Grain Financial Protection Board Annual Report 2011/12
Table of Contents
The 2011/12 year was an eventful year for the Board as the term for a number of Board members including the Chair's expired. It was my pleasure to accept the appointment as Chair in July 2011. The Board formally asked stakeholder groups to nominate candidates to fill the other vacancies and we received nominations for a number of strong candidates. The Board accomplished many objectives over the year and continues to work with stakeholders and the Ministry of Agriculture, Food and Rural Affairs to administer the Funds and provide producers with an effective risk management tool.
The Board continues to support the industry through discussions with stakeholders regarding deferred payments. An actuarial study was commissioned in August to assess the impacts to the Funds of regulatory changes that would allow deferred payments. The 2011 amendments to Ontario Regulation 260/97 expired on July 1, 2012 and the Board is working closely with the stakeholders, Ministry and Agricorp to assist with assessing further amendments regarding deferred payments and the impact to the Funds.
Claims were made in the spring of 2011 and a comprehensive investigation was completed to establish the eligibility of the claims. The Board worked closely with the Regulatory Compliance Unit to gather information to make informed and impartial decisions. Decisions not to pay the claims were made, and the decision letters were sent to the claimants within the targeted timeline.
A new Procurement Directive was introduced by the province in 2011, and the Board subsequently drafted and approved a procurement policy to make sure they continued to remain compliant with the new directive. Following the creation of the procurement policy, a full review of all existing by-laws and policies of the Board was conducted and minor changes were made so that the policies and by-laws remain in line with current practices of the Board. The Board will continue to review its policies and by-laws on an annual basis to ensure they remain current.
With the recent decline in the financial markets, the Board undertook a review of its investment strategy and the current investments in the portfolio. The Board continues to monitor the investment income in order to assess the soundness of the Funds. Future declines in investment rates may indicate that a change in check-off fees will be required in order to keep the Funds actuarially sound.
The Grain Financial Protection Board (Board) is classified as a Trust Agency and was established in 1984 under the authority of the Farm Products Payments Act (FPPA). The Agency operates as authorized by the FPPA and its regulations thereunder.
In March 2011, the Minister of Agriculture, Food and Rural Affairs (Minister) and the Board signed a new Memorandum of Understanding (MOU) which covers a 5-year term and expires on March 11, 2016.
The Board's vision is to protect the financial interests of Ontario producers who have sold grain corn, soybeans, wheat, and canola through licensed grain dealers, or owners who stored grain with licensed elevator operators. The vision of the Board supports Ministry of Agriculture, Food and Rural Affairs' (OMAFRA) priorities to strengthen Ontario's agri-food sector and strengthen Ontario's rural communities.
As an agency of OMAFRA, the Board's annual report is subject to the following mandatory reporting requirements established in the Agency Establishment and Accountability Directive, including:
This report covers the fiscal year April 1, 2011 to March 31, 2012.
The Board is accountable to the Minister in exercising its mandate.
The Board's annual activities are directly related to fulfilling its mandate, which is set out in the FPPA:
To maintain a solvent compensation Fund managed in the interest of producers.
Quarterly the Board reviews the financial statements and works toward annually achieving an unqualified audit opinion from the Office of the Auditor General. The Board reviews the balances and the annual growth rate of the four Funds and compares them to the objectives set by the Board.
To be self-sustaining in paying all legitimate Board expenses and claims from the Funds.
The Board regularly meets with the Controller and reviews the expenses and claims deducted from the Funds to ensure their legitimacy. The Board reviews the annual audited financial statements for accuracy and provides approval as required.
To conduct adjudicatory hearings and issue decisions in a timely and fair matter.
The Board has established a training plan for the adjudication of claims. The Board has established performance measures to measure how efficiently claims are processed. Stakeholders are updated and informed of the Boards activities in a timely manner.
To ensure that the Board is compliant with directives policies and agreements.
The Board annually reviews policies for compliance. The Board has established a training plan for the adjudication of claims. The business plan and annual report are submitted to the Minister within the timeframes required. The Board regularly reviews their external agreements to ensure they are still in effect.
To develop and implement a Board member strategy.
The Board has developed a succession plan, and works with OMAFRA to ensure the Board is at quorum. The Board has developed an orientation and training manual to assist new members.
Board Key Activities
The Board held five meetings over the 2011/12 fiscal year that focused on:
Board staff and Key activities
The Board does not have staff. The Board has contracted with Agricorp for Governance/Secretariat and Financial Support Services.
Legal services have been retained through Ministry of the Attorney General, Legal Services Branch, assigned to OMAFRA. The Board's lawyer provides the Board with advice, legal assistance in Judicial Reviews of Board decisions and the recovery of monies owed to the Board, and assists in the continual education of Board members.
Investigative ServicesThe Regulatory Compliance Unit of OMAFRA provides investigative services for the Board.
The FPPA requires that the Board be composed of not fewer than five members appointed by the Minister. The membership of the Board has traditionally comprised nominees from each of the Ontario Agri Business Association, the Grain Farmers of Ontario, and the Ontario Canola Growers' Association. The chair's position is also a Minister's appointment.
The Vice Chair position became vacant on April 4, 2011, and a recommendation was submitted to the Minister on November 29, 2011. The Vice Chair position has not yet been filled.Listed below are the appointees for April 1, 2011 to March 31, 2012.
The Board's operational performance is focused on effectiveness, efficiency, and reliability.
Claims were made in the early spring in respect of an unlicensed elevator not delivering stored grain. Three applicants submitted claims with the Board. The Board reviewed the information submitted and engaged the services of the Regulatory Compliance Unit to gather additional information regarding the claims. After thoroughly considering the facts and circumstances of each of the three claims presented, the Board declined to pay the claims and decision letters were sent to each of the claimants as well as the elevator operator involved and the Chief Inspector appointed under the Grains Act. The Board used the Claims Adjudication Guidelines, which were previously drafted to assist new members with the adjudication process.
The Board implemented its business plan and delivered on its goals and objectives. The table in Section 5 outlines the Board's performance targets
Review Performance Targets
The Board's principal activities are to administer the compensation Funds, investigate claims, grant or refuse the payment of claims, and recover any monies paid out in claims.
The Board's principal objectives for the period ending March 31, 2012 were as follows:
The following indicators define the outcomes the Board committed to achieving. These indicators are the basis for measuring and evaluating impact.
Objective 1: To maintain a solvent compensation Fund managed in the interest of grain producers
Objective 2: To be self-sustaining paying all legitimate Board expenses from the Fund
Objective 3: To conduct adjudicatory hearings and issue decisions in a timely and fair manner
Objective 4: To ensure that the Board is compliant with directives, policies and agreements
Objective 5: To develop and implement a Board member governance strategy
*Board Expenses defined for this purpose include: Governance/Secretariat, Financial and Adjudication Services, Determining Financial Responsibility and Capital Expenses
**Timelines are dependent on the Office of the Auditor General of Ontario
The Office of the Auditor General of Ontario finalized the 2011/12 financial statements in November 2012 and the Board submitted the Annual Report to the Minister shortly there after.
Check-off fees exceeded the budget due to increased fees received by the Wheat Fund.
A decline in the financial markets over the past year resulted in lower interest earnings than previous years. The Board conducted a full review of all of their investments as well as investigated strategies to maximize returns. The Board will continue to monitor the annual growth rate of all four Funds as recommended in the 2011 actuarial report.
Legislation changes in October 2010 resulted in changes to the Board's expenses and meant the Board became responsible for the costs of governance and secretariat services, financial support services and the costs of determining financial responsibility of dealers. Because the change in legislation came part way through 2010/11 the Board assumed 5/12th of these costs in fiscal year 2010/11 and then 100% of the costs in 2011/12. This is reflected in the budget and the actual numbers in the table following this section.
The Board was required to undertake an actuarial review to establish the impacts of implementing regulation changes because of deferred payments. It was also involved with a claims situation which included a detailed investigation and follow up with claimants.
The Board continues to focus on operating effectively and efficiently. Despite these unplanned events, the Board still managed to control expenses within two per cent of their budget.
1 Governance/Secretariat Services are pro-rated @ 41.66% of $58,000 to cover the period of November 1st 2010 - March 31, 2011
2 Financial Services are pro-rated @ 41.66% of $50,000 to cover the period of November 1st 2010 - March 31, 2011
3 Costs of Determining Financial Responsibility Services are pro-rated @ 41.66% of $156,240 to cover the period of November 1st 2010 - March 31, 2011. Costs for FRRC services are pro-rated @ 41.66% of $23,200 to cover the period of November 1st 2010 - March 31, 2011
4 Includes $42,920 cost for actuarial study.
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