(PNCC), formerly Construction Development Corporation of the Philippines, on the
reclamation works and construction of the MCCRRP.
38
On December 29, 1981, PRA entered into a MOA with PNCC, with the latter giving up
in favor of PEA/PRA all its rights and participation in and to the areas of reclaimed land
and the latter paying the sum of P1,517.959 million by assuming PNCC’s obligation with ■-
PNB of P788.820 million and by issuance of promissory notes of P729.139 million.
Payments for the notes shall come from the equity releases from the NG. ......... ....
A total of P545.117 million was released by the BTr in payment for the notes. The
balance of the notes of P43.593 million, which was assignecTby"PNCC to the Asset
Privatization Trust (APT), was converted to NG equity in PRA in accordance with
Administrative Order (AO) No. 397 issued on May 13, 1998. AO 397 further provided
for the recognition by the Committee on Privatization (COP)/APf of PRA’s assumption of
PNCC's obligation with PNB in the amount of P788.820 million together with the accrued
interests and charges of P1.861 billion as of June 30, 1986 and the conversion into NG
equity in PRA of the resulting obligations as a consequence Of the foregoing totaling
P2.650 billion.
24. BUSINESS INCOME
This account consists of income from the following:
2017 2016
Service concession revenue 401,947,797 272,256,171
Sales revenue 61,831,199 200,698
Interest income 50,691,561 41,889,617
Fines and penalties 52,315 91,775
Management fees ^0 4,425,650
Other business income 83,026,096 101,702,407
597,548,968 420,566,318
Service concession revenue pertains to the 9 per cent income share of PRA from the
gross toil receipts along the Cavite Expressway, in accordance': with the Joint Venture
Agreement entered into with Cavite Infrastructure Corporation.
Sales revenue pertains to business from the following:
• Sale of reclaimed lands on installment basis to individuals and government entities.

Income on sale of lots is recognized when all the conditions of PAS 18 (Revenue) for
sale of goods have been met.
• Sale of housing units arising from collections from PEA Babahay housing loan
amortization.
• Sale of Coastal Plaza condominium units refers to the realization of the amount of 13
per cent of collection previously charged to deferred income. 1
interest income represents income on time deposits and short-term investments,

including interest earned on car loan of employees.
39
Fines and penalties pertains to penalty imposed on iate payments of PEA housing loan
program.
Other business income pertains mainly to income earned from;various activities such as
fun run events, concerts, cycling and other similar activities held at PRA’s CBP-1A
property.
25. SERVICE INCOME
2017 2016
Filing 2,763,000 900,000
Regulatory 1,997,997 67,875,000
Restoration 260;000 0
Clearance . 93,572 500
Processing ; 0 100,000
Other fines and penalties ; 0 10,246,844
5,114,569 79,122,344
There was a substantial decrease in regulatory fees in 2017 because of the decrease in
reclamation projects.
26. MISCELLANEOUS INCOME
2017 2016
Miscellaneous income 4,702,308 1,161,669
Other fines and penalties 4,579 1,157,899
4,706,887 2,319,568
Miscellaneous income pertains to ancillary income from PEA Tollway Corporation

(PEATC) such as share in advertising and rental income of; roadways from fun run
activities held in PRA properties.
27. PERSONNEL SERVICES
2017 2016
Salaries and wages 69,331,186 60,638,522
Other compensation 24,262,601 39,607,777
Personnel benefits contribution 7,914,234 8,707,993
Other personnel benefits 4,572,182 3,875,167
106,080,203 112,829,459
40
28. MAINTENANCE AND OTHER OPERATING EXPENSES
This account consists of the following: ; i
2017 2016
General services 31,614,887 19,527,659 j I
Professional services 15,023,024 24,111,135
Taxes, insurance premiums and other fees 10,489^389- ■ 49,426,016.... ..... 1 1
Travelling expenses 7,998,651 7,679,424
Utility expenses 5,198,379 6,722,617
Repairs and maintenance 4,619,528 5,403,031
Training and scholarship expenses 3,561,639 1,691,868
Supplies and material expenses 3,116,277 2,606,358 I !
Communication expenses 3,096,359 3,863,224
Confidential, intelligence and extraordinary 69,949 628,807
Other maintenance and operating expenses 12,659,429 18,296,576
97,447,511 139,956,715
29. FINANCIAL EXPENSES ' i
This account pertains to bank charges such as trustee fees;and fees on investment ;
placements.
30. INCOME TAX EXPENSE/BENEFIT
Income tax expense (benefit) for the years ended December 31 ;consists of the following:
2017 2016
Current Tax 619,645,516 245,655,997
Deferred Tax (744,503,327) (221,032,605)
(124,857,811) 24,623,392
The reconciliation of income tax expense computed at applicable statutory tax rates and
income tax expenses shown in the statement of comprehensive;income follows:
2017 2016
Statutory income tax 72,547,852 48,174,740
Income tax effects of:
Income already subjected to final tax (39,831,393) (23,551,349)
Expenses where no deferred tax was
recognized (157,574,270) 0
(124,857,811) 24,623,392
41
An analysis of deferred tax assets and deferred tax liabilities are as follows:
2017 2016
Deferred tax assets
Allowance for impairment 115,818 115,818
Deferred revenue I o 142,382,104
Unearned service concession revenue 2,076,003,279 2,151,601,192
Terminal leave benefits 7,187,344 ... ,6.978.24.0
2,083,306,441 2,301,077,354
Deferred tax liabilities
Installment receivables 356,744,085 1,258,485,860
Service concession asset 2,076,003,279 2,151,601,192
Interest receivables 27,503,449 12,438,000
2,460,250,813 3,422,525,052
Net deferred tax liability 376,944,372 1,121,447,699
31. CONTINGENCIES
Value-Added Tax Assessments
On February 5, 2003, PRA received from BIR a Formal Assessment Notice for alleged
deficiency in Value-Added Taxes (VAT) for the taxable years 1996 to 1999 in the total
amount of P117.363 million including increments. The following transactions were
covered by the assessment: (a) the transfer of the 10-hectare undeveloped reclaimed
property to Shoemart, Inc. as the transaction was made “in; the course of trade or
business”, (b) the supervision fee and management fee for services rendered by PRA to
the DENR, (c) the refunds made to the buyer of units at the Coastal Plaza Condominium
Project, and (d) rental payments for the buildings constructed by PRA for BIR. PRA, in
its letters dated March 12 and April 14, 2003, contested the assessment of VAT on the
above transactions and requested BIR to reconsider and/or re-evaluate the Formal
Assessment. The same was, however, denied through a letter dated July 3, 2003.
On August 15, 2003, PRA, through the Office of the Government Corporate Counsel
(OGCC), filed a case in the Court of Tax Appeals (CTA). On September 17, 2003, BIR
filed a Motion to Dismiss ,on the ground that the CTA has no jurisdiction over the case.
An Opposition and Supplemental Opposition were filed by PRA on September 25, 2003
and October 2, 2003, respectively. On October 16, 2003, the CTA promulgated a
Resolution dismissing the petition for lack of jurisdiction. PRA then filed a Motion for
Reconsideration on November 6, 2003 which was denied on January 9, 2004. On
February 16, 2004, PRA, through the OGCC, filed a Petition (for arbitration/mediation
appeal on disputed assessment) before the Department of Justice (DOJ).
On March 31, 2004, BIR issued its Final Decision on Disputed Assessment formally
assessing PRA of VAT for the taxable year 2000 amounting to P41.529 million including
interest and surcharges. On April 29, 2004, PRA filed a Petition for Arbitration with the
DOJ. On July 23, 2004, BIR filed an Answer to the Complaint. PRA, through OGCC,
filed its Motion to Admit Reply to the Answer of the BIR oh August 27, 2004. In a
meeting held on June 10, 2005 between BIR and PRA, the former proposed that during
the pendency of the arbitration case, PRA will pay the principal amount of VAT less
42
penalties and interests which was relayed to OGCC on August 5, 2005. Last hearing
was held on January 26, 2006. !
The abovementioned VAT deficiencies for CYs 1996-200Q in the totai-am ount-of-
P69.324 million, exclusive of interest and surcharges, were bettied/remitted to BIR in
December 2010 after negotiation with the BIR. PRA’s application for the abatement or
cancellation of interest and surcharge tax liabilities on the] said deficiencies in the
amount of P89.034 million was filed on January 4. 2011 andlis_still peading_witta_BJR:._.
Quezon City. I
Henry T. Sy, Jr.
Civil Case No. 05-575 was filed against PRA on June 29, 2005 at the Regional Trial
Court of Makati, Branch 149 to compel PRA to execute I the necessary deed of
conveyance covering the 19,274 square-meter parcel of land located in CBP 1A, relative
to the Agreement entered into between PRA and SM Inc. dated May 12, 1994, the Joint
Venture Agreement dated August 9, 1994 and the Deed of Undertaking dated June 29,
1995. Under the said Deed of Undertaking, SM Inc. shall advance P85 million to be
used for the relocation of squatters at CBP 1A, and PRA shall repay the same with lands
at CBP 1A. The case was referred to mediation and was terminated on October 5,
2005. On February 28, 2008, the Judgment was issued in favor of Mr. Henry Sy, Jr.
ordering PRA to convey and transfer the title and ownership,] including the delivery of
possession to Henry Sy. Notice of Appeal was filed by PR/ji, through OGCC, to the
Court of Appeals (CA) on March 26, 2008. The CA, in its resolution dated November 4,
2008, required PRA to file Appellant’s Brief, to which PRA, through OGCC, complied.
The appeal is deemed submitted for decision and ordered re-raffled for study and report.
On March 10, 2011, the CA directed the parties to manifest, within 10 days from receipt
of notice, whether or not supervening events have transpired that would render the
resolution of the appeal moot and academic. On March 28, 20jl1, PRA, through OGCC,
filed its Manifestation. I
On December 13, 2012, PRA and Plaintiff-Appellee. Sy filed] their Memoranda dated
December 11, 2012 and December 12, 2012, respectively. j
On March 26, 2013, a Motion for Reconsideration was filed by PRA, through OGCC,
after the CA’s decision denying PRA’s appeal and affirming the decision of the trial court.
On November 25, 2013, PRA filed a Petition for Certiorari before the Supreme Court
(SC) after the CA denied PRA’s Motion for Reconsideration.
The case is still pending with the SC. j
Central Bay Reclamation and Development Corporation (formerly Amari Coastal

Bay Development Corporation) j
I
|
This pertains to the claim for reimbursement of Amari in the amount of P11.528 billion
relative to the Joint Venture Agreement (JVA) it entered into with PRA on April 25, 1995.
The JVA was amended but was subsequently declared null and void by the SC in 2002.
Several motions for reconsideration were filed by Amari to set aside the said decision
43
but the SC denied with finality. Instead, the SC recognized Amari’s right for
■reimbursement on a quantum meruit basis.
In December 2009, Amari initially submitted its claim for reimbursement in the amount of
P13.386 billion.
PRA acknowledged the reimbursement claims of Amari and was able to verify the total
amount of P1.004 billion subject to validation by COA.
Based on the present petition, after a thorough internal review of documents and re
computation by Central Bay of its claims vis-a-vis the findings of PRA, Central Bay now
submits that the correct amount due for reimbursement is P11.528 billion and not merely
P1.004 billion as initially determined by PRA.
The issue now is whether or not Central Bay (Amari) is entitled to the total amount of
P11.528 billion as cost for reimbursement of what it had incurred in implementing the
voided JVA/Amended JVA.
On December 21, 2010, PRA received the Order dated December 15, 2010 of Director
Fortunato M. Rubico, Director IV, Commission Secretary of the COA, directing PRA to
submit within 15 days from receipt the Answer to the Petition filed by Central Bay
(Amari).
On January 11, 2011, the OGCC, in behalf of PRA, filed its Entry of Appearance and
Motion for Extension of Time to File Answer with COA.
Several joint manifestations and motions for extension of time to file answer were filed in
various dates, the latest of which was on January 13, 2014. i
On April 11, 2014, PRA filed its Answer with COA, praying that judgment be rendered
recognizing only the amount of P1.027 billion as validated by.PRA and dismissing the
other claims of Central Bay for lack of basis.
A Joint Motion for Judgment based on the Compromise Agreement executed between
the parties dated October 14, 2016 was filed by both parties on November 11, 2016.
PRA and Central Bay agreed to amicably settle the validated claims and all other claims
subject to COA CP Case No. 2010-350 by way of conveyance of property owned by
PRA. For this purpose, PRA decided to convey its real property located in Barangay San
Dionisio, Paranaque City with an area of 102,703 square meters and appraised at Php
10,000 per square meter.
Lito Potestad, et al.
On August 15, 2003, petitioner security guards Lito Potestadj et al. filed a complaint
before the Labor Arbiter, National Labor Relations Commission (NLRC) - National ■
Capital Region (NCR) against PRA and ACD Investigation Security Agency, Inc.
(ACDISA). They alleged that they were illegally dismissed due to their reassignment
from their original posts without any prior notice to vacate and placement to such posts
of another set of security guards.
44
On June 28, 2005, the Labor Arbiter ruled that petitioners were illegally dismissed and
ordered ACDISA and PRA to jointly and severally pay their back wages, separation pay,
salary differentials, 13th month pay, and service incentive leave pay from the time they
were illegally dismissed to the date of the decision.
PRA appealed to the NLRC whereby the latter, in a Resolution dated April 30, 2007,
modified the award of the Labor Arbiter and absolved PRA from payment of back wages
and separation pay but found it solidarily liable with ACDISA for the payment of salary
differential, 13th month pay, and service incentive leave pay.
On June 30, 2009, the Court of Appeals affirmed the NLRC Resolution dated April 30,
2007. The Supreme Court, Third Division, in its Resolution dated June 3, 2009, denied
the Petition for Review on Certiorari filed by PRA for failure to show that the Court of
Appeals committed any reversible error in the challenged Decision and Resolution. The
Resolution of the Supreme Court became final and executory on October 12, 2009.
Pursuant to the finality of the decision rendered by the Supreme Court, plaintiffs filed a
petition for money claim before the COA for the settlement of PRA’s obligation to pay
their salary differential, 13th month pay and service incentive leave pay in the amount of
P817.370.
On March 14, 2016, COA issued COA Decision No. 2016-006 granting the petition for
money claim of Mr. Lito Potestad, et al in the reduced amount of P777.804 without
prejudice to the right of PRA to recover the money award from the ACDISA.
PRA is coordinating with ACDISA to verify if Potestad, et al. have not yet claimed
payment from ACDISA before any payment will be made.
The COA issued its decision No.2016-006 dated March 14, 2016, resolving to grant the
petition for money claim of Mr. Lito Potestad against PRA.
On January 25, 2017, Potestad et al. filed a Motion for Execution. Subsequently, the
COA issued a Notice of Finality of Decision dated January 3.1, 2017. Pursuant to the
said COA decision, the PRA Board ordered the payment of money claim in the amount
of P777.804. PRA informed the legal counsel of the claimants of the requirements (such
as IDs, Affidavits of Quitclaim) prior to release of payment.
PRA is awaiting compliance to the requirements before payment will be released.
Other Contingencies
PRA is contingently liable for other lawsuits and claims filed by third parties, the
outcomes of which are not presently determinable. In the opinion of Management, the
eventual liability under these lawsuits, if any, will not have a material effect on the
financial statements.
32. ALABANG STOCK FARM PROJECT
On September 27, 1990, a Memorandum of Agreement (MOA) was entered into

between the Department of Environment and Natural Resources (DENR) and PRA,
45
formerly Public Estate Authority (PEA). PRA was responsible for the developmental
planning, marketing, contract administration and overall supervision of the Alabang
Stock Farm (ASF) Project. In exchange of PRA’s management and supervisory
services, it received management fee equivalent to 7.5% of the gross project revenue
and supervision fee equivalent to 2.5% of the total project cost. The MOA was effective
for 10 years from the date of signing and renewable for a similar term by mutual
agreement of the parties.
On April 14, 1993, a Joint Venture Agreement (JVA) was entered into between The
Republic of the Philippines (RP) and Filinvest Alabang, Inc.j (FAI), formerly Filinvest
Development Corporation (FDC), for the ASF Project. The ASF Project aims to develop
the 244-hectare lot located in Alabang, Muntinlupa which is now known as the Filinvest
City. The administration of the project was assigned to the DENR.
Based on the JVA, the profit sharing is at 51%-49% in favor ofithe National Government
(NG). The NG opted to convert its 25% share in profit for 19,000 housing units, which
eventually become 21,000 due to a Compromise Agreement dated April 14, 1993. The
new profit sharing ratio after the conversion is 74%-26% in favor of FAI.
DENR informed PRA in its letter dated April 19, 2016 that the arrangement between
PRA and DENR as to management of the property is no longer in effect. PRA shall no
longer act in representation of or in behalf of the DENR on;any matter involving the
Property, particularly on the receipt of the income and other fees pertaining to its
management and utilization. Simultaneously, FAI was advised to directly transact with
the Land Management Bureau (LMB) of the DENR.
In August 2017, PRA remitted to the NG through the Bureau of the Treasury (BTr) in
their remaining profit share in the ASF Project in the amount of P1,240,282,291 with
Official Receipt No. 2546298 dated August 22, 2017.
The terminal report of ASF Project was already presented in Board Meeting last July 19,
2017. On October 13, 2017 DENR acknowledged receipt of proof of remittance and the
terminal report in compliance with the DENR letter and PRA’s full disengagement to the
Alabang Stock Farm (ASF) Project. ;
PRA coordinated with the Project Oversight Committee (POC) chaired by the LMB
Director and other LMB officials and FAI representatives for: the smooth turn-over of
documents pertaining to ASF Project. This includes submission of ASF Project Terminal
Report and remittance to NG the remaining profit share in the project.
33. AUTHORIZATION FOR ISSUE
The Board of Directors approved on February 21, 2018 the PRA’s financial statements
for the year ended December 31, 2017 and 2016 as per Board Resolution No. 4826
series of 2018.
46
34. SUPPLEMENTARY INFORMATION REQUIRED UNDER BIR REVENUE
REGULATIONS
In compliance with the requirements set forth by BIR under RR 15-2010, hereunder are
the information on taxes, duties and license fees paid or accrued during the taxable
year:
i) Philippine Reclamation Authority is a VAT-registered' government-owned 67

controlled corporation with VAT output tax declaration of P 38.034 million for the year
based on the amount reflected in the sales account of P 316.950 million.
ii) The amount of VAT input taxes claimed are broken down as follows:
a) Beginning of the year 855,320
b) Current year’s purchases:
1. Goods other than for resale or manufacture 838,957
2. Services lodged under other accounts j 3,527,297
c) Claims for tax credit (4,861,861)
Balance at the end of the year 359,713
iii) Other taxes and licenses

a) Local
Community Tax Certificate (CTC) 10,500
b) National
BIR Annual Registration 500
11,000
iv) Amount of withholding taxes paid for the year amounted to: j
a) Tax on compensation 13,405,779
b) Creditable withholding taxes ; 1,631,551
c) Final withholding taxes 2,157,430
17,194,760
v) Corporate income taxes paid
a) 1st quarter 2017 150,583,549

b) 2nd quarter 2017 370,579,424
c) 3rd quarter 2017 2,746,555
d) 4th quarter 2017 485,450,795
1,009,360,323
47
PART II
AUDIT OBSERVATIONS AND
RECOMMENDATIONS
AUDIT OBSERVATIONS AND RECOMMENDATIONS
PRA’s Performance on Various Projects
The Manila Cavite Tod Expressway Project (MCTEP)
In 1990, a Toll Operation Certificate was issued to PRA by theEepu.bIicôLthe_Hbilippines.

(RP), through the Toll Regulatory Board (TRB), for the construction, operation and
maintenance of R-1 Expressway and R-1 Expressway Extension as toll facilities for 25
years. Subsequently, in 1994, PRA and the Malaysian corporations, Majlis Amana Rakyat
(MARA) and Renong Berhad (RENONG) entered into a Joint Venture Agreement (JVA)
where they agreed to develop the Manila Cavite Toll Expressway (MCTE), which now
includes the C5 Link Expressway, and to operate the same for 35 years. In consideration of
their respective obligations, the parties agreed that their proportionate share in the project
income shall initially be 10 per cent - 90 per cent in favor of the Malaysian parties and
(Malaysia) Berhad (UEM). The Malaysian parties, UEM and MARA, then incorporated and
assigned their rights and obligations to UEM-MARA Philippines Corporation (UMPC), which
represented them in the Toll Operation Agreement (TOA) executed with the RP and PRA.
In 1999, UEM divested its entire equity interest in UMPC to the Coastal Road Corporation
(CRC), officially relinquishing all of UEM’s obligations and liabilities in the JVA and TOA.
On August 25, 2006, UMPC entered into a P3.500 billion Omnibus Loan Agreement with a
syndicate of lenders for the construction of Segment 4 of R-1 Expressway Extension of the
MCTE Project. One of the conditions of the lenders is that the Project must have a strategic
partner which is an Equity Contractor. Thus, the No. 14th Metallurgical Construction
Company of China Nonferrous Metal Industry signed an agreement to purchase 40 per cent
of UMPC for a P1.500 billion equity.
On November 14, 2006, an Operations and Maintenance Agreement (OMA) was executed
between PRA, UMPC and TRB. Under the OMA, the revenue sharing was
amended/modified temporarily wherein PRA shall receive 8.5 per pent of gross toll revenue
while UMPC shall receive 91.5 per cent of the gross toll revenue: absorbing all Operating
and Maintenance costs and expenses. PRA’s share shall be increased by 0.5 per cent every
periodic Toll Rate Adjustment under the TOA but not to exceed 10 per cent of gross toll
revenue.
Upon repayment in full of loans and interests costs, costs advances, capital investment and
the return of equity, UMPC and PRA shall share at the ratio of 60-40 as originally agreed
upon under the JVA, from the R-1 Expressway and R-1 Expressway Extension in favor of
PRA (Clause 5.b of the OMA).
The amended revenue sharing arrangement shall be implemented during the period of the
existence of the loan, which is payable for a period of eight years under the Omnibus Loan
Agreement of August 25, 2006, and the repayment of the equity of the Equity Contractor,
which shall be converted into subordinated debt pari passu with the Lenders for a period
which shall not exceed an additional three years after the period of eight years.
On May 20, 2010, the PRA Board of Directors approved the extension of the effectivity of
the OMA for a period of four years from August 25, 2017 to August 25, 2021, or upon full
48
settlement of the funding obtained, whichever comes first, subject to compliance of several
terms and conditions.
On March 5, 2012, the Securities and Exchange Commission approved the-application-of-

UMPC for change of corporate name to Cavitex Infrastructure Corporation (CIC). On
December 19, 2012, CIC advised PRA that Cavitex Holdings Inc. (CHI),-formerly Coastal
Road Corporation, entered into a financing and cooperation agreement with Metro Pacific
Tollways Corporation (MPTC), a wholly-owned subsidiary.of._^feiiXLJBsusifii3-JLovesjtme^
Corporation. The agreement involves the issuance of a P6.7 billion bond convertible into
non-voting redeemable preferred shares of CHI. Under the said agreement, MPTC will
provide management assistance to CIC effective January 2, 2013.;
Audit Observations on the MCTEP
1. Ten per cent share from the project income of the MCTEP covering the years 1998
to 2006 amounting to P222.644 million is doubtful.
The JVA provides that Phase 1 of the MCTEP means the design and improvement of
the R-1 Expressway and the design and construction of the C-5 Link Expressway.
Based on the revenue sharing clause of the JVA, Project Income after meeting
Operation and Maintenance Costs shall be shared by the parties in the following manner
and proportion:
a. During the period from the completion of the Design and Construction Works
for Phase 1 to the repayment in full of the loans and interest cost cost
advances, capital investments of both the Malaysian Parties and PRA and
the Return on Equity to each of the parties hereto pursuant to clause 4.5:
PRA -10%
Malaysian Parties - 90%
b. Thereafter, during the remainder of the Toll Collection Period:
PRA - 60%
Malaysian Parties - 40%
According to Management, construction of C-5 Link Expressway was deferred due to the
Right-of-Way (ROW) issue and was subjected to another revenue sharing provision
under the OMA. Based on the records of PEATC, from the years 1998 to 2006, the
project income after meeting O&M Costs amounted to P2.226; billion, as shown on the
next page:
49
Year Project Income* PRA (10 %) CIC (90 %)
1998 26,706,964 2,670,696 24-036,268
1999 165,752,561 16,575,256 149!, 177,305
2000 211,020,828 21,102,083 189,918,745
2001 199,532,406 19,953,241 179,579,165
2002 291,450,695 29,145,069 262;305,626
2003 303,233,962 30,323,396 272;910,566
2004 302,728.836 30,272,884 272:455.952___
2005 372,604,300 37,260,430 335:343,870
2006 353,409,513 35,340,952 318:068,561
2,226,440,065 222,644,007 2,003;796,058
‘ Equivalent to the funds distributed to the venturers based on the record of PEATC.
Based on the table, PRA got P222.644 million while UMPC got P2.004 billion based on
the sharing of 10 per cent - 90 per cent ratio in favor of UMPC. Repayment in full of the
loans and interest cost, cost advances, capital investments and the Return on Equity
may have been met already and instead of the revenue sharing of 10 per cent - 90 per
cent, the 60 per cent - 40 per cent sharing in favor of the PRA should have been
applied. Due to absence of monitoring reports supposedly prepared by PRA and duly
validated by the TRB for the determination of the applicable sharing ratio between PRA
and the Malaysian Parties, now CIC, the correctness of revenue share of PRA based on
10 per cent of project income in years 1998 to 2006 was not attested.
There was no other alternative procedure that we could adopt to obtain sufficient
evidence to determine whether the repayment condition! was already met and
subsequently determine the correctness of the share of PRA in the project income of
MCTEP.
We recommended that Management take the necessary actions to determine whether

the repayment condition was already met to commence the project income sharing ratio
of 60-40 in R-1 Expressway in favor of PRA and to collect the amount rightfully due to it
under the JVA.
Management submitted information on their actions on the issue of the 60:40 shift in
revenue sharing on the MCTEP taken as a whole, but the determination of whether the
repayment in full of the loans and interest cost, cost advances, capital investments and
the Return on Equity pertaining to R-1 Expressway as of 2006 was not presented.
Thus, we reiterate our recommendation that Management! determine whether the

repayment in full of the loans and interest cost, cost advances, capital investments and
the Return on Equity pertaining to R-1 Expressway as of 2006 were already met to
commence the project income sharing ratio of 60-40 in favor of PRA and to collect the
amount rightfully due to it under the JVA.
50
2. The accuracy and completeness of the 9 per cent share from ancillary income in
the MCTEP, amounting to P4.296 million, were not ascertained as contracting for
ancillary services and collection of related income were unilaterally undertaken by
CIC. . _______
The co-operation clause which serves as a control design to enable both -parties-to
protect their interests in the JV income sharing was not implemented. Section 3.4 of the
JVA provides that_none_qf the parties hereto, shall enter into any agreement with any
other person for any purpose connected with the Project ■without the prior written
approval of the other parties hereto.
Upon the execution of the OMA, PRA in effect surrendered to CIC the rights and
obligations of the PEA Tollway Corporation (PEATC) pertaining to the collection of
ancillary income in the MCTEP, when contracting for all to ancillary services, and the
collection of the ancillary income were unilaterally undertaken by CIC.
PRA collected P3.655 million in CY 2017 and P641,403 in January 2018 from CIC and
reported P3.655 million as miscellaneous income representing PRA’s 9 per cent share
from ancillary income in the MCTEP, as follows:
OR
No. Date P articulars A m ount R em arks
8082 April 25, 2017 Share on ancillary income as P2,944,194.17 Reported as
of December 2016 income in CY
2017
9601 November 2, Share on ancillary income 710,672.76 Reported as
2017 income in CY
2017
S ub-total, reported as in co m e in CY 2017 3,654,866.93
09995 January 29, Share on ancillary income for 641,403.00 Collected in CY
2018 September to December 2017 2018
4,296,269.93
As a result, we were not able to validate the completeness and accuracy of the P4.296
million reported 9 per cent share of PRA on the ancillary income collected by CIC.
a) Consider making a representation with CIC for the application of Section 3.4 of the
JVA, on the co-operation provision, and that all collections: of income in the MCTEP
and the remittance of shares be undertaken by PEATC;
b) Monitor the activities in the MCTEP to ensure that the share of the PRA in the
Project/ancillary income is complete and at correct amounts to protect the interest of
the Government; and 1
c) Determine the bases of agreed-upon advertising rates.
51
Management committed to undertake the following plans of action:
• Require the Project Committee, to be involved in the negotiation and approval of all
projects of PEATC considering its responsibility over the Project;
• Formally inform CIC that PRA be also involved in the negotiation and approval -of-
contracts pertaining to ancillary income; ’
• Monitor the activities in the MCTEP thru the Financial Controller and other managers
of PRA, as may be relevant and necessary, until the PEATC Board of Directors is
duly constituted; and
* Participate in determining and verifying the bases of agreed-upon advertising rates

and other relevant ancillary income sources due the Project.
The Audit Team will monitor the action to be taken by Management to address the
issues raised.
3. Some provisions of the OMA entered into by PRA with CIO and TRB relative to the
MCTEP appear to be disadvantageous to the Government/PRA.
The following provisions of the OMA executed between PRA, CIC and TRB on
November 14, 2006 appear to be irregular and/or disadvantageous to the Government:
a) Clause 3 of the OMA. PRA agreed to execute and deliver a VTA which shall be
coupled with an interest covering two-thirds of the outstanding capital stock of
PEATC in order to transfer the voting rights over such PEATC shares in favor of
UMPC.
b) Clause 4 of the OMA. As a consequence of UMPC’s share in the O&M, and subject
to the provisions o f Executive Order No. 380-A dated April 3, 2006, UMPC shall
nominate five of the Board of Directors of PEATC and PRA\shail nominate two of the
Board o f Directors o f PEA TC. xxx
The power to appoint the members of the Board of Governryient Owned or Controlled
Corporations (GOCCs), like the PEATC, belongs to the President of the Philippines,
thus this power of the President cannot be diminished/changed or be subject of
agreement by the parties in the VTA.
c) Clause 5.b. of the OMA. Upon repayment in full o f loans and interests costs, costs
advances, capital investment and the return of equity, UMPC and PRA shall share at
the ratio o f 60-40 as originally agreed upon under the JVA, from the R-1 Expressway
and R-1 Expressway Extension in favor of PRA.
Linder Clause 3.2 of the JVA, the parties agreed that they shall cause the
preparation of the Project Cash Flow. The Project Cash Flow shall be the basis for
the computation of the repayment in full of the of loans and interests costs, costs
advances, capital investment and the return of equity. This control design under the
JVA was not provided in the OMA.
52
Project income means the revenue from any Tolls collected by PRA and any
Ancillary Income received by PRA after deduction o f;a ll costs and expenses
associated with such collection and income (Clause 1.1 of the JVA). When the OMA
took effect, Project cash flows is no longer readily available because PRA through
PEATC no longer accounts for the costs and expenses associated with toll
collections and income. . . .
Prior, to.-the. -OMA,_the--to!ls-Col!ected and -any AncillaQit-lncome—received-after—

deduction of all costs and expenses associated with such Collection are accounted in
the books of PEATC. The TOA obligated PRA, formerly PEA, to incorporate a
wholly-owned subsidiary company, the powers and function of which shall only be to
undertake and perform PRA’s obligations under the JVA and TOA. PEA/PRA cannot
collect toll fees until such time that a subsidiary is incorporated for this purpose1.
Thus, PRA incorporated PEATC on October 7, 1997 to undertake and perform the
O&M obligations of PRA under the TOA specifically to manage, operate, monitor,
maintain, construct and repair the MCTEP including the construction of feeder roads,
interchanges and other facilities at any point of MCTE Toll Roads and to collect fees
therefrom.
d) Clause 6.e of the OMA. All disbursements for O&M shall be authorized solely by
UMPC. In effect, there shall be no PEATC/PRA Board approval for any O&M
disbursement.
This appears to be contrary to Section 16 of Executive Order No. 518 dated January
23, 1979 which provides that, ‘The operating budget of\a government owned or
controlled corporations shall be accompanied by similar l operating budgets of its
subsidiaries and affiliated companies” The CY 2017 Corporate Operating Budget
(COB) of PEATC was not presented as part of the COB of PRA. CIC approves the
COB of PEATC.
e) Clause 5 of the OMA. Effective on the first day of UMPC's participation in O&M,
there will be a new and improved distribution of PRA and UMPC share. PRA shall
receive 8.5% of gross toll revenue while UMPC shall receive 91.5% o f the gross
revenue absorbing any of the O&M costs and expenses.
Prior to the OMA, the sharing is 90:10 after deducting O&M, thus, in effect PRA
shares only 10% of O&M cost, which was shouldered by UMPC under the OMA.
There is no guarantee that the sharing is improved.
f) Clause 5.a (ii) of the OMA. The new PRA share shall be implemented during the
period of repayment of the equity contractor which shall not exceed three years after
the 8-year payment period of the Omnibus Loan.
In Note 1 to CY 2017 financial statements of PEATC, it was clearly stated that the
agreement with the' equity contractor was not executed and declared null and void.
Thus, the 3-year repayment period extending the effectivity of the OMA may not be
necessary and/or the recovery of the investment of the equity contractor amounting
to P1.5 billion may be excluded from the conditions under 5.b of the OMA.
1 Section 15.03(2) of TOA
53
During the exit conference, Management confirmed that the agreement with the
equity contractor did not materialize, and instead the CY 2010 Project fund was
sourced from Manila Cavite Toll Road Finance Company (MCFC) or the Special
Purpose Entity (SPE).
In Note 13 to CY 2016 financial statements of CIC, it was disclosed that in-2010,-CIC

entered into an agreement with MCFC or the SPE for the sale of its rights to the
future ..toll collectioJlsî jhe.toll. road over a certain period tothe SPE.______________
In view of the non-existence of the equity contractor in 2006, clause 5.a(ii) on the
repayment of the equity contractor which shall not exceed-three years has no basis
and should have not been considered in the extension of the OMA for a period of
three years.
In view of the foregoing, we recommended that Management study the options

available to protect the interest of government/PRA in the MCTEP because of the
adverse effects of the arrangement under the OMA, and the deletion of several control
measures under the TOC, TOA and the JVA to enable Management to effectively
monitor the conditions for the realization of the 60 per cent; PRA share on the toll
revenue.
Management commented as follows:
• The OMA was reviewed and found legally in order by the Office of the Government
Corporate Counsel (OGCC) in its Contract Review No. 354, Series 2006, Moreover,
the VTA, which is an annex to the OMA, was likewise reviewed and found legally in
order by the OGCC in its Contract Review No. 377, Series of 2006. Thus, the OP,
through the Executive Secretary, approved the OMA on November 21,2006.
* On December 4, 2017, the Governance Commission fo r GOCCs (GCG) directed

PRA to submit 2 nominees and CIC its 10 nominees to the PEATC Governing Board,
to be vetted and shortlisted by GCG, for recommendation to the President of the
Philippines for approval. The President shall then appoint 2 nominees from PRA and
5 from CIC. Flence, Clause 3 and 4 of the OMA do not divest and take away the
power of the President of the Philippines to appoint members of the Board of
GOCCs.
• Sometime in 2010, to enable CIC to obtain funding from sources and/or through
means other than project finance loans, CIC sought the approval of both PRA and
TRB to create an offshore special purpose entity (SPE). In'its letter dated March 30,
2010, the TRB communicated to CIC its approval of the said SPE transaction while
PRA communicated its approval to CIC in its letter dated May 21, 2010, on the basis
of PRA Board Resolution No. 4113, Series of 2010.
In addition, during the exit conference conducted on May: 28, 2018, Management
informed the Audit Team that GCG wrote a letter referring to the OGCC the application
of R.A. 10149 in relation to the validity and/or continued validity of the VTA, as well as its
extension including the extent of its coverage to PEATC operations.
The Audit Team noted in the letter dated March 15, 2018 of GCG to OGCC that the
former stated that currently, PEATC is being operated by CIC, a private corporation.
54
Moreover, during the years 2006 to 2012, members of the PEATC Board and the
PEATC President assumed their positions without the desire Jetter from the President,
seemingly recognizing Clauses 3 and 4 of the OMA. Thus,:we do not agree on the
explanation of Management that the OMA does not divest and take away the power of
the President of the Philippines to appoint members of the Board of GOCCs in the case
of PEATC.
In Contract Review No. 354. series of 2006, the OGCC; st ated that the subject
agreement may be given due course, however, they emphasized that they express no
opinion on the sufficiency and reasonableness o f th e ; financial and technical
considerations of the Agreement as well as the necessity or propriety of entering into the
same as these are matters best determined by PRA management in the exercise of its
sound business judgment
In Contract Review No. 377, series of 2006, on the review of the VTA, the OGCC
determined that the contract may be given due course, however, it contains a statement
that the provisions relating to the duration of the Agreement was not passed upon in the
contract review as the matter is solely left to the sound business judgment o f the PRA.
Lastly, the OMA was approved by the OP of the Republic of the Philippines on
November 21, 2006, however, the review did not cover the sufficiency and
reasonableness o f the financial and technical considerations of the Agreement as well
as the necessity or propriety o f entering into the same as those are matters best
determined by PRA in the exercise of its sound business judgment From the foregoing,
PRA cannot claim that the review of the OGCC concluded that the OMA and the VTA
was found to be advantageous to the government.
The Aiabang Stock Farm (ASF) Project
On September 27, 1990, a Memorandum of Agreement (MOA) was entered into between
the Department of Environment and Natural Resources (DENR) and PRA. PRA was
responsible for the developmental planning, marketing, contract administration and overall
supervision of the ASF Project. In exchange of PRA’s management and supervisory
services, it received management fee equivalent to 7.5 per cent of the gross project revenue
and supervision fee equivalent to 2.5 per cent of the total project cost. The MOA was
effective for 10 years from the date of signing, or until September 2000, and renewable for
a similar term by mutual agreement of the parties.
On April 14, 1993, a Joint Venture Agreement (JVA) was entered into between the Republic
of the Philippines (RP) and Fiiinvest Aiabang, Inc. (FAI), formerly Filinvest Development
Corporation (FDC), for the ASF Project. The ASF Project aims to; develop the 244-hectare
lot located in Aiabang, Muntinlupa which is now known as the Filinvest City. The
administration of the project was assigned to the DENR.
Based on the JVA, the profit sharing is at 51 per cent - 49 per cent in favor of the National
Government (NG). The NG opted to convert its 25 per cent share in profit for 19,000
housing units, which eventually become 21,000 due to a Compromise Agreement dated
April 14, 1993. The new profit sharing ratio after the conversion is 74 per cent - 26 per cent
in favor of FAI.
55
Audit Observation on the ASF Project
4. PRA has not yet rendered a complete accounting of its accountabilities related to
the ASF Project.
In a letter dated April 19, 2016 of the DENR to PRA, PRA was informed that the
arrangement between PRA and DENR as to management of the property is no longer in
effect. PRA shall.no Jonger.act in.representation of or in behalf of the DENR on any
matter involving the Property, particularly on the receipt of the income and other fees
pertaining to its management and utilization. Simultaneously, FAI, the project developer,
was advised to directly transact with the Land Management Bureau (LMB)'of the DENR.
The balances of assets, liabilities and equity of the ASF Project per record of PRA as of
December 31, 2017 are the following:
ASSETS
Current Assets
Cash in Bank 82,546,578
Receivables 134,540,878
Inventories 521,023,500
Total Current Assets 738,110,956
Non-Current Assets
Property and Equipment 1,613,176,500
TOTAL ASSETS 2,351,287,456
LIABILITIES AND EQUITY

Current Liabilities 84,006
Deferred Credits 164,592,809
Equity 2,186,610,641
TOTAL LIABILITIES AND EQUITY 2,351,287,456
Cash in Bank consists of the remaining P56.337 million escrow fund used to finance the
replication of affected government facilities and structures in the area and P26.209
million unremitted collection from housing units sold. Receivables pertain mainly to loan
receivables from housing units amounting to P117.627 million. ;
inventories pertain to remaining saleable lots subject to proportionate sharing between

the FAI and the DENR recorded at cost of P1,500/square meter. Property and
Equipment pertains to cost of land used as Roads and Open Spaces and the 26.5
hectare land share of NG used in relocation and replication of government facilities and
structures inside the ASF Project with the titles in the name of RP.
The accounting for sales and collections pertaining to the Project was undertaken by
FAI. The financial statements prepared by FAI for the Project is being audited by a
private auditing firm.
In our view, considering that PRA has been formally disengaged in the Project per letter
dated April 19, 2016 of the DENR, PRA has the obligation to render an accounting of the
outcome of the services it rendered on the planning, marketing, contract administration
and overall supervision of the ASF Project.
56
We recommended and Management concurred to render a complete accounting and
settlement of all its accountabilities related to the ASF Project. Meeting with
representatives from the LMB of the DENR for the proper turnover of the obligations with
regard to ASF Project, will be requested by PRA. Management also plans-to-remit-the---------- -j -
remaining funds amounting to P28.8 million in June 2018. j j
The Audit Team will validate the correctness of the amount that Management will, remit,.. | !
...............
to DENR....................... . . . ...... ____________________ l_L
The Costal Plaza Condominium Project (CPCP)
On December 21, 1990, PRA entered into a construction agreement with the First United
Construction Corporation (FUCC) for the construction of fourteen (14) identical tenement
buildings consisting of four floors known as “Bahay Pangarap". This was originally
conceptualized as a relocation site for the marginalized families displaced from the
reclamation area which is now known as Central Business Park; I and Freedom Islands.
However, PRA adopted the cross subsidy scheme which modified the concept from low-cost
housing units to a condominium type dwelling units to escalate the: cost value. The project’s
name was changed to CPCP. To date, although most of the units were already sold,
occupancy rate for each building is relatively low.
Audit Observation on the CPCP
5. The maintenance services in the CPCP were provided to unit buyers free of
charge resulting in incurrence of unnecessary expenses amounting to P5.142
million.
In CY 2015 Annual Audit Report, we reported that PRA continues to assume the costs
for the maintenance of CPCP because of the refusal of the unit owners to organize the
Condominium Corporation pending resolution of their issues/concerns regarding CPCP,
i.e., delay of PRA in the delivery of the agreed facilities and amenities.
All the required deliverables were delivered by PRA when the construction of access
road, including the concrete fence separating the informal settlers across the
condominium, was finally completed in December 2015. However, PRA still continues to
pay for the maintenance costs in the CPCP, resulting in incurrence of unnecessary
expenses amounting to P5.142 million for the period January 1 to December 31, 2017,
as follows:
Particulars Amount
Security 3,619,343
Water 836,983
Electricity 440,805
Janitorial 225,821
Telephone 18,937
5,141,889
This is not in consonance with the Master Deed with Declarations of Restrictions for the
Project.
57
These costs are expected to increase in succeeding years, and should PRA be unable
to enforce the provisions under the Master Deed, incurrence of additional unnecessary
expenses by PRA will not be prevented. As per inquiry, PRA ;has been paying for the
maintenance expenses in CPCP since its completion in 1994. - ---- ---------
We recommended that Management recover the amount paid for- the- maintenance-
expenses from the occupants/buyers of CPCP. Management is likewise_advised_to_
discontinue the _provision^ „ o f . maintenance services for free to the CPCP
occupants/buyers to prevent unnecessary use of government funds.
Management commented that the Estates Management Department will conduct general
assembly meeting in June 2018 to discuss with the buyers/occupants of the CPCP the
creation of a Condominium Corporation. In the meeting they will also be informed on the
payment of monthly assessments that will cover the maintenance and administration
costs of CPCP. An evaluation is being done for the possible increase in the cost of
water per cubic meter at CPCP which will be implemented in the July 2018 billing.
Management of PRA Properties
6. Portion of Central Business Park (CBP) 1A, covering an iarea of 34,644 square
meters, is occupied without authorization or consent from PRA. No income is
generated therefrom.
CBP 1A covers an area of 180 hectares located entirely in Pasay City, with 45 hectares
owned by PRA prior to their disposition. As of December 31, 2017, 53,919 square
meters, or 5.39 hectares, valued at P492.488 miliion are still owned by PRA, which is
presented as Inventories in its Statement of Financial Position. !
The Audit Team conducted inspection of the CBP 1A with the assistance of the PRA
personnel on April 18, 2018. The following were noted during the inspection:
a) 3,401 square meters with Transfer Certificate o f Title (TCT) No. 145169
Based on inquiry, the property titled in the name of PRA is proposed for use as site
of PRA Building. However, upon inspection, the property is being used as a
motorcycle parking space with one person guarding the area;
b) 2,917 square meters with TCT No. 142199 and Tax Declaration No. B1-076-02465;
and 2,501 square meters with TCT No. 142200 and Tax Declaration No. B1-076-
02466, or total area of 5,418 square meters
Based on the Schedule of Property submitted by Management, these land assets are
earmarked for conveyance to Shoemart, Inc. (SM). The TCTs are under the name of
PRA. However, upon inspection, it was found that a construction is in progress on
the area. With the on-going construction, it appears that a building permit was
secured despite the lack of consent from PRA.
c) 3,122 square meters with TCT No. 142203 and Tax Declaration No. B1-076-02469;
and 2,483 square meters with TCT No. 142202 and Tax Declaration No. B1-076-
02468, or total area of 5,605 square meters.
58
Based on the Schedule of Property submitted by Management, these land assets
are, likewise, earmarked for conveyance to SM. Both TCTs are under the name of
PRA.
Upon inspection, portion of Mall of Asia Arena Annex (MAAX) Building is built on the-
two lots owned by PRA. The MAAX is currently operational [and earning income from
operation. It appears that a building permit was, likewise, secured despite the lack of
consent from the PRA. Per inquiry with Management, the building was erected
sometime in 2012, and no income was generated by PRA from the land occupied by
MAAX.
d) 20,221 square meters with TCT No. 148559
The property was converted to a parking space with one person guarding the area.
Based on financial reports of PRA, no rental income is realized from the property.
a) Direct the Marketing Department to demand the unauthorized occupants to vacate

the properties of PRA and to pay PRA for compensation for the use of the property to
protect the interest of the government; and
b) Take appropriate actions against officials who are negligent in the performance of
their duties of securing the properties of PRA.
Management commented that:
• 3,401 square meters with TCT No.145169. The said area was earlier designated as
Meralco sub-station relocation; hence in line with the turn-oyer of utilities for security
and administration, the Condominium Corporation secured the area and utilized it as
security station. PRA will notify the Corporation that the site will be used as location
for the proposed PRA Building and will ask the Association to clear the area and
vacate the premises from unauthorized used.
• Total area of 5,418 square meters covered by 2 TCTs and the total area of 5,605
square meters covered by 2 TCTs - The properties are the-share of Shoemart in the
development of CBP 1A, PRA withheld the actual turnover of the titles pending the
issuance of a Certificate of Completion and Acceptance. An Acceptance Committee
was created to look into the completion of the rectification works from SM. PRA will
notify SM and call their attention on the use of the properties pending conveyance.
20,221 square meters with TCT No. 148559 - This is part; of the area subject of a
Court Judgment based on Compromise Agreement between PRA and City of Pasay
for settlement of PRA’s alleged Real Property Taxes due td Pasay City. Pasay City
has been authorized to occupy and take possession of the land pursuant to said
Judgment based on the Compromise Agreement. A casd is still pending with the
Supreme Court seeking/nullification of the said Compromise Agreement and for PRA
to take over the possession of the property.
59
It appears from the above explanation of Management that the 3,401 square-meter lot
proposed site of PRA building is idle which could be a potential source of income, in the
meantime that the construction of the PRA building has not yet started. Hence, we
suggest that Management utilize the property to generate income for the PRA.
7. The requirement that the 50-meter strip along the containment walls shall be left
as green public way provided in the land use plan under the Boulevard 2000
Integrated Framework Plan was not implemented. ____j_ _ _ _________________
The land use plan under the Boulevard 2000 Integrated Framework Plan provides as
follows:
“4.2 Greens and Open Spaces
As lungs of the project, the green and open spaces will provide the organic
effect for the development What was lost along Roxas Boulevard as regards
the strand of Manila Bay has to be recovered along the coastal strips of
reclamation. The green strips and pocket parks that must dot the reclamation
are the planning features that will generate the image of freshness of the
project The proper disposition and guarantee for the public access of these
features humanize the project The strong human longing for nature and the
sea is therefore met.
It should therefore be recognized as a non-negotiable element in Boulevard

2000 the 50-meter strip of land along the containment walls of reclamation
shall be left as a green public way. Xxx1’
The Investment property of PRA includes Esplanade valued at P1.161 billion. The
Esplanade is a green belt along the bay edge of Boulevard 2000, located at the coastal
strips CBP 1A, CBP 1 Island B & C and CBP II. It is a fifty (50) meter wide open space
registered in the name of PRA in behalf of the Philippine Government per TCT Nos.
144375, 181090 and 179166 with an area of 97,821 square meters, 18,537 square
meters, and 29,379 square meters, respectively.
In the Compromise Agreement between Salem Investment Corporation (SIC) dated May
3, 2006 relative to the 8.57-hectare Esplanade property, it was agreed that 20 per cent
or 17,100 square meters of the Esplanade was to be leased to SIC for mixed uses
(food/dintng outlet and amusement/entertainment purposes). The remaining 80 per cent
shall be developed by SIC for park, open promenade, joggers and bikers lane.
Based on Management’s data, the improvement made by SIC covered about 26,712
square meters of the Esplanade, thus exceeding by 9,612 square meters the 17,100
square meters allocated for lease. This is a clear violation of the agreement, however,
the Compromise Agreement, governing the terms and conditions on the lease of the
property, has already expired since May 3, 2016.
Upon expiration of the Compromise Agreement, PRA and SIC failed to agree to the
terms of contract but SIC continues to occupy the property and paid the corresponding
rental. Hence, PRA filed a Motion for Execution which was decided by the Regional Trial
Court in favor of SIC. To date, the parties are under negotiation for the renewal of the
contract.
60
On the other hand, upon inquiry, Management disclosed that One Esplanade building
owned by SM was constructed within the 50-meter esplanade; owned and titled in the
name of SM.
In our view, the land use in the above-quoted provision of the Boulevard 2000 was not
complied as discussed above. Thus, the vision that between the Manila Bay shoreline
and the structures, a green buffer zone, 50-meter wide which shall be open to the public
becomes the highlight for waterfront development, may not be/was not attained.________
We recommended that Management direct the Marketing Department to:
a) Take remedial actions to correct the encroachment on the 50-meter strip of land
along the containment walls of reclamation which shall be left as a green public way
in the reclaimed areas;
b) Evaluate and monitor compliance with the fundamental requirements of Section 3.2
(Green Zone and Seafront Promenade) of Boulevard 2000 in the esplanade area
owned by PRA; and
c) Determine and hold accountable the officials who were remiss in the performance of
their duties of securing the properties of PRA.
Management commented that the Esplanade has a total area of 9.7 hectares, 8.4
hectares of which was leased to SIC while 1.3 hectares was leased to SM Prime
Holdings. The land use as green public way was maintained with only 20 per cent of the
area leased for commercial purposes. The arrangement is for the lessee to maintain
and secure the entire area on top of the lease for the 20 per cent of the area. The
increase in the area leased was a result of encroachments made by the lessee on the
areas that should have been maintained as open/public space. Management resorted to
leasing a portion of the Esplanade to pass on the security and maintenance costs of the
park to private investors.
It is our view that, the claim that despite leasing out of portion of esplanade the non-
negotiable element in Boulevard 2000, the 50-meter strip of land along the containment
walls of reclamation shall be left as a green public way is still complied, appears to be
self-serving. Only the security and maintenance cost was required to be assumed by the
lessors of the Esplanade. The green strips and pocket parks was not validated by PRA
to ensure compliance with the quoted provisions of Boulevard 2000.
8. Significant portions of R-1 Landstrips were either leased to various entities at

symbolic amount of P1.00 per year or occupied by lessees with expired contracts
of lease.
The R-1 Landstrips property of PRA pertains to the 157.844 hectares reclaimed land at
various elevations along Coastal Road from Barangay Tarribo, Parahaque City to
Sarangay llaya, Las Pinas City registered in the name of PRA in behalf of the Philippine
Government. R-1 Landstrip is presented in the Statement of Financial Position as a
portion of Investment Property.
We have noted that Lease Contract Agreements for the use of portions of R-1 Land
strips were executed in favor of various entities at symbolic amount of P1.00 per year.
61
Also, PRA and Meralco executed a contract for the latter’s use of portion of R-1 land
strip without cost.
Moreover, contracts with the following lessees had already expired, but the lessees
continue to occupy the properties:
a) Foundation of Our Lady of Peace Mission, Inc. (FOLMI) covering parcel of land
with an area.of 12,445 square meters, expired on August 20, 2015; __
b) DENR with a leased area of 2,000 square meters, expired on October 30, 2017;
and
c) Las Pinas General Hospital with a leased area of 4,638 square meters, expired
on July 20, 2015.
This appears to be inconsistent with the provisions of Section 37 and 38 of

Commonwealth Act No. 141 of 1936, otherwise known as The Public Land Act which
provides that:
"Section 37. The annual rental of the land leased shall not be less than three
per centum of the value of the land, according to the appraisal and
reappraisal made in accordance with section sixteen of this Act; except for
lands reclaimed by the Government which shall not be less than four per
centum of the appraised and reappraised value of the land: xxx
Section 38 xxx. Upon the final expiration of the lease, all buildings and other
permanent improvements made by the lessee, xxx shall\become the property
o f the Government. ”
We recommended that Management require the Marketing Department:
a. Re-examine the lease rate of P1 per year charged to various entities leasing PRA
property since it is grossly disadvantageous to the government; and
b. Revisit the agreement with MERALCO jn order to collect a reasonable rental

payment for land use considering that the grant of free rental to earning private
corporation is again grossly disadvantageous to the government.
Management commented as follows:
• 12,445 square-meter lot leased to FOLPMI - On March 24, 2017, PRA sent a
demand letter to FOLPMI. Several follow-ups were made to. have meeting to discuss
the renewal of Contract of Lease. On January 25, 2018, a meeting was held, and
FOLPMI informed PRA that they will seek Presidential Proclamation. Last May 28,
2018, PRA received a letter from the Presidential Management Staff requesting PRA
to evaluate the request of FOLPMI. i
• 4,638 square-meter lot leased to Las Pinas General Hospital - A Contract to Sell
was executed for the sale of the property. The Deed of Absolute Sale will be
executed as soon as the issue on the penalties is addressed.
62
• 1,000 square-meter lot occupied by Philippine Councilor’s League (PCL) - PCL is
seeking Presidential Proclamation for the transfer of ownership of the property they
are occupying;
• 1,980 square-meter lot leased to PNP - PNP turned over the property to Paranaque
City, which is a violation of the Memorandum of Agreement (MOA): PRA- issued a
Notice to Vacate to Paranaque City but no response was received. The ...Estates
Management Division.of .the .PRA sought the assistance of the I final npnartmgnf fn
file an appropriate case against the City of Paranaque, which was referred to the
OGCC.
• The area occupied by MERALCO is a reclaimed land and subject of the MOA
between PRA and MERALCO, however, the titling of the property was held in
abeyance due to the pending approval of the survey plan submitted by PRA. In 2007
DENR issued title to the approved Miscellaneous Sales Application which covers the
areas of MERALCO and TRANSCO. PRA filed a case for the nullification of the titles
issued the buyer, and the case is still pending with the Supreme Court.
We enjoined Management to monitor the outcome of the actions taken on the

recommendations in order to collect reasonable rental rates.
Financial Audit
9. Long outstanding account receivables (ARs) in the total amount of P2.730 billion
remained uncollected. Confirmation disclosed discrepancies that were not yet
reconciled with the debtors.
In CY 2016 Annual Audit Report (AAR), we reported that the following receivable
accounts amounting to P2.730 billion are long outstanding.
Debtors : Amount
Department of Public works and Highways (DPWH) P2,349,092,032
Bases Conversion Development Authority (BCDA) i 187,397,009
R-l Consortium i 116,828,072
Pasay City 66,369,249
Privatization and Management Office (PMO) 5,638,812
Port Center Development Corporation (PCDC) 3,654,634
Seaoil Petroleum Corporation 809,174
P2,729,788,982
Management neither exerted efforts nor taken appropriate actions to ensure collectability
of these receivable accounts.
In CY 2017 audit, confirmation letters were sent to selected debtors, which include the
uncollected accounts per above table. The confirmation replibs showed the following
exceptions by the debtors on the above accounts: ;
63
Debtors PRA books Exceptions
DPWH 2,349,092,032 For resolution of the issues on the legality and amount
of payment to be made to PRA per letter dated March
3, 2017 of DPWH to PRA. The letter to DOF dated
March 21, 2017 was sent by DPWH seeking advice
before acting on the request for confirmation.________
BCDA 187,397,009 Zero payable to PRA
Pasay City____ 66,369,249 No. record of payable to PRA..
PMO 5,638,812 No recorded unpaid obligation to PRA
2,608,497,102
The unresolved exceptions by the debtors on the ARs may have caused the non
collection of the accounts, and casts doubt on the existence of the receivable accounts.
No response was received from PCDC because the whereabouts of the accountable
office which absorbed the functions of PCDC is not known. No allowance for impairment
was provided.
We recommended and Management concurred to reconcile or resolve the issues with

debtors who did not confirm the balances due from them and to exert efforts to collect
the accounts. They explained that with regard to receivables from PCDC, PRA was
informed that the revenues generated from the PCDC were; already remitted to the
Presidential Commission on Good Government (PCGG).
10. The outstanding car loans totaling P16.679 m illion o f members of the Board and o f
resigned and retired officers, including a form er General Manager (GM), remain
unsettled.
Board Resolution No. 4554, Series of 2015 approved the PRA Modified Car Loan
Program Guidelines and Mechanics. The PRA Car Loan Program is intended to be used
as a tool to provide eligible officers of PRA to meet the demands of their work with more
facility and efficiency, as well as to provide them with the economic means of coping with
the prestige and status attendant to their respective positions. ;
The loan is payable within a maximum period of six years with 12 per cent interest
thereon for the whole period of six years to be added to the loan amount.
In the audit of CY 2017 transactions, we noted that:
a) A board member still has an unpaid car loan of P1.900 million as of December 31,
2017, thus the recommendation to require the board; member concerned to
immediately pay the outstanding car loan was not implemented;
b) Six officers, including the former GM, have been separated from office/no longer
connected with PRA, and cleared from all their accountabilities, but have car loan
balances totaling P7.295 million as of December 31, 2017. :
64
o) Under the previous Car Plan, P7.483 million remain uncollected. This consists of the
following accounts:
Previous Board of Directors [BOD] (7 accounts) P3,892,752.57 .............

Resigned/retired employees (11 accounts) 3,589,961.93
Total P7,482,714.50
Of the 13'accounts;'oniy_2 are still paying the loan, ine restore considered dormant
accounts. Likewise, the Official Receipts and Certificates of Registration of the
vehicles acquired by them through car plan were not presented to the Audit Team
during inspection.
Available documents show that uncollected accounts of four previous members of

the BOD were subjected to civil cases and have court decisions in favor of PRA, but
still collection of accounts was not enforced.
COA issued COA Order of Execution (COE) dated January 13, 2017 on the
disallowed car loan of another previous board member in the amount of P710,999.96
per Notice of Disallowance (ND) No. 2011-12 dated July 27, 2011.
Based on the foregoing data, as of December 31, 2017, P16.679 million remains
uncollected and is at risk of non-collection.
a) Revisit the existing car loan program to protect the interest of PRA from losses,
including the determination of the necessity of the program; and
b) Take appropriate actions to collect all receivables from separated officers and the
unpaid accounts of the members of the BOD.
Management commented that an amendment to the PRA Modified Car Loan Program
was made where the members of the Board were removed from the list of PRA officials
qualified/entitled to avail of the car loan program.
The former member of the Board of Directors issued post-dated checks to cover the
payment of his outstanding liability over the motor vehicle he acquired.
The six officers, including the former GM, availed of the provision under Rule IV, Section
5(b) of the Modified Car Loan Program which provides that-In case of resignation,
retirement (voluntary, employee compulsory) expiration \of term, transfer or
re-assignment to another government offices/agencies, the borrowing officer shall have
the option to issue post-dated checks covering his/her remaining monthly amortizations.
Also, Management sent demand letters to the former Members of the Board and
employees, but some of them have either relocated, hence, they cannot locate them
while some are deceased and one former member of the Board is living abroad.
65
Considering that the purpose of the car plan, of providing PRA employees with the
economic means of coping with the prestige and status attendant to their respective
positions, is no longer met upon their separation from the service, full payment of the
unpaid loan should be enforced. - -- -------- --
11. The cost of Service Concession Asset amounting to P7.998 b illio n - is - n o t

supported w ith inventory o f all existing physical assets and facilities.
Philippine Public Sector Accounting Standards (PPSAS) 32 defines Service Concession

Arrangement and Service Concession Asset as follows:
A service concession asset is an asset used to provide public services in a service

concession arrangement that:
(a) Is provided by the operator which:

(i) The operator constructs, develops, or acquires from a third party; or
(ii) Is an existing asset of the operator; or
(b) Is provided by the grantor which:
(i) Is an existing asset o f the grantor; or
(ii) Is an upgrade to an existing asset o f the grantor
Service Concession Asset account amounted to P7.998 billion as of December 31,

2017, with details shown below:
Road Network P 591,108,767 ;

R-1 Expressway 614,792,495 j
R-1 Extension 7,028,337,396
C5 Link 32.860.170 ;
P 8.267.098.828 j
These Service Concession Assets consist of the assets owned by PRA and those
constructed, develop or acquired from CIC in relation to its obligation under the TOA,
which was later amended by the OMA on the MCTEP.
The assets which were provided by CIC were not properly accounted. The initial amount
recognized for R1 Expressway, R1 Extension and C5 Link amounting to P7.407 billion
were adopted from the net book value of the Intangible Assets of CIC as presented in
CIC’s Audited Financial Statements (FS) as of December 31, 2016. The recorded assets
are not itemized to determine the related depreciation expenses that have to be
provided/recognized. ;
The complete inventory of all existing physical assets and facilities, including all
equipment and appurtenances is therefore necessary for the! Management to comply
with the requirements of PPSAS 32.
We recommended that Management account for the details/breakdown of the

concession assets, and that the depreciation expenses be computed based on the
useful life of the specific asset.
Management commented that they will request CIC for the details/breakdown of the
concession assets.
66
12. PRA has unremitted dividends to the National Government (NG) amounting to
P489.093 m illion.
On September 27, 2007, PRA and Light Rail Transit Authority (LRTA) signed a MOA for
the Grant of Right-of-Way by PRA to LRTA over a 27,355-square meter lot located in the
City of Parahaque and the Municipality of Bacoor, Cavite for the implementation of the
LRT Line 1 South Extension Project. The value of the PRA property for the right-of-way
in the amount ..of P571.586 million was proposed to be charged against the PRA’s
dividends payable to NG in prior years of P489.093 million. Breakdown of the dividends
payable to NG in prior years but not fully remitted to the Bureau of the Treasury (BTr) is
shown in the table on the next page:
Year Unremitted Dividends

1997 P 490,046.09
1998 1,754,627.45
1999 6,071,459.98
2000 331,951.09
2002 15,632,035.98
2003 27,987,174.67
2005 62,496,685.53
2007 137,873,532.54
2008 236,455,620.31
P 489,093,133.64
However, the charging/offsetting of PRA’s dividends payable was not approved by the
Department of Finance (DOF) and that the latter preferred cash dividends rather than
property dividends.
We recommended and Management agreed to comply with the provisions of RA 7656

by remitting the outstanding dividends due to the National Treasury.
Gender and Development
13. Not all planned GAD program s were fu lly implemented.
Data on the approved GAD Plans and Programs vis-a-vis GAD Accomplishment Report
disclosed that only five out of the six planned GAD programs: and activities were fully
implemented in CY 2017. PRA utilized a total amount of P170,330 only or 12.88 per cent
of the approved P1.322 million budget in the accomplishment of six (6) GAD programs.
In CY 2017, all organization-focused GAD activities were implemented while the client-
focused GAD program remained partially implemented.
The targeted area for the client-focused activity was the Municipality of Bacoor, Cavite.
Activities such as ascertaining the beneficiaries and their needs have been conducted.
Also, a database for the families that will be affected by the jreclamation project was
obtained. However, the Municipal Mayor informed the GAD Focal Point that it may be
prudent to undertake the livelihood program after the relocation of affected families is in
place. Thus, the said program was rescheduled pending the relocation of the affected
67
families. Also, PRA organized the graduates of the previous livelihood programs into a
cooperative and facilitated the election of the officers and members of the Board and
assisted in the registration of the cooperative. j
We recommended that Management accomplish the partially completed program on

livelihood intervention training. Moreover, Management is advised to exert more-effort to
utilize the approved GAD budget by providing and implementing more GAD programs.
Management commented that the implementation of the livelihood training program is

carried over this 2018 and the GAD Focal Point System is currently coordinating with the
target Local Government Unit for the profiling of beneficiaries, j
Status of Suspensions, Disallowances and Charges
As of year-end, the status of Notices of Suspensions, Disallowances and Charges issued is

as follows:
B eginning Balance I Ending Balance

A udit A ction Issued Settled j
January 1, 2017 | Daôrnher 31, 2017
Suspensions 32,164,440.32 j 0 0 32,164,440.32
Disallowances 50,169,312.76 0 3,876,076.26 46,293,236.50
Charges 1,923,508,081.61 0 io 1,923,508,081.61
2,005,841,834.69 | 0 3,876,076.26 2,001,965,758.43
Audit suspension in the amount of P32.164 million pertains to the Notice of Suspension
issued on the payment made to J.D.Legaspi Construction (JDLC) on December 12, 2007
pursuant to a Court Order dated December 6, 2007 (on Civil Case No. 05-618 decided by
RTC Branch 148, Makati City) for the full payment of services rendered by JDLC for the
President Diosdado Macapagal Boulevard Project and Soil Boring and Design Works for the
Bay Boulevard Project.
Unsettled audit disallowances in the total amount of P46.293 million pertain to Notices of
Disallowance on the following: (a) P35 million - covering release of check on April 4, 2008 in
favor of the Municipality of San Simon, Pampanga for the cost ofi filling materials which is
currently with pending appeal before the Commission Proper; (b) P2.841 million -
representing reimbursement of extraordinary expenses by the Chairman of the Board of
Directors in 2011 which is also with pending appeal before the Commission Proper; and (c)
P8.452 million - representing various disallowances issued to former members of the PRA
Board and incumbent and resigned PRA officers and employees. Some of the
disallowances are being settled on installment basis by the officers/employees found liable.
Notice of Charge in the amount of P1.924 billion issued by the Legal Services Sector, Fraud
Audit and Investigation Office (FAIO), on September 13, 2012 pertains to the shortfall in the
assured income/revenue on the ASF Project relative to the Joint Venture Agreement
entered into by the Republic of the Philippines, thru PRA, its authorized representative, and
Filinvest Development Corporation (FDC). A Petition for Review was filed by FDC and its
assignee, Filinvest Alabang, Inc. (FAl), on March 22, 2013 through registered mail under
Registry Receipt No. 06812 addressed to the COA FAIO, now Fraud Audit Office. On April
3, 2013, the case was forwarded to the COA Legal Affairs Office and was thereafter
forwarded to the Commission Proper on March 5, 2015 with Case-No. 2014-227. The case
is pending resolution.
68
PART III
STATUS OF IMPLEMENTATION OF PRIOR
YEAR’S AUDIT RECOMMENDATIONS
STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT RECOMMENDATIONS
Of the sixteen (16) audit recommendations embodied in prior year’s Annual Audit Reports,
seven (7) were implemented, eight (8) were partially implemented and one (1)~was“ not“
implemented.
Status o f ___ ...

Reference Observation Recommendations Implementation
AAR 2016, 1. Necessary Ensure that the Partially implemented
Observation actions in transactions and the
No. 1, Page connection with account balances in the PRA has been
34 the cessation ASF Project’s financial disengaged in the project
and turnover of statements are properly effective April 19, 2016.
the accounted for and fully
management supported; Reiterated in
and supervision Observation No. 4, Part II
of the Alabang of this Report.
Stock Farm
(ASF) Project to Remit to Bureau of the Partially implemented
the Land Treasury (BTr) the NG's
Management remaining profit share in PRA remitted the share
Bureau not the Project and the of NG from distributed JV
undertaken. balance of the escrow profit in the ASF Project
fund; per PVB Check No.
1099895 dated August
16, 2017 amounting to
PI .240 billion and BTr
OR No. 2546298 dated
August 22, 2017.
However, the balance of
escrow accounts is yet to
be remitted.
Prepare a terminal Partially implemented

report regarding PRA’s
disengagement from the A terminal report was
Project; prepared and was
submitted to/received by
DENR on October 13,
2017. However, said
report failed to render
complete accounting of
the accountabilities of
PRA.
Reiterated in
Observation No. 4, Part II
of this Report.
69
Status of
Coordinate with Partially implemented
DENR/LMB for the
smooth transition and PRA has not yet
turnover of assets, rendered a complete
accounts, records and accounting of its
documents relating .to_ accountabilities related to
the Project; and trie ASF Project.
Reiterated in
of this Report.
Initiate action to resolve Implemented

prior years’ audit
observations and PRA has been
recommendations. disengaged in the project
effective April 19, 2016.
AAR 2016, 2. Share on Collect PRA’s 9 per cent Implemented

Observation ancillary income share on all income
No. 2, Page from Joint generated from the CIC remitted P4.296
36 Venture operation of the million covering the 9 per
Agreement not MCTEP, including cent share of PRA on
collected ancillary income. ancillary income from
December 2016 to
December 2017, under
trie following:
. ! OR No. 8082 dated 4-25-

18 for P2.944 million;
• , OR No. 9601 dated 11-2-
17 for P.711 million; and
- OR No. 9995 dated 1-29-
18 for P.641 million
Validate the j Partially implemented

completeness of the j
contracts on billboards Though Management
submitted by CIC and submitted several
determine the bases of contracts on billboards,
the agreed-upon completeness is still not
advertising rates. determined since all the
contracts were awarded
and the related collection
was unilaterally
i
undertaken by CIC.
i
J
i Reiterated in
I
i
_________________________ L of this Report.
70
Status of
AAR 2016, 3. Grant of car Revisit the existing car Implemented
Observation loan to a loan policy to protect the
No. 3, Page member of the interest of PRA; The PRA Modified Car
36 Board of Loan Program has been
Directors (BOD) amended by. PRA BOD
without___legal thru Board Resolution
basis and No. 4780, series of 2017,
outstanding car dated July 19, 2017. The
loan of former amendment excludes the
Genera] Chairman and the BOD
Manager not form availing the said
settled Car Loan Program. Also,
no car plan has been
approved in CY 2017.
Strictly comply with the Implemented

provisions of EO 24 and
other rules and
regulations as regards
benefits that maybe
granted to members of
BOD;
Require the board Partially implemented

member concerned to
immediately pay the Former GM of PRA
outstanding car loan; already issued post
otherwise, we will be dated checks covering
constrained to disallow it his outstanding balance
in audit in the absence in the car loan. But the
of legal basis; and BOD member issued
post-dated checks
covering his
amortizations until
December 2018 only.
Strictly implement the Partially implemented

provisions of the PRA
Modified Car Loan Retired/separated
Program Guidelines and employees issued post
Mechanics in cases of dated checks covering
separation of borrowers their outstanding
from PRA. balances in their car
loan.
This finding was first

raised in CY 2015.
71
I Status of
Reiterated in
Observation No. 10, Part
li of this Report.
l
AAR 2016, 4. Long- Exert efforts to collect Partially implemented
Observation outstanding the long-outstanding
No. 4, Page accounts accounts; Follow up letters has
38 receivable in been sent to the payees
the total amount but no response has
of P2.730 billion Been received yet.
For the receivable from

DPWH, no date for a
meeting to resolve their
issue on the subject lot
Has been set yet.
PRA will be following

COA Circular No. 2016-
005 dated December 19,
2016, guidelines on
vj/riting off some dormant
receivable accounts.
3
th is finding was first
rbised in CY 2015.
Reiterated in
of this Report.
AAR 2016, 5. Deficiencies Strictly follow the Implemented

Observation noted in the guidelines in the
No. 5, Page PRA conduct of alternative PRA has been following
38 procurement methods of procurement t(ie guidelines in the
process as set forth in the 2016 ponduct of alternative
revised IRR of RA 9184 modes of procurement.
and PRA’s policy on Also, all small value'
reimbursements; procurements or
procurement through
shopping for 2017 are
thru the Petty Cash
rather than on
reimbursement basis.
Address the issue of Implemented

long period of j
processing requests for i
procurement thru i
I
72
Status of
alternative methods
making it significantly
shorter than the
recommended minimum
period allowed for public
................................................................- - -
. bidding; and __
Strictly follow the Not implemented

procedures set in
Section 44, Chapter 10, There are still instances
Government Accounting of delayed recording of
Manual (GAM) for procured items in PRA
National Government books.
Agencies for the
recognition in the book This finding was first
of inventories and raised in CY 2015.
properties acquired.
AAR 2016, 6. Refund of Monitor all contracts or implemented

Observation guaranty subscriptions for internet
No. 6, Page deposits on services so that deposits The provider already
40 terminated with the service closed their operations.
internet service providers are promptly The security deposit for
contracts not applied for and refunded one pocket wifi was paid
yet applied for by the user while other
hardware was turned
over to MIS department.
Necessary adjustment
entries were recorded in
JEV 17-07-1857 dated
duly 28, 2017 to
derecognize the security
deposit.
This finding was first

raised in CY 2015.
73

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Republic of the Philippines :

CORPORATE GOVERNMENT SECTOR

June 29, 2018 PHILIPPINE RECLAMATION AUTHORITY

Pursuant to Section 2, Article IX-D of the Philippine Constitution and Section 43 of

We expressed a qualified opinion on the fairness of presentation of the financial statements ;

We recommended that Management:

c. Determine the bases of agreed-upon advertising rates^ !

We request that appropriate actions be taken on the observations and recommendations I

Very truly yours,

The President of the Republic of the Philippines j

PHILIPPINE RECLAMATION AUTHORITY

AGENCY ACTION PLAN and

Agency Action Plan

Name and Position of Agency Officer Date

PRA has 143 permanent employees as of December 31, 2017.

Scope and Objectives of Audit

Comparative Financial Position

Independent A u d ito r’s Report of the Financial Statements

We rendered a qualified opinion on the fairness of the presentation of the financial

Summary o f S ignificant Observations and Recommendations

We recommended that Management take the necessary actions to determine whether

c. Determine the bases of agreed-upon advertising rates.

Audit Suspensions, Disallowances and Charges

As of December 31, 2017, the unsettled balance of audit suspensions/disallowances and

Status of Implementation of Prior Year’s Audit Recommendations

PART I AUDITED FINANCIAL STATEMENTS

Independent Auditor’s Report 1

Statement of Management’s Responsibility for Financial

Statements of Financial Position 6

Statements of Profit or Loss 7

Statements of Changes in Equity 8

Statements of Cash Flows 9

Notes to Financial Statements 10

PART II AUDIT OBSERVATIONS AND RECOMMENDATIONS 48

PART III STATUS OF IMPLEMENTATION OF PRIOR YEAR’S

INDEPENDENT AUDITOR’S REPORT

THE BOARD OF DIRECTORS

Report on the Audit of the Financial Statements

We have audited the accompanying financial statements of the Philippine Reclamation

Basis for Qualified Opinion

We conducted our audit in accordance with International Standards of Supreme Audit

Responsibilities of Management and Those Charged with

In preparing the financial statements, management is responsible for assessing PRA’s

As part of an audit in accordance with iSSAIs, we exercise professional judgment and

• Evaluate the appropriateness of accounting policies used and the reasonableness of

• Conclude on the appropriateness of management’s use of the going concern basis of

Report on Other Legal and Regulatory Requirements

May 28, 2018

STATEMENT OF MANAGEMENT’S RESPONSIBILITY

The Management of PHILIPPINE RECLAMATION AUTHORITY is responsible for the

Date Signed Date Signed

PHILIPPINE RECLAMATION AUTHORITY

Note 2017 \ 2016 January 2016

31,613,692,473 33,406|287,696 35,445,399,230

C urrent Lia b ilitie s j

Total Lia b ilitie s 11,649,863,307 13,042,[734,006 14,894,043,832

Equity 23 19,963,829,166 20,363,^53,690 20,551,355,398

31,613,692,473 33,406,287,696 35,445,399,230

Note ■2017 2016

See accompanying Notes to Financial Statements,

Note Government Retained Total Equity

Changes in Equity fo r 2016