Grain Financial Protection Board 2016-17 Annual Report

Contents

  1. Message from the Chair
  2. Governance
  3. Board objectives and activities
  4. Board appointments
  5. Operational performance
  6. Performance measures and targets
  7. Analysis of financial performance

1. Message from the Chair

As the Vice Chair, on behalf of the Grain Financial Protection Board (GFPB), I am pleased to present to you the Annual Report for the year ending March 31, 2017.

The vision of the Board is to protect the financial interests of Ontario producers who have sold grain corn, soybeans, wheat, and canola and owners who stored grain with elevator operators. This is directly linked to one of the Ministry's goals of ensuring the sustainability of agriculture in Ontario.

The Grain Financial Protection Program (GFPP) was introduced in the mid-1980's following a series of grain elevator bankruptcies. GFPP consists of two components which are:

  1. The annual licensing of grain dealers and elevator operators under the Grains Act. Agricorp, is under contract with OMAFRA to administer the program.
  2. The administration of the Funds. The Board is responsible for the administration of the Funds. All income held in the Funds comes from producer check-off fees and investment income. The purpose of the Funds is to provide producers/owners with financial compensation in the event that a dealer or elevator defaults on their obligation or if there is a storage shortfall.
    This year the Board continued to focus on managing the Funds to ensure long-term sustainability and ability to provide farmers with an effective risk management tool.

The Board conducted an annual review on the performance of the Funds. The balances and growth rates are compared to the recommendations in the 2011 actuarial report. Historically, all of the Funds with the exception of the soybean Fund have met the established target balances as outlined in the actuarial report. The soybean Fund had been below the targeted balance, but with steady growth over the past few years, in 2015-16 and in 2016-17 this Fund met the established target balance. Because it is meeting the target Fund balance, the annual growth target rate of 2% in the soybean Fund balance is no longer needed for 2017-18.

In 2016 the Board conducted an actuarial review of the Funds. The Board will be considering the results and recommendations from this review in the 2017-2020 business plan period and will to continue to monitor all the Funds annually and make the appropriate changes as needed.

The Board worked with the Minister throughout the year on appointing members to the Board. In 2016-17, one new Board member was appointed and the position of Vice Chair was filled in August by an existing board member. As of March 31, 2017 the Board had four vacancies, including one board member whose term expired and who is seeking re-appointment. Since this time, two additional Board members have fulfilled their terms, one of which was our Chair. Currently there is no one appointed as Chair, so as Vice Chair I will fulfill the Chair duties until the Minister appoints one. Secretariat services worked with the Chair and myself to support this transition by providing orientation on processes specific to the Chair's role.
The Board has submitted recommendations to the Minister for consideration and is working actively to fill these vacancies in a timely manner. By continuing to work collaboratively with the Ministry, the Board will remain effective in its operations and ensure appropriate governance is in place to fulfill its mandate.

Looking forward, the Board will continue to focus on ensuring the long-term sustainability of the Funds.

Respectfully submitted,


Henry Van Ankum
Vice Chair, Grain Financial Protection Board

 

Preface

The Grain Financial Protection Board (Board) was established in 1985 and is classified as a Board-Governed Provincial Agency under the Agencies and Appointments Directive (AAD). The Board under the AAD, "administers funds or other assets for beneficiaries named under statute". The Board's mandate, strategies and activities have always been focused on prudent management of the Funds to ensure financial compensation is available to grain corn, soybean, wheat, and canola producers/owners when required. The Board's mandate of administering the Funds, investigating, granting or refusing claims, and recovering money is directly linked to one of the Ministry's goals of ensuring the sustainability of agriculture in Ontario.

2. Governance

The Board members are accountable to the Minister of Agriculture Food and Rural Affairs (the Minister), through the Chair, for setting goals, objectives, and the strategic direction for the Board. It operates under the authority of the Farm Products Payments Act (FPPA) and in accordance with the Memorandum of Understanding (MOU) between the Minister and the Chair. A revised MOU has been signed by the previous Board Chair and the Minister. The MOU will be effective until it is revoked or a new MOU is signed by the Parties. The MOU sets out the operational and reporting relationship between the Board and the Minister, and also outlines the administrative, financial, and auditing arrangements with the Ontario Ministry of Agriculture Food and Rural Affairs (OMAFRA).

This report covers the fiscal year April 1, 2016 to March 31, 2017.

3. Board objectives and activities

The Board's primary focus is on the prudent management of the Funds and preparing for claims when they occur. Claims are infrequent; however, the Board remains current on the claims procedure and is prepared to adjudicate claims when required. The Board makes decisions on claims based on the evidence and the law and, if applicable, payments to producers and owners are made after the Board has approved a claim.

Mandate

The Board is responsible to the Minister and is constituted under the authority of the FPPA and its regulations:

  • Reg. 70/12 Payments From Funds For Grain Producers
  • Reg. 321/11 Fees Payable to Boards

The Board's legislative mandate is outlined in section 4 of the FPPA as:
It is the function of a board and it has power,

(a) to administer its fund
(b) to investigate all claims made to it under this Act and to determine the extent of their validity
(c) to grant or refuse the payment of claims or any part thereof and determine the amounts and manner of payment
(d) to recover any money to which it is entitled under this Act by suit in a court of competent jurisdiction or otherwise.

Mandate letter from Minister

In June 2016, a new requirement was added to the Agencies & Appointments Directive (AAD) that the Minister annually issues an agency mandate letter to the Chair of all board governed agencies to inform their business plan. The Grain Financial Protection Board Chair received the 2017-18 mandate letter from the Minister on November 2, 2016 and results against these expectations will be reported in the 2017-18 annual report.

Business Plan

To assist the Board with achieving their mandate , they have established goals with corresponding objectives and activities. For 2016-17, the Board established the following five goals:

  1. Long-term sustainability of the Funds - The Board has hired Agricorp for the day to day administration of the Funds; however, the Board is ultimately responsible for the oversight and management of the Funds. The Board annually measures the performance of the Funds against established targets. The Board will request Actuarial Reviews on the Funds periodically or as required and they will only invest the Funds in instruments that are approved in the MOU, The Board has established an investment policy that is reviewed annually, and it also reviews financial statements yearly. All Board policies, guidelines and By-laws were reviewed and updated as required this year.
  2. Maintain an adjudication process that is simple, fair and accessible with minimal delays - The Board has approved claim adjudication guidelines and has established operational procedures to assist with the processing of claims. These activities will assist the Board to ensure that the adjudication process is fair and has minimal delays. The Board received no claims in 2016-17.
  3. Ensure agreements and directives are understood and documentation required under the MOU is in place -The Board reviews the documentation required under the MOU to ensure that it is both understood and that the appropriate documentation is on file to remain in compliance with the MOU. Legal counsel is available to assist the Board with any needed agreements.
  4. Ensure a high performing Board - The Board regularly reviews tenures of members and works with OMAFRA and stakeholder groups to seek recommendations of qualified candidates for appointments to the Board. The Board also maintains an orientation manual and provides new members with training. This year, one new member was appointed and the position of Vice-Chair was filled.
  5. Consultation with Industry Stakeholders - The Board participates in meetings with stakeholders as required. A stakeholder meeting was held on April 1, 2016 where it was determined to hold a meeting every three years or more frequently, as needed.

The affairs of the Board are subject to an annual audit by the Office of the Auditor General of Ontario. The Office of the Auditor General of Ontario typically makes audited financial statements available four months after the fiscal year end.

Board key activities

The Board held five meetings over the 2016-17 fiscal year that focused on:

  • the actuarial review that was conducted;
  • the revised Memorandum of Understanding (MOU);
  • reviewing quarterly financial statements;
  • business planning and risk assessment;
  • the appointment process management including posting requirements for the Chair vacancy;
  • staying current regarding stakeholder issues (stakeholder meeting held April 1);
  • reviewing and updating the Statement of Investment policy; and
  • reviewing and updating policies and by-laws.

Board staff

The Board does not have staff. In 2016-17, the Board has contracted with Agricorp for Governance/Secretariat and Financial Support Services. For 2017-18, the Board is in discussion with Agricorp to potentially enter into a multi-year service agreement with Agricorp.

Legal services

Legal services have been retained through Ministry of the Attorney General, Legal Services Branch, OMAFRA. The assigned lawyer provides the Board with advice regarding claims, legal assistance in any judicial reviews of Board decisions, and regarding the recovery of monies owed to the Board, and also assists in the continual education of Board members.

Investigative services

The Regulatory Compliance Unit of OMAFRA provides investigative services for the Board.

4. Board appointments

Board structure

The FPPA requires that the Board be composed of no fewer than five members appointed by the Minister. The membership of the Board has been traditionally comprised of nominees from each of the Ontario Canola Growers' Association, the Ontario Agri Business Association and the Grain Farmers of Ontario. Both the chair and the vice chair position are filled by the Minister's appointment.

In 2016-17 an existing Board member was appointed to the role of Vice Chair and one new female board member was appointed. Listed below are the appointees for the fiscal year 2016-17. Two Board members fulfilled their terms in 2016-17, and two additional Board members' terms have since expired as of April 2017, one of which was the former Board Chair. The Board has submitted recommendations to the Minister for these vacancies including for the Board Chair position.

Member Name Position Tenure
Jim Campbell

Chair
*Position currently vacant

12-Apr-2005 - 03-Apr-2017
*fulfilled term April 2017
Henry Van Ankum Vice Chair 19-Apr-2012 - 30-Aug-2019
*appointed Vice Chair Aug 2016
David Buttenham Member
*seeking reappointment
22-Mar-2011 - 21-Mar-2017
*fulfilled term Mar. 2017
Jeff Kobe Member 19-Jul-2007 - 18-Jul-2016
*fulfilled term July 2016
Darcy Oliphant Member 30-Jul-2011 - 29-Jul-2020
Barry Senft Member 22-Apr-2011 - 21-Apr-2017
*fulfilled term April 2017
Mark Brock Member 22-Aug-2012 - 22- Aug-2018
Markus Haerle Member
29-Jun-2015-28-Jun-2018
Jennifer MacDonald Member 13-Mar-2017-12-Mar-2020

5. Operational performance

The Board's operational performance is focused on effectiveness, efficiency, and reliability.
The Board conducted its annual review of the investment of the Funds in August 2016. This review showed that the corn, canola, and wheat Funds continue to meet the minimum target balances as outlined in the 2011 actuarial report. The soybean Fund had been below the minimum target balance the past few years but in 2015-16 and in 2016-17 with more growth it has met the target balance.

The Board annually reviews their established policies to ensure they are current. Minimal changes (not material) to the established policies were recommended this year. The Board also approved updates to their investment policy (Statement of Investment Policy), ensuring alignment with the MOU.

The Board annually reviews the claim adjudication guidelines to ensure members are familiar with the claim process. The Board infrequently (once every four or five years on average), receives claims and a regular review of the guidelines helps members stay up to date on the claims process and will assist with ensuring that the adjudication process is fair and has minimal delays. In 2016-17 the Board received no claims to adjudicate.
The Board conducted an actuarial review on the Funds in November 2016. As a best practice, actuarial reviews are done every five years to ensure that the Funds remain actuarially sound. The objective of this review was to determine the appropriate amount of producer check-off fees required in order for the four Funds to remain solvent under various scenarios and thus available to pay future claims as well as each Fund's equitable share of the current program costs. The review also included an assessment of the impacts to the Funds if the governance model was to change and all costs associated with the program were paid from the Funds. The Board will be considering the results and recommendations of this review during this business plan period and will to continue to monitor all the Funds annually and make the appropriate changes as needed. The next review would be scheduled for approximately 2021.

In 2016/17 the Board continued to work collaboratively with the Minister and stakeholder groups to fill a number of vacant positions, and is progressing towards meeting the Ontario government gender diversity target. One new female Board member was appointed and the position of Vice Chair was filled in August by an existing board member. The Board continues to monitor its vacancies and act proactively to make recommendations to ensure it has the appropriate governance in place to fulfill its mandate.

Over the past year, the Board implemented its business plan and has delivered on its goals and objectives. The table in Section 4 summarizes the Board's performance targets and results. The Board was able to either meet all of its objectives, or was able to implement strategies to assist it in meeting its objectives in the future.

6. Performance measures and targets

The Board's principal activities are to manage the Funds effectively and prepare for claims when they occur.

The Board's principal objectives for the period ending March 31, 2017 were as follows:

  1. Maintain a solvent compensation Fund managed in the interest of grain producers
  2. Conduct adjudicatory hearings and issue decisions in a fair and timely manner
  3. Grant or refuse claims and seek recovery of amounts paid
  4. Ensure that the Board is compliant with directives, policies, and agreements.

The following indicators define the outcomes the Board committed to achieving. These indicators are the basis for measuring and evaluating impact.

Performance Measure Baseline Target 16/17 Actual 16/17 Target 17/18 Target 18/19 Target 19/20
Objective 1: To maintain a solvent compensation Fund managed in the interest of grain producers.
Annual financial audit achieves an unqualified audit opinion in accordance with Canadian generally accepted accounting principles
Unqualified
Unqualified
Achieved
Unqualified
Unqualified
Unqualified
Minimum Target Fund Balances are maintained as per Actuarial Review. Note soybean fund is the only one that has an annual growth target due to the fact that it had been below the minimum fund balance the past few years.
Grain Corn target Fund balance Minimum
Fund balance $4,600,000 maintained
Minimum
Fund balance $4,600,000 maintained
Achieved-
Balance $5,981,975
Minimum
Fund balance $4,600,000 maintained
Minimum
Fund balance $4,600,000 maintained
Minimum
Fund balance $4,600,000
maintained
Wheat target
Fund balance
Minimum Fund balance $2,200,000 maintained Minimum Fund balance $2,200,000 maintained Achieved-
Balance $3,676,332
Minimum Fund balance $2,200,000 maintained Minimum
Fund balance $2,200,000 maintained
Minimum
Fund balance $2,200,000
maintained
Canola target
Fund balance
Minimum Fund balance $900,000 maintained Minimum Fund balance $900,000 maintained Achieved-
Balance $1,013,745
Minimum
Fund balance $900,000 maintained
Minimum
Fund balance $900,000 maintained
Minimum
Fund balance
$900,000
maintained
Soybean target
Fund balance
Minimum Fund balance $4,400,000 maintained Minimum Fund balance $4,400,000 maintained Achieved -
Balance $4,761,874
Check-off fees increased in 2014 and Fund is increasing as a result
Minimum
Fund balance $4,400,000 maintained
Minimum
Fund balance $4,400,000 maintained
Minimum
Fund balance $4,400,000
maintained
2% Annual growth in Fund balance 2% Annual growth in Fund balance Achieved. Met its target
balance in
2015/16 and 2016/17
therefore this
target is no
longer
needed.
N/A N/A N/A
Receipt and review Fund financial statements from Agricorp Quarterly Quarterly Achieved Quarterly Quarterly Quarterly
Performance Measure Baseline Target 16/17 Actual 16/17 Target 17/18 Target 18/19 Target 19/20
Objective 2: To conduct adjudicatory hearings and issue decisions in a fair and timely manner.
Claims processed with minimal delays Claimants notified within 2 days, dealer and elevators within 4 days of receipt of claim Claimants notified within 2 days, dealer and elevators within 4 days of receipt of claim

Achieved - no claims submitted in 2016/17.

Claimants notified within 2 days, dealer and elevators within 4 days of receipt of claim Claimants notified within 2 days, dealer and elevators within 4 days of receipt of claim

Claimants

notified within 2 days, dealer and elevators within 4 days of receipt of claim

Claims are adjudicated fairly Claims are reviewed individually, and follow adjudication guidelines established Claims are reviewed individually, and follow adjudication guidelines established Achieved - no claims submitted in 2016/17. Claims are reviewed individually, and follow adjudication guidelines established Claims are reviewed individually, and follow adjudication guidelines established Claims are reviewed individually, and follow adjudication guidelines established
Claimants received notification of Board decision Within 10 days of a Board decision Within 10 days of a Board decision Achieved - no claims submitted in 2016/17. Within 10 days of a Board decision Within 10 days of a Board decision Within 10 days of a Board decision
Performance Measure Baseline Target 16/17 Actual 16/17 Target 17/18 Target 18/19 Target 19/20
Objective 3: To grant or refuse claims and to seek recovery of amounts paid.
Claims are reviewed to determine their validity Board refers to FPPA and uses legal counsel as required to determine validity of claims Board refers to FPPA and uses legal counsel as required to determine validity of claims Achieved - no claims submitted in 2016/17.
Board refers to FPPA and uses legal counsel as required to determine validity of claims Board refers to FPPA and uses legal counsel as required to determine validity of claims Board refers to FPPA and uses legal counsel as required to determine validity of claims
Recover any money to which the Board is entitled to under the FFPA Legal counsel is consulted when proceeding with any recovery action Legal counsel is consulted when proceeding with any recovery action

Achieved - no claims submitted in 2016/17.

Legal counsel is consulted when proceeding with any recovery action Legal counsel is consulted when proceeding with any recovery action Legal counsel is consulted when proceeding with any recovery action
Performance Measure Baseline Target 16/17 Actual 16/17 Target 17/18 Target 18/19 Target 19/20
Objective 4: To ensure that the Board is compliant with directives, policies and agreements.
Updated MOU in place
(expiry March 8, 2016)
Updated as per the Agencies and Appoint-ments Directive section 1.9.1 Not applicable MOU was reviewed and signed. Updated as per the Agencies and Appointments Directive section 1.9.1 (if applicable) Updated as per the Agencies and Appointments Directive section 1.9.1 (if applicable) Updated as per the Agencies and Appointments Directive section 1.9.1 (if applicable)
Submit Annual Report Annually Within 90 days of the agency's receipt of the audited financial statement. Achieved; met AAD requirement.
Report was submitted in October 2, 2017 within 90-days of completing the financial audit (Sept. 18, 2017) meeting the AAD requirements.
Within 90 days of the agency's receipt of the audited financial statement meeting AAD requirements. Within 90 days of the agency's receipt of the audited financial statement meeting AAD requirements. Within 90 days of the agency's receipt of the audited financial statement meeting AAD requirements.
Submit Business Plan Annually March 2017 Achieved. Submitted on Feb. 24, 2017. March 2018 March 2019 March 2020
Submit Quarterly AAD Quarterly Quarterly Achieved Quarterly Quarterly Quarterly
Submit Quarterly Risk Assessment Report Quarterly Quarterly Achieved. Submitted to Ministry liaison Quarterly Quarterly Quarterly
Submit Agency Attestation
New requirement for 2015/16
Annually Annually Achieved. Submitted to Agency liaison on March 27, 2017. Annually Annually Annually


7. Analysis of financial performance

The Office of the Auditor General of Ontario finalized an audit of the 2016-17 financial statements in September 2017 and the Board submitted the Annual Report to the Minister shortly there after.

Annually, the Board conducts a full review of their investment strategies, including the investigation of alternate strategies, to ensure that returns are maximized within the investment framework. The Board concluded that they are maximizing their return on investments, and no changes in investment strategies were recommended this year.

The amount of interest earned this year is 3% per cent below what was earned last year which is less than 1% below the budget. The average return on investment is 1.67% which is slightly below last year return of 1.76%. This is considered an acceptable rate of return given the current low interest rate environment.

  Budget Actual Budget Actual
Fiscal Year 2015/16 2015/16 2016/17 2016/17
Revenue
Fees
375,000
432,092
375,000
498,255
Investment Interest
242,246
255,307
248,027
246,430
Claim Recoveries
0
7,617
0
0
Total Revenue
621,246
695,016
623,027
744,685
Expenses
Claims
263,000
7,617
263,000
0
Governance/Secretariat Services
45,000
28,050
60,000
15,963
Financial Services
30,000
15,183
45,000
27,701
Professional fees (Actuarial)
N/A
N/A
60,000
37,500
Financial Responsibility Review (see Note 1)
168,9401
172,1121
168,9401
168,7011
Total Expense
506,940
222,962
596,940
249,865
Net Balance (Total Revenue - Expenses)
114,306
472,054
26,087
494,820
Fund Balance Beginning of Year
14,466,962
14,466,962
14,581,268
14,939,016
Adjustment on the adoption of the financial instrument standard
0
0
0
0
Fund Balance End of Year
$14,073,260
$14,939,016
$14,607,355
$15,433,836

Notes:
1 Expenses included in financial responsibility review includes the Cost of Determining Financial responsibility, one FRRC member and other administration (ie: bank charges).

  Budget Actual Budget Actual
Cost of Determining Financial Responsibility $156,240 $156,240 $156,240 $156,240
FRRC (see Note 2) $12,500 $15,7522 $12,500 $12,4032
Other Administration $200 $120 $200 $58

2 Expenses included in FRRC are invoices from the firm of Graham, Scott and Enns LLP and from Gee,Lambart and Courtney less the revenue recovered from other revenue (eg.dealer FRRC fees).


Financial Statements of the Grain Financial Protection Board (Funds for Producers of Grain Corn, Soybeans, Canola, Wheat)

Year Ended March 31, 2017

Management's responsibility for financial reporting

The accompanying financial statements have been prepared by management, in accordance with Canadian Public Sector Accounting Standards. Management is responsible for the accuracy, integrity and objectivity of the information contained in the financial statements. The financial statements include some amounts that are necessarily based on management's best estimates and have been made using careful judgment.

In discharging its responsibility for the integrity and fairness of the financial statements, management maintains financial and management control systems and practices designed to provide reasonable assurance that transactions are authorized, assets are safeguarded, and proper records are maintained. The systems include formal policies and procedures and an organizational structure that provides for appropriate delegation of authority and segregation of responsibilities.

The Board of Directors is responsible for ensuring management fulfills its responsibilities for financial reporting and internal control. The Board meets regularly to oversee the financial activities and annually reviews the financial statements.

These financial statements have been audited by the Auditor General of Ontario . The Auditor General's responsibility is to express an opinion on whether the financial statements are fairly presented in accordance with Canadian Public Sector Accounting Standards. The Independent Auditor's Report, which appears on the following page, outlines the scope of the Auditor General's examination and opinion.


Signed by:

Erich Beifuss
CFO, Agricorp

Valerie Smith
Finance Manger, Agricorp

September 18, 2017


Independent Auditor's Report


To the Grain Financial Protection Board and to the Minister of Agriculture, Food and Rural Affairs

I have audited the accompanying financial statements of the Grain Financial Protection Board (Funds for Producers of Grain Corn, Soybeans, Canola and Wheat), which comprise the statement of financial position as at March 31, 2017, and the statements of operations and fund balances, remeasurement gains and losses and changes in cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management' s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with Canadian generally accepted auditing standards. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Opinion

In my opinion, the financial statements present fairly, in all material respects, the financial position of the Grain Financial Protection Board (Funds for Producers of Grain Corn, Soybeans, Canola and Wheat) as at March 31, 2017 and the results of its operations, their remeasurement gains and losses and their cash flows for the year then ended in accordance with Canadian public sector accounting standards.
Toronto, Ontario
September 18, 2017

Susan Klein, CPA, CA, LPA Assistant Auditor General


The Grain Financial Protection Board (Funds for Producers of Grain Corn, Soybeans, Canola, Wheat)

Statement of financial position as at March 31,2017
 
Grain Corn
Soybeans
Canola
2017 2016 2017 2016 2017 2016
Current Assets
Cash
$69,360
$114,982
$391,189
$297,124
$1,431
$12,933
Short term investements (note 4)
5,296,086
4,166,396
3,906,133
3,083,707
940,280
653,070
Accounts Receivable (note 3)
4,110
1,111
20,624
39,617
907
300
Total current assets
5,369,556
4,282,489
4,317,946
3,420,448
942,618
666,303
Long term investements (note 4)
642,045
1,790,769
477,393
1,135,020
74,666
348,018
Assets
$6,011,601
$6,073,258
$4,795,339
$4,555,468
$1,017,284
$1,014,321
Liabilities and fund balances
Accounts payable
26,914
79,688
31,915
101,561
2,977
8,126
Total liabilities
26,914
79,688
31,915
101,561
2,977
8,126
Fund balances
5,981,975
5,975,106
4,761,784
4,442,789
1,013,745
1,002,635
Accumulated remeasurement gains
2,712
18,864
1,640
11,118
562
3,560
Liabilities, fund balances, and accumulated remeasurement gains
$6,011,601
$6,073,258
$4,795,339
$4,555,468
$1,017,284
$1,014,321

 

 
Wheat
Total
2017 2016 2017 2016
Current Assets
Cash
$172,653
$85,160
$634,633
$510,199
Short term investements (note 4)
3,276,855
2,252,937
13,419,354
10,156,110
Accounts Receivable (note 3)
6,456
8,486
32,097
49,514
Total current assets
3,455,964
2,346,583
14,086,084
10,715,823
Long term investements (note 4)
227,342
1,203,023
1,421,446
4,476,830
Assets
$3,683,306
$3,549,606
$15,507,530
$15,192,653
Liabilities and fund balances
Accounts payable
5,016
18,819
66,822
208,194
Total liabilities
5,016
18,819
66,822
208,194
Fund balances
3,676,332
3,518,486
15,433,836
14,939,016
Accumulated remeasurement gains
1,958
12,301
6,872
45,443
Liabilities, fund balances, and accumulated remeasurement gains
$3,683,306
$3,549,606
$15,507,530
$15,192,653

See accompanying notes to financial statements


The Grain Financial Protection Board (Funds for Producers of Grain Corn, Soybeans, Canola, Wheat)

Statement of operations and fund balances - Year ended March 31, 2017
 
Grain Corn
Soybeans
Canola
2017 2016 2017 2016 2017 2016
Revenue
Fees from producers
$6,468
$6,505
$364,711
$347,792
$6,755
$5,711
Investment income
98,073
105,099
72,921
72,938
16,857
17,344
Claim recoveries
2,153
5,464
Total Revenue
104,541
113,757
437,632
426,194
23,612
23,055
Expenses
Financial responsibilitiy review
65,944
65,887
80,096
83,925
8,444
6,735
Governance and secretariat
6,240
10,655
7,580
13,675
798
1,122
Financial services
25,488
5,767
30,961
7,402
3,260
607
Claims paid
2,153
5,464
Total expenses
97,672
84,462
118,637
110,466
12,502
8,464
Excess of revenue over expenses
6,869
29,295
318,995
315,728
11,110
14,591
Fund balances, beginning of year
5,975,106
5,945,811
4,442,789
4,127
1,002,635
988,044
Fund balances, end of year
$5,981,975
$5,975,106
$4,761,784
$4,442,789
$1,013,745
$1,002,635

 

 
Wheat
Total
2017 2016 2017 2016
Revenue
Fees from producers
$120,321
$72,084
$498,255
$432,092
investment income
58,579
59,926
246,430
255,307
Claim recoveries
7,617
Total Revenue
178,900
132,010
744,685
695,016
Expenses
Financial responsibilitiy review
14,217
15,565
168,701
172,112
Governance and secretariat
1,345
2,598
15,963
28,050
Financial services
5,492
1,407
65,201
15,183
Claims paid
7,617
Total expenses
21,054
19,570
249,865
222,962
Excess of revenue over expenses
157,846
112,440
494,820
472,054
Fund balances, beginning of year
3,518,486
3,406,046
14,939,016
14,466,962
Fund balances, end of year
$3,676,332
$3,518,486
$15,433,836
$14,939,016

See accompanying notes to financial statements


The Grain Financial Protection Board (Funds for Producers of Grain Corn, Soybeans, Canola, Wheat)

Statement of remeasurement gains and losses - Year ended March 31,2017
  Grain Corn Soybeans Canola
2017 2016 2017 2016 2017 2016
Accumulated remeasurement gains, beginning of year
$18,464
$48,918
$11,118
$27,722
$3,560
$7,934
Unrealized (losses) on investments
(13,196)
(25,054)
(7,939)
(14,208)
(2,725)
(3,846)
Realized (gains) reclassified to the statement of operations and fund balances
(2,556)
(5,400)
(1,539)
(2,396)
(273)
(528)
Net change for the year
(15,752)
(30,454)
(9,478)
(16,604)
(2,998)
4,374)
Accumulated remeasurement gains, end of year
$2,712
$18,464
$1,640
$11,118
$562
$3,560

 

  Wheat Total
2017 2016 2017 2016
Accumulated remeasurement gains, beginning of year
$12,301
$26,846
$45,443
$111,420
Unrealized (losses) on investments
(9,511)
(12,842)
(33,371)
(55,950)
Realized (gains) reclassified to the statement of operations and fund balances
(832)
(1,703)
(5,200)
(10,027)
Net change for the year
(10,343)
(14,545)
(38,571)
(65,977)
Accumulated remeasurement gains, end of year
$1,958
$12,301
$6,872
$45,443

See accompanying notes to financial statements

 

The Grain Financial Protection Board (Funds for Producers of Grain Corn, Soybeans, Canola, Wheat)

Statement of cash flows - Year ended March 31, 2017

See accompanying notes to financial statements

  Grain Corn Soybeans Canola
2017 2016 2017 2016 2017 2016
Cash provided by operating activities
Excess of revenue over expenses
$6,869
$29,295
$318,995
$315,728
$11,110
$14,591
Items not requiring an outlay of cash
Realized (gains) on investments
(2,556)
(5,400)
(1,539)
(2,396)
(273)
(528)
Changes in non-cash working capital
Accounts receivable
(2,999)
(680)
18,993
(12,355)
(607)
200
Accounts payable
(52,774)
58,971
(69,647)
76,093
(5,149)
6,691
Total
(55,773)
58,291
(50,654)
63,738
(5,756)
6,891
Total investing activity
Net proceeds (purchase) of investments
5,838
4,193
(172,737)
(147,694)
(16,583)
(14,254)
Increase in cash
(45,622)
86,379
94,065
229,376
(11,502)
6,700
Cash, beginning of year
114,982
28,603
297,124
67,748
12,933
6,233
Cash, end of year
$69,360
$114,982
$391,189
$297,124
$1,431
$12,933

 

  Wheat Total
2017 2016 2017 2016
Cash provided by operating activities
Excess of revenue over expenses
$157,846
$112,440
$494,820
$472,054
Items not requiring an outlay of cash
Realized (gains) on investments
(832)
(1,703)
(5,200)
(10,027)
Changes in non-cash working capital
Accounts receivable
2,030
(6,840)
17,417
(19,675)
Accounts payable
(13,803)
12,927
(141,373)
154,682
Total
(11,773)
6,087
(123,956)
135,007
Total investing activity
Net proceeds (purchase) of investments
(57,748)
(52,149)
(241,230)
(209,904)
Increase in cash
87,493
64,675
124,434
387,130
Cash, beginning of year
85,160
20,485
510,199
123,069
Cash, end of year
$172,653
$85,160
$634,633
$510,199

The Grain Financial Protection Board (Funds for Producers of Grain Corn, Soybeans, Canola, Wheat)

Notes to the financial statements - Year ended March 31, 2017
1. Establishment of the Funds

The Grain Financial Protection Board (the Board) was established in 1984 as an agency of the Ontario Government under the Farm Products Payments Act. It is an agency responsible for administering the funds for producers of grain corn, soybeans, canola and wheat (the Funds). The Funds were established to operate on a not-for-profit basis on behalf of the producers:

  • Producers of Grain Corn - established November 3, 1984;
  • Producers of Soybeans - established November 3, 1984;
  • Producers of Canola - established July 22, 1989; and
  • Producers of Wheat - established December 13, 2004. The Ontario Wheat Producers' Marketing Board made a $1 million non?recurring unrestricted contribution to establish the Fund.

The purpose of the Funds through regulations made under the Farm Products Payments Act is to protect producers (of grain corn, soybean, canola and wheat) against losses resulting from dealer payment default. Effective July 1, 2012, producers can be reimbursed 95% of an approved claim for any defaults by dealers. The Board attempts to recover any claims paid from the dealers.

As a board-governed provincial agency, the Grain Financial Protection Board is exempt from income taxes.

2. Significant accounting policies

a) Basis of accounting

The financial statements have been prepared by management in accordance with Canadian Public Sector Accounting Standards (PSAS) for governments as recommended by the Public Sector Accounting Board of Chartered Professional Accountants of Canada (CPA Canada). The Board has also elected to apply the section 4200 standards for Government Not-For-Profit Organizations. These financial statements are, in management's opinion, properly prepared within reasonable limits of materiality, statutory requirements and the framework of the accounting policies summarized below.

b) Revenue recognition

The Funds' revenue comprises of producer check-off fees paid under the Farm Products Payments Act and investment income. Check-off fees are paid to either the Ontario Canola Growers Association (OCGA) or the Grain Farmers of Ontario (GFO), as designated by the Regulation. The OCGA and GFO then remit the fees to the Board.

All transactions are recorded on the accrual basis except for claim recoveries, which are recorded when received due to the inherent uncertainty regarding the amounts and timing of the recovery.

c) Expense allocation

Expenses, including claims, are allocated to the four funds based on the proportionate value of each crop sold, except for Canola. The Canola allocation of expenses is set at a minimum of 5% (2016 - 4%).

d) Financial instruments

The Funds' financial instruments consist of cash, investments, accounts receivable and accounts payable.

All financial instruments are recorded at cost or amortized cost unless management has elected to carry the instruments at fair value. Management has elected to record short?term demand deposit type investments at amortized cost, which approximates fair value and all other investments at fair value. Guaranteed Investment Certificates (GIC's) are valued based on cost plus accrued interest, which approximates fair value.

Unrealized changes in fair value are recognized in the statement of remeasurement gains and losses until they are realized, when they are transferred to the statement of operations and fund balances.

All financial assets are assessed for impairment on an annual basis. When a decline is determined to be other than temporary, the amount of the loss is reported in the statement of operations and fund balances. Any unrealized gains and losses previously recognized in the statement of remeasurement gains and losses are reversed and recognized in the statement of operations and fund balances.

The Board is required to classify fair value measurements using a fair value hierarchy, which includes three levels of information that may be used to measure fair value:

Level 1 - unadjusted quoted market prices in active markets for identical assets or liabilities;
Level 2 - observable or corroborated inputs, other than level 1, such as quoted prices for similar assets or liabilities in inactive markets or market data for substantially the full term of the assets or liabilities; and
Level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.

e) Use of estimates

The preparation of financial statements in conformity with PSAS requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses. Significant items subject to such estimates and assumptions include the carrying amounts of accounts receivable and allocation of expenses across funds. Actual results could differ from those estimates.

3. Accounts receivable

Accounts receivable represent producer check?off fees due from the GFO or OCGA.

4. Investments

a) Portfolio profile at fair value and maturity profile

2017 Grain Corn Soybeans Canola Wheat Total
Short-term (<1 year)
Province of Ontario
1,182,517
715,203
244,706
853,974
2,996,400
Financial institutions - deposits held
1,263,970
1,185,293
296,840
849,957
3,596,060
Financial institutions - guaranteed investment certificates
2,849,599
2,005,637
398,734
1,572,924
6,826,894
 
5,296,086
3,906,133
940,280
3,276,855
13,419,354
Long-term (1-3 years)
Financial institutions - guaranteed investment certificates
642,045
477,393
74,666
227,342
1,421,446
 
642,045
477,393
74,666
227,342
1,421,446
Total
$5,938,131
$4,383,526
$1,014,946
$3,504,197
$14,840,800

 

2016 Grain Corn Soybeans Canola Wheat Total
Short-term (<1 year)
Other Provincial Governments
1,252,542
754,247
133,853
407,551
2,548,193
Financial institutions - deposits held
383,027
611,688
96,099
339,416
1,430,230
Financial institutions - guaranteed investment certificates
2,530,827
1,717,772
423,118
1,505,970
6,177,687
 
4,166,396
3,083,707
653,070
2,252,937
10,156,110
Long-term (1-3 years)
Province of Ontario
1,173,674
706,755
242,477
846,194
2,969,100
Financial institutions - guaranteed investment certificates
617,095
428,265
105,541
356,829
1,507,730
 
1,790,769
1,135,020
348,018
1,203,023
4,476,830
Total
$5,957,165
$4,218,727
$1,001,088
$3,455,960
$14,632,940

 

b) Fair value hierarchy

2017 Level Grain Corn Soybeans Canola Wheat Total
Cash equivalents
1
$1,263,970
$1,185,293
$296,840
$849,957
$3,596,060
Guaranteed investment certificates
2
3,491,644
2,483,030
473,400
1,800,266
8,248,340
Bonds
1
1,182,517
715,203
244,706
853,974
2,996,400
Total  
$5,938,131
$4,383,526
$1,014,946
$3,504,197
$14,840,800

 

2016 Level Grain Corn Soybeans Canola Wheat Total
Cash equivalents
1
$383,027
$611,688
$96,099
$339,416
$1,430,230
Guaranteed investment certificates
2
3,147,922
2,146,036
528,660
1,862,799
7,685,417
Bonds
1
2,426,216
1,461,003
376,329
1,253,745
5,517,293
Total  
$5,957,165
4,218,727
1,001,088
$3,455,960
$14,632,940

There were no transfers of investments between Level 1 and Level 2.

5. Financial instruments risk management

a) Market risk

Market risk is the risk that changes in market prices will affect the fair value of reported assets and liabilities. Market factors include three types of risk: interest rate risk, currency risk and equity risk. The Funds are not exposed to significant currency or equity risk as they do not transact in foreign currency or hold equity financial instruments. The Funds operate within the constraints of the investment policy, which restricts the investments to highly liquid, high-grade instruments such as deposit notes, bonds, debentures, and other forms of indebtedness, issued by federal and provincial governments, and domestic financial institutions.

b) Interest rate risk

Interest rate risk refers to the adverse consequences of interest rate changes on the Funds' financial position, operations and cash flow. Fluctuations in interest rates have a direct impact on the market valuation of the Funds' fixed income securities portfolio. The average return on investments is 1.67% (2016 - 1.75%). Fluctuations in interest rates could have a significant impact on the fair value of the fixed income securities profile.

Although investments are generally held to maturity, realized gains or losses could result if liquidation of long-term investments is required to meet obligations. There have been no significant changes from the previous year in the exposure to risk or to policies, procedures and methods used to measure the risk.

The Board's bond portfolio has an interest rate of 2.13% (2016 - 1.95% to 2.13%), with a maturity of June 2017 (2016 - June 2016 to June 2017). As at March 31, 2017, a 1% fluctuation in interest rates, with all other variables held constant, would increase/decrease the value of bonds by an estimated $5,172 (2016 - $39,144)

c) Credit risk

Credit risk is the risk that other parties fail to perform as contracted. The Funds are exposed to credit risk principally through balances receivable from the OCGA and GFO, as well as through its investment securities.

Credit risk on balances receivable arises from the possibility that the entities that owe money to the Funds may not fulfill their obligation. Collectability is reviewed regularly and an allowance for doubtful accounts, if necessary, is established to recognize the impairment risks identified.

Credit risk on investment securities arises from the Funds' position in term deposits, corporate debt securities, and government bonds. Board investment policy restricts the types of investments to high-grade Canadian debt instruments, which significantly reduces credit risk.

6. Related party transactions

Effective November 1, 2010, a Memorandum of Understanding between the Board and the Minister of Agriculture, Food and Rural Affairs established that the Funds are financially responsible for expenses related to governance, secretariat, financial services, and financial responsibility review. The Board has entered into an agreement to acquire these services from Agricorp. These expenses are included in the statement of operations and fund balances and total $199,903 (2016 - $199,474). Certain administrative expenses, specifically the costs of Board meetings, are absorbed by OMAFRA, and are not included in the statement of the operations and fund balances.

7. Comparative figures

Certain 2016 figures reclassified to conform to current year's presentation.


For more information:
Toll Free: 1-877-424-1300
E-mail: ag.info.omafra@ontario.ca
Author: Ainsley Archer - Policy Analyst - OMAFRA
Creation Date: 09 February 2018
Last Reviewed: 23 February 2018