FINANCE/ACCOUNTING ISSUESPhilippine Carabao Center is a national government agency that aims to improve the general well-being of rural farming communities and to promote carabao-based enterprises.. Since it is not a profit-oriented organization and its main source of fund is the national government, there are only few financial constraints and issues within the organization.

BUDGET AND FINANCE MANAGEMENT

The PCC has continued to improve its compliance to all mandatory financial accountability reports as prescribed by regulating and coordinating agencies such as the Commission on Audit, Department of Budget and Management, and the Department of Agriculture. Budgetary requirements of the operating units of the center were provided on time and in accordance with the approved plans.

Likewise, a more responsive process flow was adopted to address activities/emergencies not included in the approved work plans. Coordination among units involves in the process flow of property accountability and procurement was strengthened, appropriate process flow to institute regular coordination was revised and implemented. This resulted to increased number of dropped property accountabilities at the NIZ, Gene Pool, and Lomboy areas. An aggressive housekeeping of records and properties are on-going.

Appropriate administrative policies, procedures and processes were also issued and implemented to enhance transparency of operation and minimize lead time in processing financial claims and administrative services.

HOW DO PCC OBATAIN ITS FUNDS?

First, they prepare annual budget in relation to the following budgetary thrusts:Budgetary Thrusts FY 2013

Program Component I: Germplasm Pool Of Superior Swamp And Riverine Buffalos And Cryobanking Of Animal Genetic ResourcesProgram Component II: Intensification Of The National Carabao Upgrading ProgramProgram Component III: Carabao Based Enterprise DevelopmentProgram Component IV: Research And Development

Highlights of FY 2013 Budgetary Expenditures

The PCCs FY 2013 budgetary expenditures are anchored on the RUMINANT ROAD MAP 2011-2034, a recently approved program that placed a unifying umbrella to the on-going and long-term program for ruminants in the country. Dairy development based on buffalo is an important component. The PCC Strategic Plan for 2013-2025 is anchored on the ruminant road map specifically focusing the next 15 years of producing at least 2.0 million calves directly affecting 1.5 million families. Consistent with a well-coordinated push jointly undertaken by the government and private sector within the framework of comprehensive long-term scheme of the ruminant road map, the PCCs budgetary expenditures for FY 2013 budget is focused on three areas:

a. Herd Development and Productivity Improvement thru Expanded AI Program.

Artificial Insemination (AI) is a frontline service of the government for enhancing herd build-up and for the development of genetically superior dairy buffaloes. This require production of superior genetics semen donor bulls from the National Gene Pool, and expanded semen processing laboratories to produce adequate volume of frozen semen for use in AI. Another major critical element is massive training of AI technicians. To date, PCC has so far set-up functional village-level artificial insemination technicians (VBAIT) rendering AI services in strategic locations nationwide leading towards privatization of services.

In 2013, we propose to increase the number of VBAITs, increase frozen semen production five times that of the current level, establish additional one (1) bull farm and two (2) semen laboratories. The expanded program will also require other AI logistics support in order to meet the target of at least 150,000 AI services in 2013, and setting up the fundamentals for 2014 and on, requiring support to enable AI services of at least 350,000 services/year.

Fund Requirements for VBAIT training, distribution of LN2 and frozen semen are:

ITEMIn Million Pesos

MOOECOTOTAL

Establishment of Bull Farm80.880.8

Land & Infrastructure (63.0 M)

Farm Machineries (17.8 M)

Establishment of 2 Semen Laboratories92.292.2

Infrastructure (20.0 M)

Lab Equipment and Farm Machineries (49.8 M)

LN2 Tanks (22.4 M)

Transportation Equipment ()9.9

VBAIT Training (300 VBAIT)9.012.0

Liquid Nitrogen, semen, synchronizing hormones, AI guns, AI supplies, AI Services70.070.0

Monitoring and Other Services15.015.0

TOTAL94.0182.9276.9

b. Small-holders Enterprise Development

To date, there are small-holder producer cooperatives, assisted by our centers nationwide. These groups are in varied stages of development, ranging from newly organized to semi-commercial operations. With the utmost intent of making them viable dairy cooperative enterprises, capability enhancing support has to be in place. Thus, sustained organizational and entrepreneurial strengthening development programs are to be carried out in 2013.For FY 2013 budget, we propose activities which involve full private sector participation in providing critical services and support enterprises from farm to consumers. An aggressive move will be undertaken to mobilize smallholder farmers, private sector and LGU in various segment of the ruminant animal industry from production, post-harvest and processing to marketing and distribution to various markets, including the supply of production inputs, professional and technical services, and other relevant enterprises.

Critical activities are towards changing the mindset of farmers, vigorous extension, social preparation and training efforts through convergence of interventions in identified impact zones. This is apparently the completing activities after all the production related items have been installed. Without this component, the desired enterprise development among smallholders may not be successfully achieved. A total of P94.0 million budget is needed to be able to cascade the interventions nationwide.

Fund:ITEMIn MillionPesos

MOOECOTOTAL

Organization and training of existing crossbred owner8.08.0

Monitoring and provision of technical services51.051.0

Provision of post-harvest services development and management of the dairy supply chain35.035.0

TOTAL94.094.0

Expected output of 2013 of herd development and productivity improvement thru AI and Bull Loan and Enterprise Development:

Jobs : The program is expected to create about 18,000 jobs in the first 5 years and to grow geometrically thereafter, if the purebred male calves are used for crossbreeding with native animals

Income : The income average per farmer from milking and related dairy activities would be about P 52,500/ Lactation. Plus additional income of at least P5,000/ Lactation out of the female offspring.

Food Security: At a conservative estimate of 50% calving rate, the program will contribute about 1.5 M liters per year or 3.0 m liters per year of cow-milk equivalent, worth P 52.5M. This will grow considerably about 4 years as offspring start to produce milk. Yearly offspring is valued at about P50.0M per year.

c. Harnessing Biotechnology R and D and Cryobanking of Animal Genetic Resources

In 2013, PCC shall sustain and expand implementation of Biotechnology R and D across major ruminant commodities being the lead agency in the Livestock Biotechnology as contained in the Department of Agriculture Administrative Order 9, series of 2008. One major effort is Animal Resource CryoBanking, consisting of frozen semen, embyo oocytes, somatic cell and DNA R&D efforts shall focus on reproductive biotechnology (in Vitro Maturation/ in Vitro Fertilization, ovum pick Up, Embryo transfer, cloning) in support to the over-all genetic improvement program in domestic animals. Emphasis shall also given to SPERM SEXING to produce sex predetermined calves, e.g. all female calves for dairying.

DNA-maker assisted selection (MAS) shall be sustained and expanded as a tool for accurate and faster selection, for breed ID and traceability, particularly on animal products for export market, and for screening genetic defects. Requirement for this aspect are summarized below:Fund:

Output: Cryobanking for all domestic and indigenous livestock species for long term genetic conservation and genetic improvement. Development of applicable biotechnologies for improving livestock productivity. System for screening genetic defects among domestic animals. Foundation for initiating traceability related to breed, parentage, and products.

JUSTIFICATIONPROPOSAL FOR ABOVE THE CEILINGIn Million of Pesos

1.0 Establishment of additional two semen laboratories to sustain the requirements of Expanded AI ProgramMOOE26,900

Liquid nitrogen, synchronizing hormones, AI supplies, and supplies other logistics for semen production18,900

Trainings, professionals & technical services2,800

Other operating costs5,200

Capital Outlay81,000

Construction of Semen Laboratories Laboratory equipment Farm Machineries and Equipment LN2 tanks20,00040,0009,80011,200

TOTAL107,900

PCC strategic planning for the next 15 years is focused on producing at least 2.0 Million calves that will directly impact on 1.5 Million Families. This is consistent with the goals of the Ruminants Industry Road Map 2010-2034. It is envisioned that in next 5 years, 2013 until 2017, through AI and bull loan programs, a total of 510,000 breedable females/year can be produced. This population is expected to contribute significantly to the dairy sector. This requires production of superior genetics semen donor bulls from the National Gene Pool, and expanded semen processing laboratories to produce adequate volume of frozen semen for use in Artificial Insemination (AI). Thus, there is a need to establish additional two (2) buffalo semen processing laboratories in order to achieve the targets.

This requires 26,900 Million above the ceiling requirements for MOOE and P 81.00 Million capital outlay for the construction of the two (2) semen laboratories and for all the necessary equipment in the lab and in the field.

2.0 Productivity Improvement thru Expanded AI Program and Small-holders Enterprise Development

MOOE70,400

AI Technician training and conduct of AI servicesOrganization and training of existing crossbred ownersProvision of post harvest services development and management of the dairy supply chainMonitoring and Provision of Technical Services20,70018,500

14,40016,800

Capital Outlay6,800

Transportation equipment (Motorcycle)6,800

Total77,200

The next element is the conduct of AI services which can only be done by increasing the number of AI technicians in the villages. The strategic activities leading towards this critical element is massive training of AI technicians

After adequate numbers of AI Technicians are trained, massive AI services are to be carried out. This would require information campaign drive for AI, coordination/ collaboration with partner LGUs and the carabao-farmer raisers, and distribution of the LN2 and AI supplies.

And finally, the development of viable dairy cooperative enterprises for small-holders is the end products of the value chain of the PCC programs. This move would involve mobilizing the smallholder farmers, private sector, and LGU in various segments of the industry from production, post-harvest and processing to marketing, and including the supply of production inputs, professional and technical services, and other relevant enterprises. A funding requirement of P70.4M is proposed for those items.

Mobility is of utmost for Extension aspect, promoting higher adoption of suitable technologies. Therefore, we propose a P6.8M budget for the acquisition of motorcycles to be distributed to the field technicians doing extension services in 13 regions.

3.0 Harnessing Biotechnology R&D and Cryobanking of Animal Genetic Resources

Personal Services0.497

MOOE39.017

Conduct of R&D across major ruminant commoditiesConduct of operational research across product/operating centersOperation of the new Biotech LaboratoriesR&D on AnGR & Cryobanking14.70019.2503.0002.067

Total39.615

The additional Personnel Services budget is the salary differential of DR. CLARO MINGALA, who was appointed Scientist I in the Scientific Career System effective 12 December 2011 by the Scientific Career Council. Dr. Mingala previously held the position of Farm Superintendent II SG-15 with an annual PS budget of the Php 0.391 while total annual PS budget needed for a scientist I position including RATA is Php. 0.888.

The requirements for additional MOOE is needed for PCC to sustain expand implementation of Biotechnology as contained in the Department of Agriculture Administrative Order 9, series of 2008.

With the proposed above the ceiling MOOE requirements, R&D efforts shall focus on operational research across production/operating centers, reproductive biotechnology (In Vitro Maturation/In Vitro Fertilization, Ovum Pick Up, Embryo Transfer, cloning) in support to the over-all genetic improvement program in domestic animals. Emphasis shall also be given to SPERM SEXING to produce sex predetermined calves, e.g. all female calves for dairying.

SOURCES AND USAGE OF FUNDS

The agencys main sources of funds to support its operations are provided by the national government through the General Appropriations Act (GAA). Table 9 presents the details of allotment and utilization. 24

Table 9 PCC Sources and Utilization of Funds as of December 31, 2013 (Php Million) Fund Source Authorized Allotment Usage %Utilization

GAA-Current & Continuing 621.97 606.49 98%

Personnel Services 80.19 79.92 100%

Maintenance & Other Operating Expenses 267.80 264.82 99%

Capital Outlay 273.98 261.76 96%

Agri-Pinoy Livestock - Current & Continuing 170.00 40.23 99%

Maintenance & Other Operating Expenses 162.00 152.00 94%

Capital Outlay 8.00 8.00 100%

Revolving Fund- Dairy Business Module 68.59 49.36 72%

Foreign Assisted Projects 48.00 18.00 38%

TOTAL 908.56 714.08 79%

Table 10 presents the PCCs Statement of Financial Condition at the end of FY 2013. The PCCs total assets as of December 31, 2013 are valued at Php2,572.82 million comprising mainly of the agency Property, Plant & Equipment (PPE) and Breeding stocks or Other Assets. The significant change in other assets or breeding stocks represents the booking of the cost of 1,203 heads of imported Italian buffaloes.

Total liabilities posted Php171.55 million and total equity reached Php2,401.27 million. Significant decrease in liabilities represents the payment for the imported buffaloes. Likewise, increase in equity is attributed to the investment of the government for the infusion of dairy buffaloes.

TABLE 10. Statement of Financial Condition as of December 31, 2013 (Php Million)Particulars FY 2013 FY 2012% Change

Assets

Current Assets 752.59 868.92-13%

Property, Plant & Equipment 919.92798.6915%

Other Assets (Breeding Stocks) 900.31 541.95 66%

Total Assets 2,572.822,209.5516%

Liabilities 171.55 584.82-71%

Government Equity 2,401.27 1,624.74 48%

Total Liabilities & Government Equity 2,572.82 2,209.55 16%

Table 11 presents the PCCs Statement of Income and Expenses for the year end of 2013. The PCCs total income for the year reached Php913.08 million comprising mainly of the subsidy from the national government. The business income represents the sales of milk, meat, live animals, and other by-products as a consequence of the operation of the institutional dairy business module of the regional centers.

Personnel services expenses posted Php86.30 million, while total maintenance and other operating expenses including non-cash expenses for the depreciation is Php277.16 million giving a net income or surplus from operation of Php492.35 million. The decrease in net income for FY 2013 is attributed to the decrease in subsidy from the national government.

Table 11 Statement of Income and Expenses for the period ending December 31, 2013 (PhpM) Particulars FY 2013 FY 2012 % Change

Income

Subsidy Income 844.19 877.11 -4%

Business Income 68.59 53.16 29%

Other Income 0.31 32.44 -99%

Total Income 913.08 962.71 -5%

Expenses

Personnel Services 86.30 81.50 6%

Maintenance & Operating Expenses 277.16 248.97 11%

Non-cash expenses - Depreciation 57.27 41.24 39%

Total Expenses 420.73 371.70 13%

Net Income 492.35 591.01 -17%