Agricultural Research Institute of Ontario Business Plan 2014-17

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Executive summary

The agri-food and agri-products industry contributes more than $33 billion to the Ontario economy and employs approximately 700,000 people. Research and innovation are key contributors to the strength of Ontario's agri-food industry. Ontario is a top innovator in agri-food, developing value-added products and providing industry solutions that contribute to a competitive and sustainable agri-food sector.

The Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) is the provincial lead overseeing Ontario's thriving agri-food industry. OMAFRA's vision is to enable successful and sustainable agri-food and agri-products businesses. Keys to achieving this vision include strong rural communities, thriving agriculture and food sectors, and, safe food, healthy animals and a healthy environment.

The Agricultural Research Institute of Ontario (ARIO) is an Operational Services Agency reporting to the Minister of Agriculture, Food and Rural Affairs. ARIO is focused on ensuring Ontario maintains its competitive advantage in agri-food and agri-products research and innovation and concentrates its efforts in these four ways:

  1. Providing strategic advice to the Minister on agri-food and agri-products research and innovation;
  2. Leading the Infrastructure Strategy initiative to modernize the province's agri-food and agri-products research and innovation physical and virtual infrastructure;
  3. Promoting the Ontario agri-food and agri-products research and innovation system;
  4. Providing administrative and managerial oversight of open competitive research programs (e.g. New Directions, Food Safety), and the 17 ARIO owned research stations with over 6,500 acres, 300+ buildings with a book value of approximately $83 million (including capital projects under construction), and over 40 tenants that include government, not for profits, industry and private.

In addition to "increasing consumption of local food…" and "open for business…", the OMAFRA's current strategic priority that most directly aligns with the ongoing work of ARIO is "increasing the competitiveness and productivity of Ontario's agri-food and agri-product businesses through market focused innovation". For more information on ARIO's on-going work see the attached appendices.

Key ARIO accomplishments for the 2013/14 fiscal year include:

Infrastructure Strategy

Vineland Research and Innovation Centre (VRIC):

  • Final approval was given to VRIC for the construction of the new research greenhouse facility. Construction to begin in the summer of 2014.
  • Completion of a long term site management agreement with VRIC that will work in tandem with the recently finalized operating agreement between VRIC and the University of Guelph (U of G). Together they provide the operating framework that sets out the respective roles and responsibilities of all parties at the Vineland research station. VRIC took over responsibility for the operation and management of the Vineland research station from the U of G effective November 1, 2014.
  • The Order in Council that authorized transfer of ownership of the federal government owned AAFC building at the Vineland research station to VRIC in 2011 required that ARIO and VRIC complete a lease agreement for the use of the land within five (5) years. VRIC and ARIO completed negotiations on the land lease. It will be signed early in 2014-15.

Elora:

  • OMAFRA, the U of G and ARIO, working with leaders from the major livestock sectors (dairy, beef, swine and poultry) established a new industry led not for profit organization, The Livestock Research and Innovation Corporation (LRIC) to provide one livestock sector voice in research priority setting and research programming for the new livestock research and innovation centre at Elora beginning with the new dairy research facility once completed.
  • Development of a joint multi-livestock stakeholder agreement that will guide the relationships of the parties going forward was finalized and signed by all parties.
  • Construction of the new dairy research facility at Elora began in the summer of 2013. Completion is expected in the fall of 2014.

Other Centres:

  • In addition to the significant progress being made at Vineland (horticulture) and Elora (livestock), ARIO continues to implement the Infrastructure Strategy recommendations by further developing concepts for the other proposed new centres in the areas of Bioeconomy, Field Crops, and Food and Health through ongoing consultations, engagement and discussions with stakeholders.
  • Recommendations that were developed with respect to realizing operating efficiencies across ARIO's existing research infrastructure portfolio remain under consideration and review.
Minor Capital program
  • Ongoing effective administration and managerial oversight of the current research infrastructure portfolio is provided by the Secretariat. This infrastructure portfolio includes 17 locations and a total of over 6,500 acres, 300 + buildings and over 45 tenants (government, not for profits, industry and private). Its current book value of approximately $83 million (including assets under construction) is supported by a minor capital repair budget of approximately $4 million.
  • The 2013-14 program focus was on completing a number of existing large renovation projects. In addition, safety, regulatory and equipment failure issues were addressed on a case by case basis. A total of 85 projects were supported.
  • Responsibility for the administration of the Minor Capital program at the Vineland research station was transferred to VRIC from the U of G as part of VRIC's assumption of responsibility for operation and management of the station.
Research programs
  • Continued to support modernization of research program administration through ongoing development of the Research Management System (RMS). Over the next year focus will be on increasing functionality and capacity of RMS to capture and retrieve more research results data, and to accelerate knowledge translation and transfer; thereby, increasing adaptation and commercialization opportunities.
  • Continued effective administration of the Ministry's open research programs (currently New Directions & Food Safety) and other research programs (e.g. plant germplasm royalty reinvestment) by Research and Innovation branch staff (ARIO Secretariat). Total annual expenditures of approximately $3 million.

While continuing the work of managing the research infrastructure portfolio and the administration of the ministry's open research programs, ARIO recognizes that it is at a critical point in time in its agri-food research Infrastructure Strategy and looks forward to continuing the development and implementation of the research Infrastructure Strategy in the year ahead.

Mandate and mission statement

Background

The Agricultural Research Institute of Ontario ARIO was created in 1962 and continues its mandate under the Agricultural Research Institute of Ontario Act. R.S.O. 1990, c. A.13 as amended (ARIO Act) and reports to the Minister of Agriculture, Food and Rural Affairs (OMAFRA).

ARIO is classified as an Operational Services Agency under the Agency Establishment and Accountability Directive (AEAD), with a mandate to, among other things, provide strategic advice to the Minister on agri-food research and related issues and interests, manage and hold funds (ARIO manages open, competitive research funds and other trust funds) and to acquire, maintain and dispose of real property in the manner described in the ARIO Act.

ARIO mission statement

Within this legislative context, ARIO has adopted the following mission statement, in support of OMAFRA's vision for successful and sustainable agri-food and agri-products businesses:

  • "ARIO, as appointed representative of the agri-food sector, is dedicated to the strategic use of science and innovation to enhance the sustainability and profitability of Ontario's agri-food and rural sectors".

Environmental scan

Partnering to build a sustainable and thriving agri-food research and innovation system

Governments around the world, including here in Ontario, are faced with a sharply increased focus on public governance, transparency and accountability and value for money when delivering services and programs to citizens and businesses. New partnership models joining industry with governments and academia are key to the long-term success of the agri-food and agri-products industry, and are necessary for sustained economic prosperity and growth.

This can be seen by the recent launch of Growing Forward 2 (GF2) federal provincial programs (2013-2018), which has resulted in an overall increase in innovation funding and a requirement to embed innovation throughout GF2 programs. Industry-led research and innovation, along with industry, academic, business and government collaborations are becoming increasingly important to advancing innovation and commercialization, and this is reflected in GF2 programming.

  • In December 2012, Agriculture and Agri-Food Canada (AAFC) announced the federal-only Agri-Innovation Program. This program includes the industry-led research and development Agri-Science Cluster and Agri-Science Project initiatives. The Agri-Science Initiatives will mobilize scientific expertise across industry, academia and government.
  • An industry-led Agri-Innovation Commercialization Program was announced at the same time. This program provides repayable support to industry in order to reduce the financial risk of developing and adopting later stage agri-based innovations, such as technologies, products, processes and services and commercialization opportunities.
  • Under the Research and Innovation Designated Program (Canada-Ontario GF2 Bilateral Agreement), support will be provided to the Agri-Technology Commercialization Centre (ATCC), Innovation Centres (such as Vineland Research and Innovation Centre, the Livestock Research and Innovation Corporation and others) and the University of Guelph (for Knowledge Translation and Transfer, Highly Qualified Personnel and commercialization activities through the Catalyst Centre).
  • In addition, innovative projects will receive a higher level of government support through Ontario's GF2 cost-share programs for producers, processors and collaborations and organizations.

Partnership models and infrastructure leading jurisdictions use for research and innovation

A world-wide scan of how other jurisdictions organize and manage agricultural and agri-food research and development infrastructure was completed by KPMG on behalf of ARIO1. This scan concluded that jurisdictions around the world who lead in agricultural research and innovation have these success factors for agri-food and agri-products research and innovation strategic business planning and infrastructure capacity:

  • Linking infrastructure plans to vision and strategy
  • Use of multiple governance models
  • Mission-oriented long-term vision
  • Portfolio of projects
  • Need for an integrated research and development models, e.g. from producer to processor to consumer; or from basic, to strategic, to applied, to demonstration, to scale-up, to financing and commercialization. Also means that different scientific disciplines are integrated into the overall model as appropriate
  • Development of business case and implementation plan
  • Involvement of users in programs or projects
  • Access to world-wide expertise and facilities
  • State of the art equipment and facilities
  • Supporting critical mass, e.g. clustering

1. Foot note: KPMG. Development of a Comprehensive Agri-Food R & D Infrastructure Strategy for the Agricultural Research Institute of Ontario: Background Research Paper. March 7, 2008.

Building on foundation of specialized focused capacity to modernize partnerships and infrastructure

The long-term funding agreement and relationship between the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) and the University of Guelph (the Agreement) is the primary vehicle for delivering the Ministry's agri-food and agri-products innovation agenda and the supporting research infrastructure strategy put forward by ARIO. The Agreement provides the research and innovation capacity to help attract and retain investment by government and industry for both discovery and applied scientific research. The University of Guelph (U of G) as the primary user of the ARIO properties, has an active role in the new agri-food and agri-products research and innovation centres emerging under the Infrastructure Strategy and supported through Growing Forward 2.

Modern partnerships to drive innovation and operating efficiencies

Implementation of the Infrastructure Strategy has been a catalyst for new, industry-influenced governance models that support the strong research and innovation capacity and boost Ontario's economy. The Vineland Research and Innovation Centre (VRIC) at Vineland and more recently, the Livestock Research and Innovation Centre (LRIC) at Elora have demonstrated industry's increased commitment to supporting the agri-food innovation system in partnership with governments and the research community. These two centres and the proposed remaining centres (Bioeconomy, Food and Health, and Field Crop Production) will continue to drive the modernization of relationships between innovation partners - governments, industry and the research community, and lead to necessary operating efficiencies across ARIO and non-ARIO infrastructure.

In conclusion, to continue enabling Ontario's economic growth, Ontario needs to focus its agri-food and agri-products research and innovation, on the development of innovative products, safe food and sustainable and efficient production. To do so effectively, Ontario's agri-food and agri-products sectors must have the appropriate research and innovation infrastructure platforms, with oversight by new governance models that reflect increased industry investment, access, and involvement in partnerships between government, industry and academia.

Overview of current and forthcoming programs and activities

The Director of Research for ARIO, the delegates and appointees of the Director of Research for ARIO (under the ARIO Act), the Secretariat and the members of ARIO appointed by the Minister have been, and continue to be, responsible for these key programs and activities:

  1. Strategic advice
  • Continue to advise the Minister on research priorities and issues related to the agri-food and agri-products sectors.
  • Provide advice on the renewed Uof G/OMAFRA Partnership Agreement and on emerging research centre governance models e.g. Livestock Research & Innovation Corporation (LRIC) and the Vineland Research and Innovation Centre (VRIC).
  1. Leadership - implementation of the Infrastructure Strategy

Continue implementation of the research Infrastructure Strategy leading to a modern, integrated agri-food and agri-products research and innovation system with industry-influenced governance models and modern state of the art infrastructure capacity built on shared funding models between industry and government that includes:

  1. Consolidate livestock research at the Elora research station, including working with industry to plan for the relocation of swine and poultry research to Elora
  2. Enhancing beef research capacity at the Elora research station
  3. Working with Infrastructure Ontario to acquire additional lands in proximity to the Elora research station to facilitate consolidation of research at Elora
  4. Working with the turfgrass industry and the University of Guelph to develop detailed plans and begin implementation of relocating from the Guelph research station
  5. Continue to refine, develop and begin implementation of remaining 3 centres:
    • enhanced field crops
    • bioeconomy
    • food
    • health
  1. Promoting Ontario's agri-food and agri-Products research and innovation

Through focused outreach opportunities for the Chair and members, build relationships between ARIO and industry stakeholders to broaden awareness, engage and seek support for OMAFRA's research and innovation priorities and the research Infrastructure renewal that is necessary to maintain and strengthen Ontario's local, national and global competitiveness in the agriculture and agri-food and agri-product sectors.

  1. Managerial oversight
  • Provide operational and managerial oversight of the 17 agri-food research locations comprised of over 300 buildings, 6,500 acres and over 45 tenants (both government and non-government) to ensure continuing effective and efficient management of the research property portfolio in support of the various research programs.
    1. OMAFRA provides $4 million in annual funding to ARIO for the ARIO Minor Capital Program (both Base Building and Infrastructure Renewal). An annual capital program prioritized project list is established during discussions between the Secretariat, and the UofG and VRIC. Once approved by ARIO, day to day site project management and implementation is provided by the UofG and VRIC with oversight by the Secretariat.
    2. the Base Building component of the program is used to support projects related to human health and safety, code compliance, building integrity, life cycle replacement, and efficiency, conservation and cost containment to enhance program delivery and building performance.
    3. the Infrastructure Renewal (program-related) portion of the program supports projects addressing animal care, including health, safety and well-being, program needs and priorities as well as some dedicated equipment replacements.
  • ARIO provides effective and efficient administration of current OMAFRA Open Research programs (currently New Directions and Food Safety)
  • effective and efficient administration of financial operations/programs including aspects of financial consolidation and administration of research programs sponsored by OMAFRA.

Strategic direction

ARIO strategic focus

Together, the Director of Research for ARIO, the delegates and appointees of the Director of Research for ARIO, (including the Secretariat) and the members of ARIO appointed by the Minister are responsible for, and will continue to focus their efforts on four key aspects of the agricultural research system.

  1. Leadership - implementation of ARIO's Infrastructure Strategy

ARIO plays an important role in modernizing the agri-food and agri-products research and innovation system. For example, ARIO has recommended an approach to the Minister that OMAFRA is adopting to modernize the agri-food research and innovation system. OMAFRA has begun implementing some of the various phases of this strategy. The Infrastructure Strategy (IS) initiative is the road-map for modernizing research infrastructure and strengthening innovation in Ontario by providing state of the art, modern research platforms necessary to support development of new value added products and technological innovation and commercialization according to the following key criteria of the stakeholder-endorsed policy framework:

  • Government, industry and academia partnerships
  • Financial operating efficiencies found and savings reinvested into priority areas
  • Aligning infrastructure investments to specialized intellectual capacity including physical and virtual platforms
  • Greater utilization of infrastructure across both ARIO portfolio and non-ARIO infrastructure, e.g. industry, government and academia achieve improved access and collaboration

For more information visit the ARIO website.

  1. Strategic advice

A key role of ARIO is to provide strategic advice to the Minister on agri-food and rural research. The current focus is on the Innovation Strategy, the renewed Partnership including ongoing research themes and priorities, and the emerging governance models under the Innovation Strategy (e.g. LRIC) and on the strategic direction of agri-food research in the province.

  1. Promoting Ontario's Agri-food research and innovation Strategy

ARIO and its members undertake focused activities to generate increased awareness of OMAFRA's agricultural, agri-food and agri-products priorities and generate buy-in for the Innovation Strategy through increased ARIO member engagement with agri-food industry stakeholders.

  1. Managerial oversight

ARIO provides operational and managerial oversight of the infrastructure portfolio to ensure effective and efficient management of the research property portfolio in support of the various research programs. The Institute also provide oversight and the effective administration of current OMAFRA open competitive research funds and all financial operations/programs including all aspects of financial consolidation of ARIO with OMAFRA.

Resources needed to meet goals and objectives

Resources to meet ARIO's goals and objectives are being provided through transfer payment funding from OMAFRA as well as through secretariat services provided by the Research and Innovation Branch of OMAFRA (RIB). ARIO also received some revenues from leasing land and buildings within its property portfolio. Funding for major capital projects (implementation of ARIO's research infrastructure strategy) is requested and approved annually as a key component of OMAFRA's Results-based Plan.

Funding for the necessary staffing and operating resources required to support the administration of ARIO have been, and will continue to be, provided through RIB budget allocations within OMAFRA. The cost to administer ARIO has grown over the last few fiscal years, in light of the significantly increased responsibilities resulting from the property transfer. These costs are estimated at approximately $1.35 million annually, including all operating costs and a portion of ministry (RIB) staff salaries and benefits (*see table below).

The decision to consolidate ARIO with OMAFRA for the purposes of financial reporting and budgeting and the very significantly increased focus on agency governance, transparency and accountability have greatly impacted financial and operational reporting activities of the Secretariat resulting in a need for additional resources.

Revenues from ARIO's property portfolio (tenants) are used to partially offset the cost of ownership and maintenance of the portfolio.

ARIO continues to seek out non-government sources of capital investment from agricultural and agri-food related industry partners. The livestock sectors have agreed to the current model being used to develop the dairy research facility at Elora, whereby, industry will provide 20% (twenty percent) of the capital costs of any construction/redevelopment projects.

RIB secretariat support to ARIO: The following table is based on 2013-14 actual costs and estimates of staff time:

Research and Innovation Branch

Role or Unit % ARIO Salaries and Benefits $ Operating $ Total $
Director
30
77,614
30,236
107,850
Research Unit
40
309,084
23,738
332,822
ARIO Secretariat
100
na
38,308
38,308
Finances, Infrastructure and Administration
80
503,570
4,401
507,971
Innovation Unit
50
315,601
50,784
366,385
Total
na
1,205,868
147,467
1,353,335

Risk identification, assessment and mitigation strategies

ARIO is an Operational Services Agency of the government and as such has a Memorandum of Understanding (MOU) with OMAFRA. The MOU outlines the roles and responsibilities of both parties and how the ARIO Act and the various government policies and directives apply to the relationship between ARIO and OMAFRA.

All ARIO business decisions are the sole responsibility of the Director of Research for ARIO. The Director of Research of ARIO is currently an OMAFRA Assistant Deputy Minister (Minister's appointment). ARIO has no staff and all Secretariat functions are provided by the ministry through the Research and Innovation Branch (RIB). Funding for all programs and properties administered by ARIO is provided through the ministry and their annual results based planning (RbP) budget process.

Implementation of ARIO's Innovation Strategy requires significant funding over the next several years. OMAFRA has begun implementing the recommendations of the ARIO Innovation Strategy (e.g. new dairy facility at Elora); however it is always possible that budget constraints and economic realities might cause delays in completing the innovation strategy recommended. Given that the Innovation Strategy supports current priorities of the government and its focus on increasing competitiveness and productivity of the agri-food and agri-products sector; the risk of significant delays or cancellation is low. The ARIO Secretariat continues to work with the ministry's finance department (BPFMB) and central agencies in submission of annual updates and refinements to the strategy captured in the annual RbP process.

Given the role and decision making structure of ARIO, overall risk (operational, financial, political etc.) is low. A detailed Agency Risk Management Plan was updated in January 2014 and the summary is included as Appendix E.

Human resources and organizational governance

Membership

ARIO is comprised of up to 15 members appointed by the Minister for OMAFRA. Members of ARIO are recognized as leaders in the agriculture, food and rural sectors. They have been drawn from a broad cross section of commodity and business interests and geographic areas. Members do not represent any particular organization but hold positions in their own right.

ARIO Director of Research is appointed by the Minister under the ARIO Act and is responsible for the business and affairs of ARIO. The current ARIO Director of Research is the Assistant Deputy Minister, Research and Corporate Services Division and Chief Administrative Officer of OMAFRA. OMAFRA (RIB) provides administrative, operating and managerial support and acts as the ARIO Secretariat. Operational decision-making and approvals are made by the Director of Research, or his/her authorized delegate(s). The duties of the Director of Research are detailed in the ARIO Act, as well as in the MOU between ARIO and OMAFRA.

Staff numbers (Staff strength)

As mentioned earlier; ARIO does not itself hire or employ staff. OMAFRA staff act as the Secretariat to ARIO by providing all administrative support. This support is outlined in the MOU between ARIO and OMAFRA. Standard OPS disclosure policies and procedures are applicable to staff providing support to the Secretariat.

The appointed members of ARIO (as defined in the ARIO Act), are paid set daily per diems and travel costs to reimburse members for attendance at meetings held throughout the year. These per diems are set by an Order in Council.

The ARIO Act allows for the establishment of standing committees to support strong-decision making within ARIO. The following standing committees were created (in the 2005-06 fiscal) and are still active:

  • Executive Committee: Provides long term strategic leadership to the ARIO including coordination of any other ARIO committee activities and, strategic advice to OMAFRA.
  • Infrastructure Committee: Committee membership includes members from ARIO and Secretariat staff. The committee reviews proposals related to the properties, addresses operational issues affecting the ARIO infrastructure portfolio, and makes recommendations that are then presented to ARIO as a whole for discussion and ratification. Recommendations are then made to the Director of Research for decision.

The following diagram summarizes the organizational structure of ARIO in its current form.

Picture of the organizational structure of ARIO

Figure 1: The organizational structure of ARIO

Third party initiatives

In the past several years, global fiscal and economic realities facing all governments and the need to do more with less has resulted in a more focused effort and a significant shift towards collaborative research, funding partnerships, and new industry/government governance models. For example, the model being used to build the new dairy facility at Elora whereby the industry stakeholders/producer groups have agreed to fund 20% of capital construction costs, and are taking a much more active role in priority setting and overall governance through the Livestock Research & Innovation Corporation (LRIC), a recently established industry led not for profit. This new model of increased industry involvement and financial commitment is the model for all other sectors (livestock and others) wishing to rebuild their aging provincially supported research infrastructure and is the basis on which the revitalization of research infrastructure for the other primary livestock groups (e.g. swine, poultry, beef) is proceeding.

Currently ARIO receives industry funding ($376k/yr) as a condition of previous capital investments to industry by the province under the Ontario Ethanol Growth Fund (OEGF) to be used to support research programs administered by ARIO.

In addition, ARIO is collaborating with OMAFRA, AAFC and other innovation partners to leverage opportunities under Growing Forward 2, a Federal, Provincial and Territorial agricultural policy framework. GF2 in Ontario was announced jointly by Canada and OMAFRA on April 2, 2013 and will focus on innovation, competitiveness and market development.

The Research & Innovation Branch (RIB) provides all secretariat, administrative and managerial support functions for ARIO. With respect to research programs, ARIO and the research institution enter into a Research Funding Agreement that was developed and is periodically reviewed/modified with the Ministry of the Attorney General Legal Branch assigned to support ARIO.

Other transfer payment initiatives administered by ARIO on behalf of the ministry are developed in consultation with ARIO's assigned legal support and the ministry's Business Planning and Financial Management Branch (BPFMB) ensuring compliance with Transfer Payment and Accountability Directives (TPAD).

Implementation plan for ongoing strategies

For 2014-15, the Director of Research, the members of ARIO and the Secretariat will be responsible for the following key activities:

Leadership - implementation of Infrastructure Strategy

Continue implementation of the Infrastructure Strategy leading to a modern, integrated agri-food and agri-products research and innovation system with industry-influenced governance models and infrastructure capacity, some owned by government and some by industry. Upcoming activities related to the infrastructure component of the innovation strategy includes:

  1. Continue to advance the first two centres under the strategy. ARIO will work with the Vineland Research and Innovation Centre as they move forward with the construction of a pre-commercial-scale research greenhouse at the Vineland research station.
  2. Work with key partners/industry stakeholders on advancing the construction and governance model of the Livestock Research and Innovation Corporation at Elora. This includes construction of Phase One (the new dairy research facility) as well as advancing future phases at Elora by:
    1. working with Ministry of Infrastructure (MOI) and Infrastructure Ontario (IO) to purchase additional land at Elora
    2. work with the University and the Turfgrass Institute to relocate to the University and Elora
    3. work with the other primary livestock producers (swine, poultry and beef) to advance plans for relocation to Elora
  3. Continue to work with stakeholders to further develop concepts and identify partners for the remaining proposed centres (Bioeconomy, Field Crops and Food and Health).
  4. Continue to look for opportunities for achieving operational efficiencies to support a world class integrated network of research platforms/facilities.

Strategic advice

  • Continue to advise the Minister regarding the implementation and strategic positioning of the research Infrastructure Strategy.
  • Continue to provide advice on the renewed the Partnership including ongoing research themes and priorities, and the emerging governance models under the Innovation Strategy (e.g. LRIC).
  • Continue ongoing support to research priority setting by providing advice via participation in ORAN on new and existing research for the sector.

Promoting Ontario's agri-food and agri-Products research and innovation

  • Through focused outreach opportunities for the Chair and members, build relationships between ARIO and industry stakeholders to broaden awareness, engage and seek support for OMAFRA's research and innovation priorities and the research Infrastructure renewal that is necessary to maintain and strengthen Ontario's local, national and global competitiveness in the agriculture and agri-food and agri-product sectors.

Managerial oversight

  • Provide operational and managerial oversight of the 17 agri-food research properties comprised of over 300 buildings, 6,500 acres of land and over 45 tenants (both government and non-government) to ensure effective and efficient management of the research property portfolio in support of the various research programs.
  • Provide effective and efficient administration and managerial oversight of current OMAFRA open Research programs (currently New Directions and Food Safety)
  • Provide effective and efficient administration and managerial oversight of all financial operations/programs including all aspects of financial consolidation of ARIO with OMAFRA.

Communications plan

Objectives

In alignment with both the government's plan to build Ontario up through investments in the economy, people and infrastructure and the Ministry's strategic direction for research and innovation, ARIO effectively promotes Ontario's agri-food and agri-product research and innovation system through the following communication objectives:

  1. Increase awareness to industry, government and the public (e.g. at stakeholder annual meetings, conferences) of the contributions that Ontario's agriculture sector (agri-food and agri-products research, innovation and knowledge transfer) makes to the province in areas such as the economy; health; environmental protection; social good and job creation.
  2. Advance ARIO's Infrastructure strategy through internal and external communication materials providing progress updates on efforts working with industry stakeholders/partners to modernize research infrastructure that supports Ontario's agri-food competitiveness.
  3. Raise industry and the public's awareness (e.g. at outreach events such as Canada's Outdoor Farm Show) of Ontario's agri-food research priorities and strategic partnerships that align with stakeholders (e.g. industry, Agriculture and Agri-Food Canada [AAFC], and universities, particularly the UofG) in strengthening Ontario's agri-food research and innovation system.
  4. Establish and enhance working relationships with key partners and stakeholders (e.g. Livestock Research Innovation Corporation (LRIC), Vineland Research and Innovation Centre [VRIC], Agri Technology Commercialization Centre [ATCC]) strengthening strategic partnerships to leverage communications/ research/ promotional opportunities to advance agri-food and agri-product research and innovation.

Key messages

  • Ontario's agri-food sector is one of the province's leading economic engines, contributing $34 billion annually to the province's GDP
  • Agri-food produces substantial economic returns and the greatest returns come from enhancing the value of food products and processes through research, innovation and knowledge transfer
  • Research and innovation are keys to the success of agri-food businesses in Ontario and are essential to maintaining a competitive and sustainable agri-food sector in Ontario
  • Partnerships such as with the University of Guelph and the 17 agri-food research stations throughout the province are key pillars that support Ontario's agri-food research and innovation system

Key audiences / stakeholders

  • Innovation partners (e.g. LRIC, VRIC, ATCC)
  • Industry partners across sectors such as commodity organizations, food processing/retailing bioeconomy)
  • Academic institutions such as universities with an interest in agriculture, agri-food, and rural research priorities (e.g. U of G, Trent,)
  • Other governments and agencies across jurisdictions (e.g. Agriculture and Agri-Food Canada, provincial counterparts (e.g. Alberta, Quebec) and agencies (e.g. Genome Alberta).

Tools and tactics

  • Internal communication materials to brief the OMAFRA Minister and senior management on progress and successes to date and on implementing next steps of the ARIO Research Infrastructure Strategy
  • Formal annual reports and business plans submitted to the Minister containing updates regarding the research Infrastructure Strategy and the operational and managerial oversight of the 17 research stations
  • ARIO meetings that provide an opportunity to engage key partners and stakeholders in supporting planning, evaluation and reviewing, updating and advising on agri-food and agri-products research priorities and issues
  • Stakeholder and partner engagement/communications activities planned in consultation with OMAFRA, including opportunities to participate in various industry trade shows, outreach events and annual meetings

Partial list of potential communications opportunities in 2014-15

Event

Date

Canada's Outdoor Farm Show Sept. 9-11, 2014
International Plowing Match Sept. 16-20, 2014
Royal Agriculture Winter Fair Nov. 7-16, 2014
Ontario Economic Summit Oct. 22-14, 2014
Vineland Research and Innovation Centre Greenhouse Complex opening Spring 2015 (Date to be detemined)
Livestock Research and Innovation Centre (Dairy Research facility opening) Spring 2015 (Date to be detemined)
OMAFRA's Research and Knowledge Transfer Events e.g.: Emergency Management Research Expo December 2, 2014
Stakeholder annual meetings e.g.: Livestock Research Innovation Corporation Annual meeting June 19, 2014

Financials

Overview of funding

Under the ARIO Act, the Institute may accept gifts, grants, donations or bequest money for use in research and the Director of Research holds and administers these funds received "in trust".

Investments held in trust

ARIO contracts with an investment management company to assist with the management of investments held within the ARIO trust funds. The ARIO's investment policy generally follows the requirements of the Trustee Act R.S.O. 1990, 1990 c. T23 as amended (Trustee Act). The investment strategy aims to guarantee capital, maximize returns and to provide liquidity to meet short-term cash flow requirements. Funds held by ARIO are managed, on a conservative basis, in accordance with the Financial Administration Act and the Trustee Act.

See Appendix B for the Statement of Investment Policy for the Institute.

Operational costs

The cost to administer the programs within ARIO (including the proportionate cost of salaries and benefits for OMAFRA staff that spend varying portions of their time on ARIO issues) are paid from OMAFRA's budget within the allocation assigned to the RIB. The current estimate cost to provide the ARIO Secretariat functions is approximately $1.35 million (part of RIB budget).

Per diem rates and travel expenses are set by Orders in Council and are paid to ARIO members for their attendance at scheduled meetings. These per diems follow Treasury Board Guidelines for Agencies, Board and Commissions and are paid out of RIB funds. Details are provided to members in the ARIO member's handbook.

Financial statements (2013-14 Fiscal Year) and projections (3-year ooutlook)

ARIO is required to submit its Annual Report including audited financial statements to the Minister within 120 days of its year-end (by July 29th annually). The annual report is prepared by OMAFRA staff and includes financial statements that are prepared and audited by an external auditor (public accountant) contracted by OMAFRA. The financial statements for the 2013-14 fiscal year are attached to this business plan (see Appendix C).

A forecast of transfer payments and other revenues for the 2014-15, 2015-16 and 2016-17 is included in Appendix D.

ARIO is consolidated for financial reporting purposes with OMAFRA due to its close relationship, the ARIO's reliance on OMAFRA for research program funding and administrative support, and due to the "financial materiality" of ARIO resulting from the transfer of 17 agri-food research properties that had an approximate $60 million book value at the time of the transfer in 2007. ARIO is required to provide a three-year financial outlook to OMAFRA for financial consolidation purposes.

Performance measures

Infrastructure planning and management

Below is a report on achievements in accordance with the current performance measures framework outlined in the ARIO MOU and includes the current focus of the Innovation Strategy.

Outcomes

  • Increased third party investment/collaboration in R&D infrastructure

Performance measures

  • Level of funding from non-OMAFRA sources that goes toward investment in infrastructure.
    • Performance Target (1-5 years out) - Average 10% of capital investment to come from non-provincial government sources.
    • Performance Target (6-10 years out) - Average 20% of capital investment to come from non-provincial government sources.

Achievements (2012-13)

  • The Livestock Research and Innovation Centre at Elora: Industry i.e. commodity groups confirmed 20% support for the capital costs of redevelopment of Elora into the Livestock Research and Innovation Complex. This has established a new model of shared investment between industry and government that will be used for all future centres under the Innovation Strategy.

Targets (2012 -17)

  • Develop industry-influenced governance and funding models for the up to five (5) new centres recommended under the Infrastructure Strategy:
    • Vineland (Horticulture)
    • Elora (Livestock)
    • Bioeconomy
    • Field Crops
    • Food
    • Health

Outcomes

  • Accountability and efficiency in the operation of infrastructure

Performance measures

  • Infrastructure Operation & Maintenance measures that consider third party investment in Operation & Maintenance, efficiencies and offsets developed.

Achievements (2012-13)

  • Identified and recommended opportunities for exploring options re: implementing operating efficiencies in current ARIO holdings, tied to operating needs of existing governance models, e.g. the Partnership and emerging centres under the Infrastructure Strategy, e.g. Vineland Research and Innovation Centre, Livestock Research and Innovation Centre, etc.
  • Effective and cost efficient management of ARIO infrastructure/ property portfolio achieved by the ARIO Secretariat and the UofG (on behalf of ARIO).
  • As part of Research & Innovation Branch's periodic client service standards review, ARIO participates in client surveys every three years.

Appendix A - Strategic recommendations

ARIO presented the following recommendations to the former Minister of Agriculture, Food and Rural Affairs "Defining an Infrastructure Strategy for Agri-Food and Rural Research, Discovery, Adaptation and Commercialization in Ontario" in 2008.

Recommendation one

ARIO endorses a new infrastructure vision, mission and principles to guide the implementation and communication of the infrastructure strategy

Vision: Ontario has an internationally recognized, world-leading, integrated infrastructure system that is cohesively coordinated to support agri-food and rural research, discovery, adaptation and commercialization.

Mission: ARIO's mission is to facilitate leadership and investment in research infrastructure that is fundamental to the enhancement of Ontario's rural and agri-food value chain.

Guiding principles: ARIO's leadership in agri-food and rural research infrastructure investment will be guided by the following principles:

  • All recommendations and actions are taken to establish Ontario as having a world-leading integrated system (human and physical capacity) for agri-food research, discovery, adaptation and commercialization
  • Investment in the system infrastructure must create tangible value for participants in the agri-food sector
  • Investment in the system infrastructure must provide value to the broader public
  • Investment in the system infrastructure will be done in close connection with the private sector to assure that the research leads to market-driven products

Recommendation two

  • ARIO will begin a process of developing a network of up to five regionally-led sector-oriented centres (Regional Agri-Food Research and Discovery Centres) :
    • challenging regions across the province to develop concepts for regionally/sector-championed and supported centres for agri-food research, discovery, adaptation and commercialization.
  • Requiring strong, committed, visionary leaders and teams for driving these ideas forward (champions)

Recommendation three

Working with champions, develop a purpose and focus for each centre.

  • Each centre will:
    • advance research and innovation (research)
    • generate new ideas and bring them to market (value-added)
    • be a visible hub for regional and community activity (community)
  • Centres will share in the direction of effort and results, providing regionally-championed, sector-oriented solutions.

Recommendation four

Establish logical groups and relationships to create appropriate models.

  • Centres will link to the UofG's hub of basic research and knowledge translation, leveraging off OMAFRA's sustained commitment through the new Partnership Agreement
  • Champions will define the infrastructure requirements to support the value-added vision for agri-food research, discovery, adaptation and commercialization in Ontario, expecting that they include provincial, federal and other infrastructure capacity.

Recommendation five

Establish parameters by which OMAFRA and ARIO shepherd and support centres.

  • Confirm ongoing government role (emphasis may vary and evolve over time)
    • continue to set strategic direction
    • continue to provide core funding support
    • continue to provide regional and technical support
  • Sponsor the creation of new partnerships across governments, with universities, research institutions and the private sector, where appropriate.

Recommendation six

Actively pursue involvement of federal government, other institutions and the private sector to ensure that existing provincial, federal and regional infrastructure and capabilities are considered together and to encourage collaborative approaches to common issues. This is to occur throughout the process.

Appendix B - Statement of investment policy

General

This Statement of Investment Policy expresses the investment objectives and constraints of the Agricultural Research Institute of Ontario (ARIO). In addition to providing a framework for general direction of the portfolio, it provides a basis upon which to periodically review and evaluate portfolio performance relative to appropriate asset class benchmarks and within the required parameters of the Trustees Act.

Investment objectives

The portfolio shall be managed to:

  1. Ensure safety of capital over a 3 to 5 year time horizon by investing in high quality fixed income securities, including government bonds and/or professionally-managed pension level bond portfolios.
  2. Provide liquidity, with a portion of the portfolio available to adequately meet short-term (up to 1 year) individual program cash flow requirements. Investments may include Treasury Bills, Government of Canada/Provincial bonds or coupons, and Bankers Acceptance Paper maturing within one year.
Investment constraints

Under the Trustee Act, the following securities are eligible investments for the ARIO portfolio:

  1. Federal Government Treasury Bills and Bonds.
  2. Provincial Government Treasury Bills and Bonds from British Columbia, Ontario, Alberta and Manitoba.
  3. Instruments offered by the five major chartered banks, namely, Royal Bank, TD Canada Trust, Bank of Montreal, Canadian Imperial Bank of Commerce and Bank of Nova Scotia including GICs, Term Deposits and Bankers Acceptances (note: investments can be greater than the $60,000 CDIC limit).
Diversification

Portfolio should be diversified, within constraints of ARIO investment policy, to reduce risk to capital.

Performance objectives

The performance objectives of each element of the portfolio will be to equal the appropriate market benchmark index over a full market cycle, namely, 3-5 years. *Note: this goal is ambitious given that the ARIO portfolio(s) are constrained i.e. Canadian corporate bonds are not eligible investments but are included in the benchmark index, and due to high cash flow demand Cash maturities may average less than 90 days.

Asset class benchmarks

Cash and Equivalents: Government of Canada 90 day Treasury Bill Index

Investment advisor

ARIO shall engage the services of a professional investment firm for investment advice through a competitive process.

ARIO Comptroller

The ARIO Comptroller shall ensure the Statement of Investment Policy is adhered to.

Reporting

The investment advisor shall prepare and provide a detailed monthly statement showing the composition of the portfolio at month end and shall report all transactions during the month.

A comprehensive portfolio review and performance evaluation will occur annually and will be presented to the ARIO board. At that time the investment advisor shall report on the performance of the portfolio, as well as on the current and future economic outlook and investment strategy.

All fees billed shall be fully disclosed, transparent and included in the monthly report as they occur.

Review of investment policy

The ARIO investment policy shall be reviewed as required.

Appendix C - Independent auditor' s report

logo for RLB chartered accountants

To the members of: Agricultural Research Institute of Ontario

We have audited the accompanying financial statements of Agricultural Research Institute of Ontario, which comprise the statement of financial position as at March 31, 2014 and the statements of revenues and expenditures and changes in fund balances, remeasurement losses and 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

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we 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.

We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, these financial statements present fairly, in all material respects, the financial position of Agricultural Research Institute of Ontario as at March 31, 2014 and the results of its operations and its cash flows for the year then ended in accordance with Canadian public sector accounting standards.

Guelph, Ontario
June 13, 2014

RRp LL

Chartered Accountants, Licensed Public Accountants

Statement of financial position

As at March 31, 2014

Assets

Item $ 2014 (schedule 1) $ 2013
Cash
1,494,683
3,985,879
Investments
29,856,175
12,327,500
Accounts receivable
154,906
172,045
Subtotal
31,505,764
16,485,424
Capital assets under construction
22,155,506
24,790,842
Capital assets (note 5)
59,059,056
57,375,167
Total Assets
112,720,326
98,651,433

Liabilities

Item $2014 (schedule 1) $2013
Current Accounts payable and accruals
1,736,885
1,520,026
Current holdbacks payable
458,609
417,773
Current unclaimed expenditures
5,798,706
2,882,327
Current deferred revenue
381,091
3,065
Subtotal
8,375,291
4,823,191
Defferred captial funded contributions (note 6)
49,273,486
37,063,396
Defferred captial contributions (note 7)
32,188,072
34,242,104
Total Liabilities
89,836,849
76,128,691

Net Assets

Net Asset $ 2014 (schedule 1) $2013
Fund balances
8,879,681
8,542,270
Accumulated remeasurement losses
(33,487)
(56,811)
Contributed assets
14,037,283
14,037,283
Total Net Assets
22,883,477
22,522,742

Total liabilities plus net assets

Item $ 2014 (schedule 1) $2013
Total Liabilities plus net assets
112,720,326
98,651,433

Statement of revenues and expenditures and changes in fund balances

For year ended March 31, 2014

Research revenues

Item $ 2014 (schedule 2) $2013
Grants - provincial (note 9)
2,980,000
3,500,000
Grants - other
378,000
280,000
Intellectual property
1,117,877
1,085,306
Total research revenues
4,475,877
4,865,306

Property revenues

Item $ 2014 (schedule 2) $2013
Grants - provincial minor capital (note 9)
4,131,184
3,218,581
Rental income provincial
834,302
865,909
Rental income private industry
677,380
661,289
Transfer payments - payments in lieu of taxes
750,000
750,000
Payments in lieu of taxes
187,754
252,175
Amortization of deferred capital contribution
2,394,158
2,393,613
Total property revenues
8,974,778
8,141,567

Other revenues

Item $ 2014 (schedule 2) $2013
Investment income
207,631
271,241

Total revenues

Item $ 2014 (schedule 2) $2013
Total research revenues
4,475,877
4,865,306
Total property revenues
8,974,778
8,141,567
Total investment income
207,631
271,241
Total Revenues
13,658,286
13,278,114

Research expenditures

Item $ 2014 (schedule 2) $2013
Research project\program
2,303,064
1,948,406
Intellectual property
708,370
731,496
Total research expenditures
3,011,434
2,679,902

Property expenditures

Item $ 2014 (schedule 2) $2013
Payments in lieu of taxes
884,271
797,685
Minor capital
3,368,690
3,058,824
Operations and maintenance
733,495
772,330
Amortization of capital assets
2,394,158
2,393,613
Total property expenditures
7,380,614
7,022,452

Other expenses

Item $ 2014 (schedule 2) $2013
Other expenses
12,448
10,110

Total expenditures

Item $ 2014 (schedule 2) $2013
Total research expenditures
3,011,434
2,679,902
Total property expenditures
7,380,614
7,022,452
Total other expenditures
12,448
10,110
Total expenditures
10,404,496
9,712,464

Fund balances

Item $ 2014 (schedule 2) $2013
Excess of revenue over expenditures for the year
3,253,790
3,565,650
Net Amount transferred (to)/from unclaimed expenditures
(2,916,379)
1,657,393
Fund Balances, beginning of year
22,522,742
17,360,306
Net remeasurement gains (losses) for the year
23,324
(56,811)
Land transferred to township of Alfred
0
(3,796)
Fund balances end of year
22,883,477
22,522,742

Statement of remeasurement losses

For year ended March 31, 2014

Item $ 2014 $2013
Accumulated remeasurement losses, beginning of year
(56,811)
0
Adjustment upon adoption of financial instruments section
0
0
Unrealized gains (losses) attributable to temporary investments
69,483
(56,811)
Amounts reclassified to the statement of operations:
Realized losses on temporary investments
(46,159)
0
Net remeasurement gains (losses) for the year
23,324
(56,811)
Accumulated remeasurement losses, end of year
(33,487)
(56,811)

Statement of cash flows

For year ended March 31, 2014

Cash provided by (used in) operating activities

Item $ 2014 $2013
Excess of revenue over expenditures for the year
3,253,790
3,565,650

Items not requiring an outlay of cash

Item $ 2014 $2013
Amortization
2,394,158
2,393,613
Deferred capital contributions
(2,054,032)
(2,053,488)
Loss on disposal of capital
126,104
0
Accumulated remeasurement losses
23,324
(56,811)
Total of items not requiring an outlay of cash
3,743,344
3,848,964

Changes in non cash working capital

Item $ 2014 $2013
Accounts receivable
17,139
(13,912)
Investments
(17,528,675)
(4,819,689)
Accounts payable and accruals
216,859
111,419
Deferred capital funded contributions
12,210,090
18,627,888
Holdbacks payable
40,836
46,331
Deferred revenue
378,026
(24,722)
Total changes in non cash working capital
(922,381)
17,776,279

Cash provided by (used in) investing activities

Item $ 2014 $2013
Additions to capital assets
(1,568,815)
(475,563)
Proceeds on transfer of land
0
2
Capital assets under construction
0
(16,300,000)
Total cash provided by (used in) investing activities
(1,568,815)
(16,775,561)

Net change in cash for the year

Item $ 2014 $2013
Net (decrease) increase in cash for the year
(2,491,196)
1,000,718
Cash, beginning of the year
3,985,879
2,985,161
Cash, end of year
1,494,683
3,985,879

Notes to the financial statements

Note 1 - Nature of business

The Agricultural Research Institute of Ontario (ARIO) is a non profit corporate body reporting directly to the Ministry of Agriculture and Food (OMAF), formerly the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA). ARIO is a non profit organization within the meaning of the Income Tax Act (Canada) and is exempt from income taxes. It was created by the ARIO Act with specific responsibilities over the co ordination and direction of agricultural research programs in Ontario. These programs relate to a broad range of commodities and disciplines, covering all aspects of the agri food system.

Funding for programs supported by ARIO is available from various sources. The Ontario Government, through the Ministry of Agriculture and Food, is the primary source of funding. The Ontario Government also provides funding for the open research programs. Under the ARIO Act, ARIO may accept grants and donations for research. Other funds usually come from commercial sources (such as agri business, marketing boards, and producer associations) and can be either designated for specific projects or non designated. In addition, with the approval of the Minister of Agriculture and Food, ARIO is able to hold patents and earn royalties on research developments.

All receipts are held in trust by the Director of Research and are allocated in accordance with the terms of the funds.

The current research trust funds managed by the secretariat to ARIO are as follows:

  • Agricultural Research Institute of Ontario (ARIO)
  • New Directions Research Program (New Directions)
  • Food Safety Research Program (Food Safety)
  • Infrastructure

Note 2 - Summary of significant accounting policies

The financial statements have been prepared in accordance with Canadian public sector accounting standards for government not for profit organizations, including the 4200 series of standards, as issued by the Public Sector Accounting Board ("PSAB for Government NPOs") and include the following significant accounting policies:

Basis of accounting

ARIO follows the deferral method of accounting for contributions. Restricted contributions are recognized as revenue of the appropriate research trust fund in the year in which the related expenses are incurred. Unrestricted contributions are recognized as revenue of the appropriate research trust fund when received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured.

Financial Instruments
  1. Measurement of financial instruments:

The organization initially measures its financial assets and liabilities at fair value, except for certain non arm's length transactions.

The organization subsequently measures all its financial assets and financial liabilities at amortized cost, except for investments, which are measured at fair value. Changes in fair value are recognized in the statement of remeasurement losses.

Financial assets measured at amortized cost include cash and accounts receivable. Financial liabilities measured at amortized cost include accounts payable and accruals, holdbacks payable, unclaimed expenditures, deferred capital funded contributions and deferred capital contributions.

The organization's financial assets measured at fair value include the investments.

  1. Impairment:

Financial assets measured at amortized cost are tested for impairment when there are indicators of impairment. If an impairment has occurred, the carrying amount of financial assets measured at amortized cost is reduced to the greater of the discounted future cash flows expected or the proceeds that could be realized from the sale of the financial asset. The amount of the write down is recognized in the statement of revenues and expenditures. The previously recognized impairment loss may be reversed to the extent of the improvement, directly or by adjusting the allowance account, provided it is no greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previously. The amount of the reversal is recognized in the statement of revenues and expenditures.

  1. Transaction costs:

The organization recognizes its transaction costs in expenditures in the period incurred. However, financial instruments that will not be subsequently measured at fair value are adjusted by the transaction costs that are directly attributable to their origination, issuance or assumption.

Unclaimed expenditures

Unclaimed expenditures are defined as the total approved budget for open research projects less expenses incurred to date.

Capital assets

Capital assets are recorded at cost and are amortized using the following annual rates and method: Buildings and components 25 to 40 years straight line.

Impairment of long lived assets

Long lived assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognized when the carrying value exceeds the total undiscounted cash flows expected from their use and eventual disposition. The amount of the impairment loss is determined as the excess of the carrying value of the asset over its fair value.

Deferred capital contributions

Deferred capital contributions are amortized at the same rate as the buildings to which they relate.

Restrictions on the expenditure of funds

The purpose, funding, terms and conditions and duration of each research trust fund are stipulated in the relevant Order in Council, memorandum of understanding or Ministry correspondence.

Use of estimates

The preparation of financial statements in accordance with PSAB for Government NPOs requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Significant areas requiring the use of management estimates and assumptions relate to the valuation of accounts payable and accruals and the useful life of capital assets. Actual results could differ from those estimates.

Note 3 - Financial Instruments

Fair value

For certain of ARIO's financial instruments, the carrying amounts of cash, accounts receivable and accounts payable and accruals, approximate fair value due to the short term maturity of these financial instruments.

PS3450, Financial Instruments Disclosures requires disclosures about the inputs to fair value measurements, including their classification within a hierarchy that prioritizes the inputs to fair value measurement. The three levels of the fair value hierarchy are:

  1. Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities.
  2. Level 2 - inputs other than quoted prices that are observable for the asset or liability either directly or indirectly.
  3. Level 3 - inputs that are not based on observable market data.

ARIO's financial instruments are all classified as Level 1 as at March 31, 2014 and 2013.

There were no transfers in or out of Level 1 for the years ended March 31, 2014 and 2013.

Associated risks
  1. Market price risk:

Market price risk is the risk that the value of an instrument will fluctuate as a result of changes in market prices, whether caused by factors specific to an individual investment, its issuer or all factors affecting all instruments traded in the market. As all of ARIO's financial instruments are carried at fair value with fair value changes recognized in the statement of remeasurement losses, all changes in market conditions will directly affect the increase (decrease) in accumulated remeasurement losses. Market price risk is managed by the Investment Manager through construction of a diversified portfolio of instruments traded on various markets and across various industries.

A 1% increase (decrease) in the value of the investments would increase (decrease) the asset value and the change in unrealized gains in investments by $298,562 (2013 $123,275). The price of the investments is affected by changes in market values, foreign exchange rates and interest rates impacting the underlying financial instruments held within the individual investments managed by the Investment Manager.

  1. Interest rate risk:

Interest rate risk refers to the adverse consequences of interest rate changes on the Institute's cash flows, financial position and income. Interest rate changes have an indirect impact on the investment assets in ARIO. ARIO uses investment diversification to manage this risk.

  1. Liquidity risk:

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

All of ARIO's fixed income securities are considered to be readily realizable as they can be quickly liquidated at amounts close to their fair value in order to meet liquidity requirements.

  1. Foreign currency risk:

Foreign currency risk is the risk that fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. ARIO is not exposed to significant foreign currency risk.

  1. Credit risk:

Credit risk is the risk that a customer or counterpart may be unable or unwilling to meet a commitment that it has entered into with ARIO. ARIO is not exposed to significant credit risk.

Note 4 - Contributed assets

Contributed assets of $14,037,283 (2013 - $14,037,283) are recorded in the Infrastructure Fund and represent the cost of the land transferred to ARIO from the Government of Ontario.

Note 5 - Captial Assets

Land assets

Item Cost $ Accumulated Amortization $ Net 2014 $ Net 2013 $
Simcoe railway line
9,793
0
9,793
9,793
Regional campuses
3,092,104
0
3,092,104
3,092,104
Research stations
10,967,029
0
10,967,029
10,967,029
Total land assets
14,068,926
0
14,068,926
14,068,926

Building assets

Item Cost Accumulated Amortization Net 2014 Net 2013
Regional campuses
38,410,502
9,109,601
29,300,901
26,703,249
Research stations
22,037,911
6,348,682
15,689,229
16,602,992
Total building assets
60,448,413
15,458,283
44,990,130
43,306,241

Total land and building assets

Item Cost Accumulated Amortization Net 2014 Net 2013
Total land assets
14,068,926
0
14,068,926
14,068,926
Total building assets
60,448,413
15,458,283
44,990,130
43,306,241
Total assets
74,517,339
15,458,283
59,059,056
57,375,167

As at March 6, 2007, the titles for capital assets (land and buildings) with a carrying value of approximately $60.9 million were transferred to ARIO from the Government of Ontario. Carrying value is being used as the transfer value since the transfer took place between non arm's length parties, is non monetary in nature and does not have commercial substance. As an agency of the Government of Ontario, ARIO reports these capital assets (and other assets and liabilities) in consolidation with the Ministry of Agriculture and Food on an annual basis.

During the year, capital additions with a carrying value of $1,200,000 (2013 $72,294) were contributed to the organization by external stakeholders. Carrying value is determined as the cost of the contributed assets to the contributors which approximates fair value due to the relatively short period between the date of purchase by the contributor and the asset being contributed to the organization.

Note 6 - Deferred capital funded contributions

Deferred capital contributions relating to construction of capital funded projects represents the amount of grants and other restricted funding received by ARIO for construction projects.

Item 2014 $ 2013 $
Balance, beginning of the year
37,063,396
18,435,508
Less amortization for the year
(340,125)
(340,125)
Add contributions received for capital purposes
12,550,215
18,968,013
Balance, end of the year
49,273,486
37,063,396

The funding sources are as follows:

Item 2014 $ 2013 $
Federal
1,312,500
1,347,500
Provincial
43,440,544
32,335,236
Industry
4,520,442
3,380,660
Total funding sources
49,273,486
37,063,396

Note 7 - Deferred capital contributions

Deferred capital contributions represent the unamortized amount of the net book value of the buildings transferred to ARIO from the Government of Ontario in 2007. The amortization of capital contributions is recorded as revenue in the statement of revenues and expenditures. The changes in the deferred capital contributions are as follows:

Item 2014 $ 2013 $
Balance, beginning of the year
34,242,104
36,295,592
Less amortization for the year
(2,054,032)
(2,053,488)
Balance, end of the year
32,188,072
34,242,104

Note 8 - ARIO research fund

Revenue ($)

Item Seed Royalty Technology Royalty Unpledged Equity Total 2014 Total 2013
Intellectual property
948,613
169,264
0
1,117,877
1,085,306
Investment income
54,889
45,987
0
100,876
116,129
Total revenue
1,003,502
215,251
0
1,218,753
1,201,435

Expenses ($)

Item Seed Royalty Technology Royalty Unpledged Equity Total 2014 Total 2013
Expenses
700,692
20,126
0
720,818
741,606

Fund balances ($)

Item Seed Royalty Technology Royalty Unpledged Equity Total 2014 Total 2013
Net surplus
302,810
195,125
0
497,935
459,829
Fund balance, beginning of year
1,653,492
1,991,799
0
3,645,291
3,200,851
Remeasurement losses
2,770
1,822
0
4,592
(15,389)
Fund balance, end of year
1,959,072
2,188,746
0
4,147,818
3,645,291

Note 9 - Grants received from provincial government

The following grants have been received from the Ontario Ministry of Agriculture, Food and Rural Affairs and successor ministries:

Research programs

Program 2014 $ 2013 $
New Directions
2,480,000
3,000,000
Food Safety
500,000
500,000
Total research programs
2,980,000
3,500,000

Capital

Item 2014 $ 2013 $
Minor capital
4,500,000
4,500,000
Elora Livestock Environmental and Energy Complex
10,981,400
16,214,300
Payments in lieu of taxes
750,000
750,000
Total capital
19,211,400
24,964,300

The following Provincial Government capital transfer payment grants have been partially capitalized as Deferred Capital Funded Contributions and partially recognized as Revenues as follows:

Minor capital

Item 2014 $ 2013 $
Funding received
4,500,000
4,500,000
Capitalized deferred Capital funding contribution
(368,816)
(1,281,419)
Net revenue
4,131,184
3,218,581

Elora Livestock Environmental and Energy Complex

Item 2014 $ 2013 $
Funding received
10,981,400
16,214,300
Capitalized deferred Capital funding contribution
(10,981,400)
(16,214,300)
Net revenue
0
0

Schedule 1 - Research trust funds: financial position

As at March 31, 2014

Assets

Item ARIO $ Infrustructure $ New Directions $ Food Safety $ Eliminations $ 2014 $
Current cash
1,494,683
0
0
0
0
1,494,683
Current investments
29,856,175
0
0
0
0
29,856,175
Due from ARIO
0
19,416,476
5,843,938
1,198,462
(26,458,876)
0
Accounts receivable
93,667
57,717
2,889
633
0
154,906
Subtotal
31,444,525
19,474,193
5,846,827
1,199,095
(26,458,876)
31,505,764
Capital assets under construction
0
22,155,506
0
0
0
22,155,506
Capital assets (note 5)
9,793
59,049,263
0
0
0
59,059,056
Total Assets
31,454,318
100,678,962
5,846,827
1,199,095
(26,458,876)
112,720,326

Liabilities

Item ARIO $ Infrustructure $ New Directions $ Food Safety $ Eliminations $ 2014 $
Current liability due to other research trust funds
26,458,876
0
0
0
(26,458,876)
0
Accounts payable and accruals
847,624
110,955
590,459
187,847
0
1,736,885
Holdbacks payable
0
0
336,213
122,396
0
458,609
Unclaimed expenditures
0
0
4,785,810
1,012,896
0
5,798,706
Deferred revenue
0
3,091
378,000
0
0
381,091
Subtotal
27,306,500
114,046
6,090,482
1,323,139
(26,458,876)
8,375,291
Deferred capital funded contributions (note 6)
0
49,273,486
0
0
0
49,273,486
Deferred capital contributions (note 7)
0
32,188,072
0
0
0
32,188,072
Total liabilities
27,306,500
81,575,604
6,090,482
1,323,139
(26,458,876)
89,836,849

Fund balances

Item ARIO $ Infrustructure $ New Directions $ Food Safety $ Eliminations $ 2014 $
Fund balances
4,158,615
5,081,639
(237,811)
(122,762)
0
8,879,681
Accumulated remeasurement (losses)
(10,797)
(15,564)
(5,844)
(1,282)
0
(33,487)
Contributed assets (note 4)
0
14,037,283
0
0
0
14,037,283
Total
4,147,818
19,103,358
(243,655)
(124,044)
0
22,883,477

Total liabilities plus fund balances

Item ARIO $ Infrustructure $ New Directions $ Food Safety $ Eliminations $ 2014 $
Total liabilities
27,306,500
81,575,604
6,090,482
1,323,139
(26,458,876)
89,836,849
Total fund balances
4,147,818
19,103,358
(243,655)
(124,044)
0
22,883,477
Total
31,454,318
100,678,962
5,846,827
1,199,095
(26,458,876)
112,720,326

Schedule 2 - Research trust funds: revenues and expenditures

For the year ended March 31, 2014

Research revenues

Item ARIO (note 8) New Directions $ Food Safety $ 2014 $
Research grants - provincial (note 9)
0
2,480,000
500,000
2,980,000
Research grants - other
0
378,000
0
378,000
Intellectual property
1,117,877
0
0
1,117,877
Total research revenue
1,117,877
2,858,000
500,000
4,475,877

Property revenues

Item Infrastructure $ 2014 $
Grants - provincial - minor capital (note 9)
4,131,184
4,131,184
Rental income - provincial
834,302
834,302
Rental income - private industry
677,380
677,380
Transfer payments - payments in lieu of taxes
750,000
750,000
Payments in lieu of taxes
187,754
187,754
Amortization of deferred capital contribution
2,394,158
2,394,158
Total property revenues
8,974,778
8,974,778

Other revenues

Item ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ 2014 $
Investment income
100,876
70,329
29,710
6,716
207,631

Total revenues

Item ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ 2014 $
Total research revenue
1,117,877
0
2,858,000
500,000
4,475,877
Total property revenues
0
8,974,778
0
0
8,974,778
Investment income
100,876
70,329
29,710
6,716
207,631
Total revenues
1,218,753
9,045,107
2,887,710
506,716
13,658,286

Research Expenditures

Item ARIO (note 8) New Directions $ Food Safety $ 2014 $
Research project/program
0
1,827,896
475,168
2,303,064
Intellectual property
708,370
0
0
708,370
Total research expenditures
708,370
1,827,896
475,168
3,011,434

Property Expenditures

Item Infrastructure $ 2014 $
Payments in lieu of taxes
884,271
884,271
Minor capital
3,368,690
3,368,690
Operations and maintenance
733,495
733,495
Amortization of capital assets
2,394,158
2,394,158
Total property expenditures
7,380,614
7,380,614

Other expenditures

Item ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ 2014 $
Other expenses
12,448
0
0
0
12,448

Total expenditures

Item ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ 2014 $
Total research expenditures
708,370
0
1,827,896
475,168
3,011,434
Total property expenditures
0
7,380,614
0
0
7,380,614
Other expenses
12,448
0
0
0
12,448
Total expenditures
720,818
7,380,614
1,827,896
475,168
10,404,496

Fund balances

Item ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ 2014 $
Excess of revenues over expenditures
497,935
1,664,493
1,059,814
31,548
3,253,790
Net amoundt transferred (to) from unclaimed expenditures
0
0
(2,283,722)
(632,657)
(2,916,379)
Subtotal
497,935,
1,664,493
(1,223,908)
(601,109)
337,411
Fund balances, beginning of year
3,645,291
17,431,313
971,386
474,752
22,522,742
Net remeasurement gains (losses) for the year
4,592
7,552
8,867
2,313
23,324
Fund balances, end of year
4,147,818
19,103,358
(243,655)
(124,044)
22,883,477

Appendix D - ARIO Projected Revenues and Expenditures

Property Management ($):
Item 2014-15 2015-16 2016-17 2017-18
Minor capital - base
3,000,000
3,000,000
3,000,000
3,000,000
Minor capital - program
1,000,000
1,000,000
1,000,000
1,000,000
Infrastructure Strategy
26,000,000
10,510,000
10,510,000
na
Payments in lieu of tax
750,000
750,000
750,000
750,000

Research Programs ($):

Item 2014-15 2015-16 2016-17 2017-18
New Directions
1,350,000
1,350,000
1,350,000
1,350,000
Industry Contributions
378,000
378,000
378,000
378,000
Food Safety
500,000
500,000
500,000
500,000

Other ($):

Item 2014-15 2015-16 2016-17 2017-18
Rent
1,700,000
1,700,000
1,700,000
1,700,000
Misc (royalty, interest)
250,000
250,000
250,000
250,000
Industry contribution to capital projects
4,000,000
7,600,000
2,600,000
na

Appendix E - ARIO Risk Management Plan Summary

Strategic Risks

  1. Strategic direction/ objectives/ mandate not clearly understood by external stakeholders and some internal Ministry staff:
Cumulative impact Likelihood Speed of onset Risk tolerance Risk prioritization - Score and Rating Mitigation
5 2 1 1 9 - low Risk is low & mitigated on an ongoing basis
  1. Inadequate funding for programs and capital infrastructure:
Cumulative impact Likelihood Speed of onset Risk tolerance Risk prioritization - Score and Rating Mitigation
9 3 2 3 17 - medium Continue to inform & advocate through annual RbP
  1. Inability to generate stakeholder support for the strategy to revitalize the agri-food research infrastructure system:
Cumulative impact Likelihood Speed of onset Risk tolerance Risk prioritization - Score and Rating Mitigation
10 1 2 1 14 - low Established financial contribution parameters that have been accepted by industry stakeholders
  1. Advice and recommendations on research needs and resource allocation not reflective of sector needs:
Cumulative impact Likelihood Speed of onset Risk tolerance Risk prioritization - Score and Rating Mitigation
3 1 1 1 6 - low All decision making authority rests with the ministry. ARIO provides advice on research needs & resource allocation & is only 1 component of the decision making process.

ARIO is only one component of the advice informing priority setting and resource allocation.

Accountability / Governance Risks

  1. Perceived conflict of interest re governance structure with respect to the current dual role of Director of Research/ CAO and dual role of staff secretariat:
Cumulative impact Likelihood Speed of onset Risk tolerance Risk prioritization - Score and Rating Mitigation
9 4 3 1 17 - medium

No option. Mitigation is continual & ongoing

  1. Central agencies understanding of ARIO agency's role and structure:
Cumulative impact Likelihood Speed of onset Risk tolerance Risk prioritization - Score and Rating Mitigation
6 4 2 2 14 - medium

Continue to work with & educate central agency staff.

  1. Accountability/ Governance inability to maintain sufficient and qualified number of members, as well as timely appointments to fill vacancies in membership:
Cumulative impact Likelihood Speed of onset Risk tolerance Risk prioritization - Score and Rating Mitigation
3 1 1 1 6 - low

Continued focused effort to identify good candidates

  1. Accountability/ Governance member roles and responsibilities not clearly understood by the members:
Cumulative impact Likelihood Speed of onset Risk tolerance Risk prioritization - Score and Rating Mitigation
3 2 1 2 8 - low

Provide orientation and training as needed.

  1. Accountability / Governance Inherent government liability in ARIO agreements (e.g. leases, research funding etc.) allowing exposure to legal actions:
Cumulative impact Likelihood Speed of onset Risk tolerance Risk prioritization - Score and Rating Mitigation
7 1 1 1 10 - low

Legal review of all agreements before they are finalized to ensure liabilities are minimized where possible.

Standardization of agreements where possible

  1. Lack of process documentation and/or knowledge transfer (including cross training):
Cumulative impact Likelihood Speed of onset Risk tolerance Risk prioritization - Score and Rating Mitigation
9 3 1 1 14 - low

RIB is focusing on developing succession plans & is implementing a pilot KMS

Operational Risks

  1. Inability to effectively and efficiently operate and manage the infrastructure portfolio. All of the ARIO owned properties are operated and managed under agreements with third parties. The University of Guelph operates and manages all of the properties except the Vineland research station which is operated and managed by VRIC:
Cumulative impact Likelihood Speed of onset Risk tolerance Risk prioritization - Score and Rating Mitigation
10 1 1 2 14 - low

Issues are identified and managed on an ongoing basis.

  1. Inadequate business continuity plans:
Cumulative impact Likelihood Speed of onset Risk tolerance Risk prioritization - Score and Rating Mitigation
3 1 1 1 6 - low

ARIO Secretariat (Research and Innovation Branch) is governed by OMAFRA emergency & business continuity planning which is considered adequate for ARIO purposes.

  1. Tenant or delivery agent activities which result in changes in PIL/Tax and assessment:
Cumulative impact Likelihood Speed of onset Risk tolerance Risk prioritization - Score and Rating Mitigation
6 4 1 3 14 - low

Tenants & delivery agents are carefully screened to ensure compatibility with ARIO's mandate.

Information Technology and Infrastructure Risks

  1. Potential damage or destruction of property:
Cumulative impact Likelihood Speed of onset Risk tolerance Risk prioritization - Score and Rating Mitigation
7 3 1 3 14 - low

Property risks are well managed. ARIO is included in the government's self insurance policy.

Other Risks

  1. Potential financial losses incurred on investments:
Cumulative impact Likelihood Speed of onset Risk tolerance Risk prioritization - Score and Rating Mitigation
6 2 1 2 11 - low

Investments are managed externally by a professional firm with oversight by RIB staff.

Workforce Risks

  1. ARIO has no staff of its own. Research and Innovation Branch staff act in a secretariat role to ARIO:
Cumulative impact Likelihood Speed of onset Risk tolerance Risk prioritization - Score and Rating Mitigation
na na na na na

na

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For more information:
E-mail: research.omafra@ontario.ca
Author: Wilma Macfarlane, ARIO liaison/RIB
Creation Date: 12 February 2015
Last Reviewed: 26 May 2015