Agricultural Research Institute of Ontario Financial Statements 2017-18

Financial Information

Independent auditor&‌rsquo;s report

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, 2018 and the statements of revenues and expenditures and changes in fund balances, remeasurement (losses) gains 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, 2018 and the results of its operations and its cash flows for the year then ended in accordance with Canadian public sector accounting standards.

Chartered Professional Accountants
Licensed Public Accountants
Guelph, Ontario
June 18, 2018

Statement of financial position as at March 31, 2018

Assets

Asset 2018 $ (schedule 1) 2017 $
Cash 6,662,999 3,740,844
Investments 27,213,712 37,124,309
Accounts receivable 188,426 269,672
Accounts receivable - OMAFRA (re: TBARS) 500,000 0
Note receivable - North Grenville (re: Kemptville sale) (note 11) 4,000,000 0
Total current assets 38,565,137 41,134,825
Tangible capital assets under construction 8,432,364 3,389,048
Tangible capital assets (note 5) 78,598,160 84,698,918
Total assets 125,595,661 129,222,791

Liabilities

Liability 2018 $ (schedule 1) 2017 $
Accounts payable and accruals 1,570,026 1,471,415
Holdbacks payable 528,076 427,842
Unclaimed expenditures 3,267,330 2,769,930
�Deferred revenue 562,552 339,471
Total current liabilities 5,927,984 5,008,658
Deferred capital funded contributions (note 6) 71,842,359 72,286,239
Deferred capital contributions (note 7) 16,826,781 22,022,133
Total liabilities 94,597,124 99,317,030

Net assets

Net assets 2018 $ (schedule 1) 2017 $
Fund balances 18,367,711 16,683,246
Accumulated remeasurement (losses) gains (51,348) 15,232
Contributed assets (notes 4, 5 and 11) 12,682,174 13,207,283
Total net assets 30,998,537 29,905,761

Total liabilities and net assets

Liabilities and net assets 2018 $ (schedule 1) 2017 $
Total liabilities and net assets 125,595,661 129,222,791

Statement of revenues and expenditures and changes in fund balances for year ended March 31, 2018

Research revenues

Revenue 2018 $ (schedule 2) 2017 $
Grants - provincial (note 9) 500,000 1,850,000
Grants - OEGF (Kawartha and IGPC) (note 12) 378,000 378,000
Intellectual property (note 8) 1,539,667 1,521,773
Total research revenues 2,417,667 3,749,773

Property revenues

Revenue 2018 $ (schedule 2) 2017 $
Grants - provincial - minor capital (note 9) 4,500,000 4,260,952
Grants - provincial - Food Innovation (note 9) 800,000 0
Rental income - provincial 948,489 836,868
Rental income - private industry 1,570,505 1,306,250
Deferred capital impairment (notes 4, 6 and 7) 765,910 6,000,403
Deferred capital contributions on sale of tangible capital assets (note 11) 3,437,392 0
Grants - provincial - payments in lieu of taxes (note 9) 750,000 750,000
Payments in lieu of taxes 189,430 206,852
Amortization of deferred capital contributions 2,646,124 3,046,549
Total property revenues 15,607,850 16,407,874

Other revenues

Revenue 2018 $ (schedule 2) 2017 $
Gain on disposal of tangible capital asset (note 11) 4,197,692 0
Investment income (note 13) 465,843 408,541
Total other revenues 4 663 535 408,541

Total revenues

Revenue 2018 $ (schedule 2) 2017 $
Total research revenues 2,417,667 3,749,773
Total property revenues 15,607,850 16,407,874
Total investment income 4,663,535 408,541
Total revenues 22,689,052 20,566,188

Research expenditures

Expenditure 2018 $ (schedule 2) 2017 $
Research project/program 1,430,079 2,522,338
Intellectual property (note 8) 1,005,668 956,074
Total research expenditures 2,435,747 3,478,412

Property expenditures

Expenditure 2018 $ (schedule 2) 2017 $
Payments in lieu of taxes 1,032,852 965,206
Minor capital 4,226,092 4,684,373
Transfer payments - U of G - Guelph Turfgrass Institute (note 10) 5,000,000 0
Transfer payments - U of G - Food Innovation (note 10) 800,000 0
Provision for forgivable loan (note 11) 3,700,000 0
Operations and maintenance 1,198,997 942,529
Loss on disposal of tangible capital asset 0 327,253
Impairment of tangible capital assets (note 5) 765,910 6,000,403
Amortization of capital assets 2,646,124 3,046,549
Total property expenditures 19,369,975 15,966,313

Total expenditures

Expenditure 2018 $ (schedule 2) 2017 $
Total research expenditures 2,435,747 3,478,412
Total property expenditures 19,369,975 15,966,313
Total expenditures 21,805,722 19,444,725

Excess of revenue over expenditures for the year

Item 2018 $ (schedule 2) 2017 $
Excess of revenues over expenditures for the year 883,330 1,121,463
Net amount transferred from unclaimed expenditures 736,220 709,417
Net excess of revenues over expenditures for the year 1,619,550 1,830,880

Fund balances

Fund balances 2018 $ (schedule 2) 2017 $
Fund balances, beginning of year 29,905,761 28,858,842
Net remeasurement (losses) gains for the year (66,580) 46,039
Impairment of contributed land (note 4) (460,194) (830,000)
Fund balances, end of year 30,998,537 29,905,761

Statement of remeasurement (losses) gains for year ended March 31, 2018

Remeasurement (losses) gains 2018 $ 2017 $
Accumulated remeasurement gains (losses), beginning of year 15,232 (30,807)
Unrealized (losses) gains attributable to temporary investments (56,981) 117,784
Amounts reclassified to the statement of operations: realized gains on temporary investments (9,599) (71,745)
Net remeasurement (losses) gains for the year (66,580) 46,039
Accumulated remeasurement (losses) gains, end of year (51,348) 15,232

Statement of cash flows for year ended March 31, 2018

Cash provided by (used in) operating activities

Operating activity 2018 $ 2017 $
Excess of revenues over expenditures for the year 883,330 1,121,463

Items not requiring an outlay of cash

Operating activity 2018 $ 2017 $
Amortization of tangible capital assets 2,646,124 3,046,549
Impairment of tangible capital assets 765,910 6,000,403
Impairment of contributed land (460,194) (830,000)
Completed project surplus transferred to unclaimed expenditures 1,233,619 31,709
Deferred capital contributions (5,195,352) (6,204,068)
(Gain) loss on disposal of tangible capital assets (4,197,692) 327,253
Net remeasurement (losses) gains (66,580) 46,039
Total items not requiring an outlay of cash (4,390,835) 3,539,348

Changes in non-cash working capital

Operating activity 2018 $ 2017 $
Accounts receivable 81,246 (18,090)
Accounts receivable - OMAFRA (re: TBARS) (500,000) 0
Note receivable - North Grenville (re: Kemptville sale) (4,000,000) 0
Investments 9,910,597 (4,702,960)
Accounts payable and accruals 98,611 (151,265)
Deferred capital funded contributions (443,880) 9,609,768
Prepaid land deposits 0 250,000
Holdbacks payable 100,234 (175,011)
Deferred revenue 223,081 (41,265)
Total cash provided by (used in) operating activities 1,079,054 8,310,525

Cash provided by (used in) capital activities

Capital activity 2018 $ 2017 $
Additions to tangible capital assets (813,583) (14,198,758)
Proceeds on sale of tangible capital assets 7,700,000 0
Tangible capital assets under construction (5,043,316) (3,389,048)
Total cash provided by (used in) capital activities 1,843,101 (17,587,806)

Net change in cash for the year

Cash 2018 $ 2017 $
Net increase (decrease) in cash for the year 2,922,155 (9,277,281)
Cash, beginning of the year 3,740,844 13,018,125
Cash end of the year 6,662,999 3,740,844

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 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, Food and Rural Affairs, is the primary source of funding. The Ontario Government also provides funding for 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, ARIO reinvests royalties earned from Ministry funded research.

All receipts are held in trust by the Director of Research and are allocated in accordance with the terms of the funds. Transactions between OMAFRA and the below programs are recorded at the exchange value.

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

Measurement of financial instruments

The organization initially measures its financial assets and liabilities at fair value, except for certain non-arm&‌rsquo;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) gains.

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 revenue, deferred capital funded contributions and deferred capital contributions.

The organization&‌rsquo;s financial assets measured at fair value include the investments.

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.

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.

Tangible capital assets

Tangible 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 recognized in the same period as the related impairment and 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:

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

ARIO&‌rsquo;s financial instruments are all classified as Level 1 as at March 31, 2018 and 2017.

There were no transfers in or out of Level 1 for the years ended March 31, 2018 and 2017.

Associated risks

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&‌rsquo;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 $272,137 (2017 - $371,243). 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.

Interest rate risk:

Interest rate risk refers to the adverse consequences of interest rate changes on the Institute&‌rsquo;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.

Liquidity risk:

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

All of ARIO&‌rsquo;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.

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.

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 $12,682,174 (2017 - $13,207,283) are recorded in the Infrastructure Fund and represent the cost of the land transferred to ARIO from the Government of Ontario. During the year, the fair value of the land in Alfred was adjusted by an impairment of $460,194 (2017 - $830,000) and the fair value of the land in Kemptville was adjusted by $64,915 (2017 - $nil) due to a sale (see note 11). The land adjustment in Kemptville represents a real transaction and not a provision for impairment. Accordingly, it has been included in excess of revenue over expenditures for the year and the impairment on contributed assets at year end is $460,194, despite contributed assets on the statement of financial position being reduced by $525,109.

Note 5 - Tangible capital assets

Land assets

Land Cost $ Accumulated amortization $ Net 2018 $ Net 2017 $
Simcoe railway line 9,793 0 9,793 9,793
Regional campuses 1,736,994 0 1,736,994 2,262,104
Research stations 24,642,185 0 24,642,185 24,642,184
Total land assets 26,388,972 0 26,388,972 26,914,081

Building assets

Building Cost $ Accumulated amortization $ Net 2018 $ Net 2017 $
Regional campuses 25,118,835 8,117,008 17,001,827 20,862,613
Research stations 45,373,538 10,166,177 35,207,361 36,922,224
Total building assets 70,492,373 18,283,185 52,209,188 57,784,837

Total land and building assets

Land and building Cost $ Accumulated amortization $ Net 2018 $ Net 2017 $
Total land assets 26,388,972 0 26,388,972 26,914,081
Total building assets 70,492,373 18,283,185 52,209,188 57,784,837
Total assets 96,881,345 18,283,185 78,598,160 84,698,918

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, Food and Rural Affairs on an annual basis.

During the year, an impairment of land and buildings was recognized resulting in a loss on tangible capital asset write down of $460,194 (2017 - $830,000) on land and $305,716 (2017 - $5,170,403) on buildings for a total of $765,910 (2017 - $6,000,403). Additionally, contributed surplus was reduced by $64,915 (2017 - $nil) due to a sale of land parcels in Kemptville.

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.

Balance 2018 $ 2017 $
Balance, beginning of the year 72,286,239 62,676,471
Less amortization for the year (1,066,593) (1,121,328)
Less deferred capital impairment (127,287) (891,556)
Add contributions received for capital purposes 750,000 11,622,652
Balance, end of the year 71,842,359 72,286,239

Funding Sources

Funding source 2018 $ 2017 $
Federal 1,172,500 1,207,500
Provincial 61,794,811 62,764,098
Industry 8,875,048 8,314,641
Total funding sources 71,842,359 72,286,239

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:

Balance 2018 $ 2017 $
Balance, beginning of the year 22,022,133 28,226,201
Less deferred capital contributions (305,716) (4,278,847)
Add prior year amortization adjustments 0 2,480
Less funds recognized on sale of Kemptville (3,310,106) 0
Less amortization for the year (1,579,530) (1,927,701)
Balance, end of the year 16,826,781 22,022,133

Note 8 - ARIO research fund

Revenue

Revenue Seed royalty $ Technology royalty $ Other $ Total 2018 $ Total 2017 $
Intellectual property 1,269,046 270,621 0 1,539,667 1,521,773
Investment income 50,814 59,280 0 110,094 178,102
Total revenue 1,319,860 329,901 0 1,649,761 1,699,875

Expenses

Expense Seed royalty $ Technology royalty $ Other $ Total 2018 $ Total 2017 $
Expenses 993,481 12,187 0 1,005,668 956,074

Fund balances

Fund balances Seed royalty $ Technology royalty $ Other $ Total 2018 $ Total 2017 $
Net surplus for the year 326,379 317,714 0 644,093 743,801
Fund balance, beginning of year 2,388,275 2,736,819 0 5,125,094 4,342,685
Remeasurement (losses) gains (15,953) (18,281) 0 (34,234) 38,608
New Directions (Competitive Research) Program transfer 0 0 500,000 500,000 0
Fund balance, end of year 2,698,701 3,036,252 500,000 6,234,953 5,125,094

Note 9 - Grants received from the provincial government

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

Research programs and other grants

Research Programs 2018 $ 2017 $
New Directions (Competitive Research) Program 0 1,350,000
Food Safety Research Program 500,000 500,000
Total Research Programs 500,000 1,850,000
Other Grants 2018 $ 2017 $
Minor capital 4,500,000 4,260,952
Growing Forward 2 - Food Innovation project 800,000 0
New Directions (Competitive Research) - re: TBARS 650,000 0
Elora Livestock Environmental and Energy Complex 0 10,510,000
Payments in lieu of taxes 750,000 750,000
Total Other Grants 6,700,000 15,520,952
Total research programs and other grants 7,200,000 17,370,952

The following grants, recorded at the exchange value, have been received from the Ontario Ministry of Advanced Education and Skills Development (MAESD):

Lakehead University Project

Lakehead University Project 2018 $ 2017 $
Funding received 500,000 0
Capitalized - Unclaimed expenditures (500,000) 0
Net revenue 0 0

Note: Funding was flowed to OMAFRA from MAESD and is payable to ARIO at March 31, 2018.

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

Minor capital 2018 $ 2017 $
Funding received 4,500,000 4,650,000
Capitalized - Deferred Capital Funding Contribution 0 (389,048)
Net revenue 4,500,000 4,260,952

Food Innovation project

Food Innovation project 2018 $ 2017 $
Funding received 800,000 0
Capitalized - Unclaimed expenditures 0 0
Net revenue 800,000 0

New Directions (Competitive Research) - re: TBARS

New Directions (Competitive Research) - re: TBARS 2018 $ 2017 $
Funding received 650,000 0
Capitalized - Unclaimed expenditures (650,000) 0
Net revenue 0 0

Elora Livestock Environmental and Energy Complex

Elora Livestock Environmental and Energy Complex 2018 $ 2017 $
Funding received 0 10,510,000
Capitalized - Deferred Capital Funding Contribution 0 (10,510,000)
Net revenue 0 0

Note 10 - Transfer payments to the University of Guelph

During 2016, ARIO entered into a funding agreement with the University of Guelph. Under the agreement, ARIO would provide maximum funds of $12,000,000 to be combined with up to $3,000,000 in industry contributions to fund the construction of a new Turfgrass Research facility on the University of Guelph&‌rsquo;s Arboretum land. The ARIO funds for this agreement come from deferred capital funded contributions which were previously received by ARIO from the Ontario Ministry of Agriculture, Food and Rural Affairs and successor ministries. At March 31, 2018 funding milestones have been met and ARIO has provided the University with $12,000,000 in funding.

During 2017, ARIO entered into a funding agreement with the University. Under the agreement, ARIO would provide maximum funds of $800,000 to fund equipment for the Guelph Food Innovation Centre. At March 31, 2018, funding milestones have been met and ARIO has provided the University with $800,000 in funding.

Note 11 - Sale of Kemptville

During the prior year, the organization sold parcels of land in Kemptville to the Municipality of North Grenville for proceeds of $7.7 million, comprised of $4 million note receivable at year end and $3.7 million set up as a provision for a forgivable loan. This involved the following transactions:

Sale of Kemptville

Sale of Kemptville 2018 $
Proceeds from sale 7,700,000
Cost of tangible capital assets - Kemptville 7,449,275
Accumulated amortization - Kemptville (4,011,882)
Net book value - Kemptville 3,437,393
  4,262,607
Contributed asset - Kemptville land (64,915)
Gain on sale of Kemptville 4,197,692

Note 12 - Funding agreements with third parties

The Agricultural Research Institute of Ontario (ARIO), Her Majesty the Queen in right of Ontario as represented by the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) and the Integrated Grain Processors Co-operative Inc. (IGPC) have jointly signed an agreement whereby, pursuant to a Capital Grant Agreement effective June 2006 between OMAFRA and IGPC, IGPC agreed to contribute to a research and development fund in exchange for the capital grant support provided by OMAFRA through the Ontario Ethanol Growth Fund. IGPC has agreed to contribute $280,000 annually for 10 years (for a total of $2,800,000) starting in April 2012 and ending with the final payment in April 2021. These funds are being paid directly to ARIO to be used to support research priorities in the agri-food sector in Ontario. Funds recognized to date are $1,680,000. See schedule 2.

Her Majesty the Queen in right of Ontario as represented by the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) and Kawartha Ethanol Inc. have signed a Capital Grant Agreement effective August 1, 2008 between OMAFRA and Kawartha Ethanol In. whereby Kawartha Ethanol In. agreed to contribute to a research and development fund in exchange for the capital grant support provided by OMAFRA through the Ontario Ethanol Growth Fund. Kawartha Ethanol Inc. has agreed to contribute $98,000 annually for 10 years (for a total of $980,000) starting April 2013 and ending with the final payment in April 2022. These funds are to be paid directly to ARIO to be used to support research priorities in the agri-food sector in Ontario. Funds recognized to date are $490,000. See schedule 2.

Note 13 - Investment income

Investment income is comprised of the net result of investment earnings and management fees paid. Included in investment income is $35,410 (2017 - $30,712) in expenses paid for management of investment portfolios.

Schedule 1 - Research Trust Funds: Financial Position as at March 31, 2018

Assets

Assets ARIO $ Infrastructure $ New Directions $ Food Safety $ Eliminations $ 2018 $
Cash 6,662,999 0 0 0 0 6,662,999
Investments 27,213,712 0 0 0 0 27,213,712
Due from ARIO 0 23,205,994 5,076,363 1,301,695 (29,584,052) 0
Accounts receivable 149,709 38,124 560 33 0 188,426
Accounts receivable - OMAFRA (re:TBARS) 500,000 0 0 0 0 500,000
Note receivable - North Grenville (re: Kemptville sale) (Note 11) 4,000,000 0 0 0 0 4,000,000
Total current assets 38,526,420 23,244,118 5,076,923 1,301,728 (29,584,052) 38,565,137
Tangible assets under construction 0 8,432,364 0 0 0 8,432,364
Tangible capital assets (note 5) 0 78,598,160 0 0 0 78,598,160
Total tangible assets 0 87,030,524 0 0 0 87,030,524
Total Assets 38,526,420 110,274,642 5,076,923 1,301,728 (29,584,052) 125,595,661

Liabilities

Liabilities ARIO $ Infrastructure $ New Directions $ Food Safety $ Eliminations $ 2018 $
Due to other research trust funds 29,594,052 0 0 0 (29,584,052) 0
Accounts payable and accruals 1,057,416 207,751 220,035 84,824 0 1,570,026
Holdbacks payable 0 0 370,390 157,686 0 528,076
Unclaimed expenditures 1,650,000 0 1,291,975 325,355 0 3,267,330
Deferred revenue 0 184,552 378,000 0 0 562,552
Total current liabilities 32,291,468 392,303 2,260,400 567,865 (29,584,052) 5,927,984
Deferred capital funded contributions (note 6) 0 71,842,359 0 0 0 71,842,359
Deferred capital contributions (note 7) 0 16,826,781 0 0 0 16,826,781
Total deferred capital 0 88,669,140 0 0 0 88,669,140
Total Liabilities 32,291,468 89,061,443 2,260,400 567,865 (29,584,052) 94,597,124

Net Assets

Fund balance ARIO $ Infrastructure $ New Directions $ Food Safety $ Eliminations $ 2018 $
Fund balances 6,240,063 8,563,419 2,829,162 735,067 0 18,367,711
Accumulated Remeasure-ment losses (5,111) (32,394) (12,639) (1,204) 0 (51,348)
Contributed Assets (notes 4, 5 and 11) 0 12,682,174 0 0 0 12,682,174
Total fund balances 6,234,952 21,213,199 2,816,523 733,863 0 30,998,537
Total liabilities and net assets 38,526,420 110,274,642 5,076,923 1,301,728 (29,584,052) 125,595,661

Schedule 2 - Research Trust Funds: Revenues and Expenditures and Changes in Fund Balances for the year ended March 31, 2018

Research revenues

Revenue ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2018 $
Grants - provincial (note 9) 0 0 0 500,000 500,000
Grants - OEGF (Kawartha and IGPC) (note 12) 0 0 378,000 0 378,000
Intellectual property (note 8) 1,539,667 0 0 0 1,539,667
Total research revenues 1,539,667 0 378,000 500,000 2,417,667

Property revenues

Revenue ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2018 $
Grants - provincial - minor capital (note 9) 0 4,500,000 0 0 4,500,000
Grants - provincial - Food Innovation (note 9) 0 800,000 0 0 800,000
Rental income - provincial 0 948,489 0 0 948,489
Rental income - private industry 0 1,570,505 0 0 1,570,505
Deferred capital impairment (notes 4, 6 and 7) 0 765,910 0 0 765,910
Deferred capital contributions on sale of tangible capital assets (note 11) 0 3,437,392 0 0 3,437,392
Grants - provincial - payments in lieu of taxes (note 9) 0 750,000 0 0 750,000
Payments in lieu of taxes 0 189,430 0 0 189,430
Amortization of deferred capital contributions 0 2,646,124 0 0 2,646,124
Total property revenues 0 15,607,850 0 0 15,607,850

Other revenues

Revenue ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2018 $
Gain on disposal of tangible capital asset (note 11) 0 4,197,692 0 0 4,197,692
Investment income (note 13) 110,093 265,528 80,581 9,641 465,843
Total other revenues 110,093 4,463,220 80,581 9,641 4,663,535

Total revenues

Revenue ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2018 $
Total research revenue 1,539,667 0 378,000 500,000 2,417,667
Total property revenues 0 15,607,850 0 0 15,607,850
Other income 110,093 4,463,220 80,581 9,641 4,663,535
Total revenues 1,649,760 20,071,070 458,581 509,641 22,689,052

Research expenditures

Expenditure ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2018 $
Research project/ program 0 0 1,076,663 353,416 1,430,079
Intellectual property (note 8) 1,005,688 0 0 0 1,005,688
Total research expenditures 1,005,668 0 1,076,663 353,416 2,435,747

Property expenditures

Item ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2018 $
Payments in lieu of taxes 0 1,032,852 0 0 1,032,852
Minor capital 0 4,226,092 0 0 4,226,092
Transfer payments - U of G - Guelph Turfgrass Institute (note 10) 0 5,000,000 0 0 5,000,000
Transfer payments - U of G - Food Innovation (note 10) 0 800,000 0 0 800,000
Provision for forgivable loan (note 11) 0 3,700,000 0 0 3,700,000
Operations and maintenance 0 1,198,997 0 0 1,198,997
Impairment of tangible capital assets (note 5) 0 765,910 0 0 765,910
Amortization of tangible capital assets 0 2,646,124 0 0 2,646,124
Total property expenditures 0 19,369,975 0 0 19,369,975

Total Expenditures

Item ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2018 $
Total research expenditures 1,005,668 0 1,076,663 353,416 2,435,747
Total property expenditures 0 19,369,975 0 0 19,369,975
Total expenditures 1,005,668 19,369,975 1,076,663 353,416 21,805,722

Excess of revenue over expenditures for the year

Item ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2018 $
Excess (shortfall) of revenue over expenditures for the year 644,092 701,095 (618,082) 156,225 883,330
Net amount transferred from unclaimed expenditures 0 0 386,514 349,706 736,220

Fund balances

Item ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2018 $
Fund balances, beginning of year 5,125,094 20,993,460 3,558,393 228,814 29,905,761
Net remeasurement, losses for the year (34,234) (21,162) (10,302) (882) (66,580)
Transfer of New Direction funds to Lakehead Project (re: TBARS) 500,000 0 (500,000) 0 0
Impairment of contributed land (note 5) 0 (460,194) 0 0 (460,194)
Fund balances, end of year 6,234,952 21,213,199 2,816,523 733,863 30,998,537


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