Guidelines
for Marketing Board Expenditures and Reporting Requirements and Regulations on
Investments by Marketing Boards
Table of Contents
Introduction
The Ontario Farm Products
Marketing Commission has prepared these guidelines to assist marketing boards
in operating within their delegated authorities when they spend producer funds.
Boards established under the
Farm Products Marketing Act and the
Milk
Act have been given the authority to collect mandatory fees from producers
of regulated products, but are restricted to using these funds for purposes defined
by regulation.
These guidelines are for use by:
- marketing
board directors when they make decisions on how to spend producer funds
- producers
when they consider their expectations of their boards
- the Commission and
its staff when they review the operations of boards.
The Commission
has given marketing boards considerable discretion as to how they spend producer
funds. These guidelines are not intended to restrict or fetter these delegated
authorities.
Prinicple
roducers are required
by law to pay mandatory fees to support compulsory marketing systems. Marketing
boards must spend funds collected from producers in a manner that is appropriate
for their industry and within their delegated authority.
In making decisions
on expenditures of funds, board directors must be mindful of their accountability
not only to the Commission, but also to their producers.
Regulatory
Context
he rights of marketing boards to collect and spend money are derived
from regulations. Boards are created under marketing plans which are approved
by Cabinet. The Commission gives boards various powers and authorities which form
the basis for an industry's marketing system.
Although each marketing regulation
is unique, the Commission has given boards the ability to obtain funds through
a combination of license fees, producer levies, service charges or penalties.
The Commission also authorizes each board to "use any class of license
fees, service charges and other money payable to it, for the purposes of paying
the expenses of the local board, carrying out and enforcing this Act and the regulations
and carrying out the purposes of the plan under which the board is established."
(from Section 7(1) 20, Farm Products Marketing Act (FPMA), see also Sections
7(1) 21 and 7(1) 22, Milk Act). The purpose of each marketing plan is to
provide for the control and regulation of the producing and marketing of one or
more farm products.
Some boards have also been given the authority to establish
funds (Section 7(1) 22, FPMA and Section 7(1) 23, Milk Act). As
well, the Commission has given each board the power to "stimulate, increase
and improve the marketing of farm products by such means as it considers proper"
(Section 3(1)(h), FPMA; see also Section 3(2)(g), Milk Act).
Marketing
boards have a clear authority to pay expenses related to the administration of
their regulated marketing systems, the enforcement of their regulations and the
promotion of their regulated product(s). Some boards also have the authority to
purchase and sell regulated products. Other expenditures are often less clear,
and so a set of general and specific guidelines have been developed to assist
in these decisions.
Guidelines
for Expenditures of Board Funds
General Guidelines
It is difficult
to cover all situations or questions in a set of guidelines relating to the expenditures
of board funds. In general, board directors should keep in mind that these funds
are generated through mandatory contributions by producers. Directors need to
ensure all expenditures will stimulate, increase or improve the marketing of the
regulated product(s) and should be prepared to defend the expenditures on these
grounds. The following outline some recommendations for more specific situations.
Guidelines for Involvement in Related Industries
- Marketing
boards may not use producer funds to invest in related businesses. If producers
(separate from the board) wish to enter the processing business or purchase an
input supplier, they have the option of forming a co-operative or company to do
so.
- There may be extenuating circumstances where a marketing board has
been delegated the authority to spend producer funds to process the regulated
product in order to remove surplus product from the market.
- Marketing
boards should avoid going into competition with existing businesses, particularly
if these businesses are in some way regulated by the board.
Guidelines
for Research Expenditures
- Expenditures on basic or applied agricultural,
product development or market research related to the regulated product(s) and
processed versions of the regulated product(s) may be justified on the basis the
results may "stimulate, increase and improve" the marketing of the regulated
product. This includes research into management and production practices for the
regulated product.
- Boards may receive royalties resulting from research
they have funded.
- When sharing the results of non-proprietary research,
marketing boards should not give a competitive advantage to one customer if it
will disadvantage another. If a board has a policy of funding proprietary research,
it should ensure that all its customers have an opportunity to present proposals
to access board funds for proprietary research.
Guidelines for Lobbying/Funding
Other Organizations
- Hiring/paying lobbyists or staff to promote a
specific goal that is intended to "stimulate, increase and improve"
the marketing of the regulated product is an appropriate use of producer funds.
- Direct funding of political parties or governments by boards is not appropriate.
- Purchasing memberships in organizations which promote goals which could "stimulate,
increase and improve" the producing or marketing of the regulated product
or which provide the marketing board services or information which help it to
do so, is an appropriate use of producer funds.
- Boards should not donate
money to other organizations unless they can clearly demonstrate how the recipient
will facilitate or improve the producing or marketing of the regulated product(s).
In cases where there is a strong will among members to provide assistance to a
particular cause or organization, boards may wish to assist in coordinating individual
producers' voluntary contributions.
- Notwithstanding the above, donations
designed to enhance corporate image can be made if there is reasonable expectation
of some future stimulus, improvement or increase in the producing and marketing
of the regulated product(s) as a result.
- Donating food and/or promotional
material is a justifiable public relations expense but boards are encouraged to
ensure these donations do not distort markets.
Guidelines for Quota Expenditures
- In general, marketing boards of supply managed industries should not purchase,
sell or lease quota to or from Ontario producers, with the following exceptions:
- Buying and selling small volumes of quota to balance a quota exchange.
-
Acting as an agent for producers if quota becomes available from another province.
However, any board transaction should be revenue neutral.
- Marketing
boards should not act in such a way as to distort the functioning of the quota
market. Actions must be transparent and fair to all producers.
Related Regulations
Reporting Requirements
- Marketing boards must report each grant made to an individual or organization
in their financial statement. However, if a board passes a by-law establishing
a threshold amount below which grants can be reported in the aggregate, and the
by-law is passed by the majority of producers or delegates at an annual meeting,
only the number of grants and the total amount of these grants needs to be reported.
- Information about grants reported in the aggregate must be provided to producers
and the Commission upon request.
- Financial reports and statements of operations
must be distributed to each producer or published in a newspaper or magazine having
a general circulation among its producers.
Reference can be made to O.Reg.
617/99 under the FPMA, and O.Reg. 615/99 under the Milk Act for
the legal requirements with respect to the reporting of grants.
Restrictions
on Board Investments
Many marketing boards maintain a reserve of surplus
or contingency funds. There are very specific requirements as to what types of
investments boards may make with these funds. This is to ensure that producer
funds are held in relatively secure financial vehicles.
Boards established
under the Farm Products Marketing Act or the Milk Act may invest
in financial vehicles such as the following:
- investment certificates
of banks including foreign banks authorized under the Bank Act to operate in Canada
-
paid up shares of credit unions or the Ontario Co-operative Credit Society
-
investment certificates of trust companies
- debentures of loan corporations
-
bonds, debentures etc. guaranteed by the federal or provincial government, a municipal
corporation, or the government of the U.K.
For a complete listing
of financial instruments in which boards can invest their surplus funds, please
refer to Figure 1.
In addition, boards under the FPMA may lend money
to funds established under the Farm Products Payment Act (Section 16(2),
Regulation 400, FPMA).
|
Figure 1 - Section 16 Of Regulation 400 Under the FPMA, and Section 13
OF O. REG. 209/99 Under The Milk Act as Amended by O. REG. 618/99 AND O.
REG. 616/99. |
Investments
No
board shall invest any surplus funds of the board other than in,
- (a)
bonds, debentures or other evidences of indebtedness,
-
- of or guaranteed by the Government of Canada,
- of or guaranteed by
the government of any province of Canada,
- of or guaranteed by the Government
of the United Kingdom,
- of any municipal corporation in Canada, including
debentures issued for public,
- eparate, secondary or vocational school
purposes, or guaranteed by any municipal corporation in Ontario., or secured by
or payable out of rates or taxes levied under the law of any province of Canada
on property in such province and collectible by or through the municipality in
which such property is situated;
- (a.1) bonds, debentures
or other evidences of indebtedness of a corporation that are secured by the assignment
to a trustee of payments that the Government of Canada has agreed to make, if
those payments are sufficient to meet the interest as it falls due on the bonds,
debentures or other evidences of indebtedness outstanding and to meet the principal
amount of the bonds, debentures or other evidences of indebtedness upon maturity;
- (a.2) debentures of any loan corporation that is registered under the Loan
and Trust Corporations Act;
- (a.3) guaranteed investment certificates of
any trust corporation that is registered under the Loan and Trust Corporations
Act;
- (a.4) deposit receipts, deposit notes, certificates of deposits,
acceptances and other similar instruments issued or endorsed by any bank listed
in Schedule I or II to the Bank Act (Canada) or by any authorized foreign bank
within
the meaning of Section 2 of the Bank Act (Canada);
- (a.5) term
deposits accepted by a credit union as defined in the Credit Unions and Caisses
Populaires Act, 1994;
- (b) investment certificates of a bank listed in
Schedule I or II to the Bank Act (Canada) or of an authorized foreign bank within
the meaning of section 2 of the Bank Act (Canada)".
- (c) Paid up shares
of,
- any credit union league to which the Credit
Unions and Caisses Populaires Act applies, and
- The Ontario Co-operative
Credit Society.
- (1.1) A board shall not invest its surplus
funds in the investments listed unless the investment is in other respects reasonable
and proper.
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