Agricultural Research Institute of Ontario Financial Statements 2018-19

Financial Information

Independent auditor&‌rsquo;s report

To the Members of: Agricultural Research Institute of Ontario

Opinion

We have audited the accompanying financial statements of Agricultural Research Institute of Ontario, which comprise the statement of financial position as at March 31, 2019 and the statements of revenues and expenditures and changes in fund balances, remeasurement losses and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

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, 2019 and the results of its operations and its cash flows for the year then ended in accordance with Canadian public sector accounting standards.

Basis of Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Agricultural Research Institute of Ontario in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the 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.

In preparing the financial statements, management is responsible for assessing the organization's ability to continue as a going concern, disclosing, as applicable, matters related to a going concern and using the going concern basis of accounting unless management either intends to liquidate the organization or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the organization's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements, as a whole, are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance,but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of the auditor's responsibilities for the audit of the financial statements is located at RLB LLP&‌rsquo;s website. This description forms part of our auditor's report.

Chartered Professional Accountants
Licensed Public Accountants
Guelph, Ontario
June 27, 2019

Statement of financial position as at March 31, 2019

Assets

Asset 2019 $ (schedule 1) 2018 $
Cash 10,054,638 6,662,999
Investments 27,549,149 27,213,712
Accounts receivable (note 14) 176,995 188,426
Accounts receivable - OMAFRA (re: TBARS) 0 500,000
Note receivable - North Grenville (re: Kemptville sale) 10,000 4,000,000
Total current assets 37,790,782 38,565,137
Tangible capital assets under construction 16,420,639 8,432,364
Tangible capital assets (note 5) 78,875,275 78,598,160
Total assets 133,086,696 125,595,661

Liabilities

Liability 2019 $ (schedule 1) 2018 $
Accounts payable and accruals 2,925,869 1,570,026
Holdbacks payable 395,142 528,076
Unclaimed expenditures 3,088,036 3,267,330
Deferred revenue 266,500 562,552
Total current liabilities 6,675,547 5,927,984
Deferred capital funded contributions (notes 6 and 9) 82,286,657 71,842,359
Deferred capital contributions (note 7) 15,616,617 16,826,781
Total liabilities 104,578,821 94,597,124

Net assets

Net assets 2019 $ (schedule 1) 2018 $
Fund balances 16,853,989 18,367,711
Accumulated remeasurement losses (27,805) (51,348)
Contributed assets (notes 4, 5 and 11) 11,681,691 12,682,174
Total net assets 28,507,875 30,998,537

Total liabilities and net assets

Liabilities and net assets 2019 $ (schedule 1) 2018 $
Total liabilities and net assets 133,086,696 125,595,661

Statement of revenues and expenditures and changes in fund balances for year ended March 31, 2019

Research revenues

Revenue 2019 $ (schedule 2) 2018 $
Grants - provincial (note 9) 1,850,000 500,000
Grants - OEGF (Kawartha and IGPC) (note 12) 378,000 378,000
Intellectual property (note 8) 775,079 1,539,667
Total research revenues 3,003,079 2,417,667

Property revenues

Revenue 2019 $ (schedule 2) 2018 $
Grants - provincial - minor capital (note 9) 0 4,500,000
Grants - provincial - Food Innovation (note 9) 0 800,000
Rental income - provincial 580,793 948,489
Rental income - private industry 1,314,501 1,570,505
Deferred capital impairment (notes 5, 6 and 7) 0 765,910
Deferred capital contributions on sale of tangible capital assets (note 11) 0 3,437,392
Grants - provincial - payments in lieu of taxes (note 9) 750,000 750,000
Payments in lieu of taxes 195,212 189,430
Amortization of deferred capital contributions 2,248,447 2,646,124
Total property revenues 5,088,953 15,607,850

Other revenues

Revenue 2019 $ (schedule 2) 2018 $
Gain on disposal of tangible capital asset (note 11) 1,035,000 4,197,692
Investment income (note 13) 583,499 465,843
Total other revenues 1,618,499 4 663 535

Total revenues

Revenue 2019 $ (schedule 2) 2018 $
Total research revenues 3,003,079 2,417,667
Total property revenues 5,088,953 15,607,850
Total other revenues 1,618,499 4,663,535
Total revenues 9,710,531 22,689,052

Research expenditures

Expenditure 2019 $ (schedule 2) 2018 $
Research projects 2,224,541 1,430,079
Intellectual property (note 8) 359,870 1,005,668
Total research expenditures 2,584,411 2,435,747

Property expenditures

Expenditure 2019 $ (schedule 2) 2018 $
Payments in lieu of taxes 1,223,035 1,032,852
Minor capital 3,976,546 4,226,092
Transfer payments - U of G - Guelph Turfgrass Institute (note 10) 0 5,000,000
Transfer payments - U of G - Food Innovation (note 10) 0 800,000
Provision for forgivable loan 0 3,700,000
Operations and maintenance 1,055,817 1,198,997
Impairment of tangible capital assets (note 5) 0 765,910
Amortization of tangible capital assets 2,248,447 2,646,124
Total property expenditures 8,503,845 19,369,975

Total expenditures

Expenditure 2019 $ (schedule 2) 2018 $
Total research expenditures 2,584,411 2,435,747
Total property expenditures 8,503,845 19,369,975
Total expenditures 11,088,256 21,805,722

Excess of (expenditures over revenues) revenue over expenditures for the year

Item 2019 $ (schedule 2) 2018 $
Excess of (expenditures over revenues) revenues over expenditures for the year (1,377,725) 883,330
Net amount transferred (to) from unclaimed expenditures (135,997) 736,220
Net excess of (expenditures over revenues) revenues over expenditures for the year (1,513,722) 1,619,550

Net assets

Net assets 2019 $ (schedule 2) 2018 $
Net assets, beginning of year 30,998,537 29,905,761
Net remeasurement gains (losses) for the year 23,543 (66,580)
Change in contributed land (note 4) (1,000,483) (460,194)
Net assets, end of year 28,507,875 30,998,537

Statement of remeasurement losses for year ended March 31, 2019

Remeasurement losses 2019 $ 2018 $
Accumulated remeasurement (losses) gains, beginning of year (51,348) 15,232
Unrealized gains (losses) attributable to investments 42,850 (56,981)
Amounts reclassified to the statement of operations: realized losses on investments (19,307) (9,599)
Net remeasurement gains (losses) for the year 23,543 (66,580)
Accumulated remeasurement losses, end of year (27,805) (51,348)

Statement of cash flows for year ended March 31, 2019

Cash provided by (used in) operating activities

Operating activity 2019 $ 2018 $
Excess of (expenditures over revenues) revenues over expenditures for the year (1,377,725) 883,330

Items not requiring an outlay of cash

Operating activity 2019 $ 2018 $
Amortization of tangible capital assets 2,248,447 2,646,124
Impairment of tangible capital assets 0 765,910
Impairment of contributed land 0 (460,194)
Completed project surplus transferred to unclaimed expenditures (315,291) 1,233,619
Deferred capital contributions (1,210,164) (5,195,352)
Gain on disposal of tangible capital assets (1,035,000) (4,197,692)
Net remeasurement gains (losses) 23,543 (66,580)
Total items not requiring an outlay of cash (1,666,190) (4,390,835)

Changes in non-cash working capital

Operating activity 2019 $ 2018 $
Accounts receivable (note 14) 11,431 81,246
Accounts receivable - OMAFRA (re: TBARS) 500,000 (500,000)
Note receivable - North Grenville (re: Kemptville sale) 3,990,000 (4,000,000)
Investments (335,437) 9,910,597
Accounts payable and accruals 1,355,843 98,611
Deferred capital funded contributions 10,444,298 (443,880)
Holdbacks payable (132,934) 100,234
Deferred revenue (296,052) 223,081
Total cash provided by (used in) operating activities 13,870,959 1,079,054

Cash provided by (used in) capital activities

Capital activity 2019 $ 2018 $
Additions to tangible capital assets (3,526,045) (813,583)
Proceeds on sale of tangible capital assets 1,035,000 7,700,000
Tangible capital assets under construction (7,988,275) (5,043,316)
Total cash provided by (used in) capital activities (10,479,320) 1,843,101

Net change in cash for the year

Cash 2019 $ 2018 $
Net increase in cash for the year 3,391,639 2,922,155
Cash, beginning of the year 6,662,999 3,740,844
Cash end of the year 10,054,638 6,662,999

Notes to the financial statements

Note 1 - Nature of organization

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)
  • Open Competitive Research (incl. New Directions, Food Safety, other)
  • 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 and unclaimed expenditures.

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, 2019 and 2018.

There were no transfers in or out of Level 1 for the years ended March 31, 2019 and 2018.

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 $275,491 (2018 - $272,137). 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 $11,681,691 (2018 - $12,682,174) 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 $0 (2018 -$460,194) and the fair value of the land in Kemptville was adjusted by $0 (2018 - $64,915) due to a sale (see note 11). Additionally, the land in Alfred was sold this year for $1,010,000, which was the residual value of the Alfred land in contributed surplus, and part of the land in New Liskeard was sold for $25,000, with cost base of $473, reducing contributed surplus by the cost base in contributed surplus of $473. In the prior year, contributed surplus was reduced by $9,990 more than intended and, accordingly, the amount was corrected in the current year. As a result, the net change to contributed surplus at year end was $1,000,483.

Note 5 - Tangible capital assets

Land assets

Land Cost $ Accumulated amortization $ Net 2019 $ Net 2018 $
Simcoe railway line 0 0 0 9,793
Regional campuses 736,984 0 736,984 1,736,994
Research stations 24,651,505 0 24,651,505 24,642,185
Total land assets 25,388,489 0 25,388,489 26,388,972

Building assets

Building Cost $ Accumulated amortization $ Net 2019 $ Net 2018 $
Regional campuses 25,118,835 8,997,045 16,121,790 17,001,827
Research stations 48,899,583 11,534,587 37,364,996 35,207,361
Total building assets 74,018,418 20,531,632 53,486,786 52,209,188

Total land and building assets

Land and building Cost $ Accumulated amortization $ Net 2019 $ Net 2018 $
Total land assets 25,388,489 0 25,388,489 26,388,972
Total building assets 74,018,418 20,531,632 53,486,786 52,209,188
Total assets 99,406,907 20,531,632 78,875,275 78,598,160

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, there was $0 (2018 - $460,194) impairment taken on land and $0 (2018 - $305,716) impairment taken on buildings for a total impairment of $0 (2018 - $765,910).

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 2019 $ 2018 $
Balance, beginning of the year 71,842,359 72,286,239
Less amortization for the year (1,038,283) (1,066,593)
Less deferred capital impairment 0 (127,287)
Add contributions received for capital purposes 11,482,581 750,000
Balance, end of the year 82,286,657 71,842,359

Funding Sources

Funding source 2019 $ 2018 $
Federal 1,137,500 1,172,500
Provincial 71,981,121 61,794,811
Industry 9,168,036 8,875,048
Total funding sources 82,286,657 71,842,359

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 2019 $ 2018 $
Balance, beginning of the year 16,826,781 22,022,133
Less deferred capital contributions 0 (305,716)
Less funds recognized on sale of Kemptville 0 (3,310,106)
Less amortization for the year (1,210,164) (1,579,530)
Balance, end of the year 15,616,617 16,826,781

Note 8 - ARIO research fund

Revenue

Revenue Seed royalty $ Technology royalty $ Other $ Total 2019 $ Total 2018 $
Intellectual property 613,060 162,019 0 775,079 1,539,667
Investment income 84,847 96,980 0 181,827 110,094
Total revenue 697,907 258,999 0 956,906 1,649,761

Expenses

Expense Seed royalty $ Technology royalty $ Other $ Total 2019 $ Total 2018 $
Expenses 347,573 12,297 0 359,870 1,005,668

Fund balances

Fund balances Seed royalty $ Technology royalty $ Other $ Total 2019 $ Total 2018 $
Net surplus for the year 350 334 246,702 0 597,036 644,093
Fund balance, beginning of year 2,698,701 3,036,252 500,000 6,234,953 5,125,094
Remeasurement gains (losses) 7,439 7,909 0 15,348 (34,234)
New Directions (Competitive Research) Program transfer 0 0 0 0 500,000
Fund balance, end of year 3,056,474 3,290,863 500,000 6,847,337 6,234,953

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 2019 $ 2018 $
New Directions (Competitive Research) Program 1,350,000 0
Food Safety Research Program 500,000 500,000
Total Research Programs 1,850,000 500,000
Other Grants 2019 $ 2018 $
Minor capital 0 4,500,000
Growing Forward 2 - Food Innovation project 0 800,000
New Directions (Competitive Research) - re: TBARS 0 650,000
Elora build projects 7,500,000 0
Payments in lieu of taxes 750,000 750,000
Total Other Grants 8,250,000 6,700,000
Total research programs and other grants 10,100,000 7,200,000

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 2019 $ 2018 $
Funding received 0 500,000
Capitalized - Unclaimed expenditures 0 (500,000)
Net revenue 0 0

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 2019 $ 2018 $
Funding received 0 4,500,000
Capitalized - Deferred Capital Funding Contribution 0 0
Net revenue 0 4,500,000

Food Innovation project

Food Innovation project 2019 $ 2018 $
Funding received 0 800,000
Capitalized - Unclaimed expenditures 0 0
Net revenue 0 800,000

New Directions (Competitive Research) - re: TBARS

New Directions (Competitive Research) - re: TBARS 2019 $ 2018 $
Funding received 0 650,000
Capitalized - Unclaimed expenditures 0 (650,000)
Net revenue 0 0

Elora build projects

Elora build projects 2019 $ 2018 $
Funding received 7,500,000 0
Capitalized - Deferred Capital Funding Contribution (7,500,000) 0
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, 2019 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, 2019, funding milestones have been met and ARIO has provided the University with $800,000 in funding.

During 2018, ARIO entered into funding agreements with the University of Guelph for the construction of a new swine research facility at Elora and a new Agronomy Research Services Building at New Liskeard. ARIO will provide maximum funds of $12,000,000 to be combined with up to $3,000,000 in industry contributions to fund the construction of the new Swine Research facility. ARIO will provide up to $4,000,000 for the New Liskeard Agronomy building project. No industry contribution is anticipated for this project. In 2018-19, ARIO provided the University with $3,000,000 for the new swine facility and $1,000,000 for the New Liskeard agronomy building. As of March 31, 2019, ARIO has received $100,000 in industry contributions for the new swine facility from Ontario Pork. The ARIO funds for these agreements 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.

Note 11 - Gain on Disposal of Tangible Capital Asset

March 31, 2019 - Sale of Alfred and New Liskeard Land

During the prior year, the organization sold parcels of land in two locations, one in Alfred and one in New Liskeard (2018 - parcels in Kemptville). All parcels of land were originally transferred to the organization and capitalized to assets and contributed surplus. There was no impairment taken on either of the assets during the year.

Gain on Disposal of Tangible Capital Asset Alfred New Liskeard Total 2019 $ Total 2018 $
Proceeds from sale 1,010,000 25,000 1,035,000 7,700,000
Cost of tangible capital assets 1,010,000 473 1,010,473 7,449,275
Accumulated amortization 0 0 0 (4,011,882)
Net book value 1,010,000 473 1,010,473 3,437,393
Contributed asset (1,010,000) (473) (1,010,473) (64,915)
Net asset value 0 0 0 3,502,308
Gain on sale 1,010,000 25,000 1,035,000 4,197,692

During the 2019 fiscal year, the Municipality of North Grenville paid $4,000,000, satisfying the terms of their promissory note and closing the final payment on the sale of the property.

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 $1,960,000. 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 $588,000. See schedule 2.

Note 13 - Investment income

Investment income is comprised of interest and dividend income, realized activity from sales of assets, realized activity from financial exchange, and management fees paid. The activity for the year is as follows:

Investment income 2019 $ 2018 $
Investment income 620,035 506,185
Loss on sale of investment (19,307) (9,599)
Financial exchange gain 5,395 4,667
Management fees (22,624) (35,410)
Net investment income 583,499 465,843

Note 14 - Corresponding figures

Prior year&‌rsquo;s figures have been reclassified to conform to the current year&‌rsquo;s presentation.

Schedule 1 - Research Trust Funds: Financial Position as at March 31, 2019

Assets

Assets ARIO $ Infrastructure $ New Directions $ Food Safety $ Eliminations $ 2019 $
Cash 10,054,638 0 0 0 0 10,054,638
Investments 27,549,149 0 0 0 0 27,549,149
Due from ARIO 0 22,468,798 5,068,126 1,398,451 (28,935,375) 0
Accounts receivable 137,159 49,061 653 122 0 186,995
Total current assets 37,740,946 22,517,859 5,068,779 1,398,573 (28,935,375) 37,790,782
Tangible assets under construction 0 16,420,639 0 0 0 16,420,639
Tangible capital assets (note 5) 0 78,875,275 0 0 0 78,875,275
Total tangible assets 0 95,295,914 0 0 0 95,295,914
Total Assets 37,740,946 117,813,773 5,068,779 1,398,573 (28,935,375) 133,086,696

Liabilities

Liabilities ARIO $ Infrastructure $ New Directions $ Food Safety $ Eliminations $ 2019 $
Due to other research trust funds 28,935,375 0 0 0 (28,935,375) 0
Accounts payable and accruals 643,735 1,573,621 606,175 102,338 0 2,925,869
Holdbacks payable 0 0 285,150 109,992 0 395,142
Unclaimed expenditures 1,314,500 0 1,231,305 542,231 0 3,088,036
Deferred revenue 0 168,500 98,000 0 0 266,500
Total current liabilities 30,893,610 1,742,121 2,220,630 754,561 (28,935,375) 6,675,547
Deferred capital funded contributions (note 6 and 9) 0 82,286,657 0 0 0 82,286,657
Deferred capital contributions (note 7) 0 15,616,617 0 0 0 15,616,617
Total deferred capital 0 97,903,274 0 0 0 97,903,274
Total Liabilities 30,893,610 99,645,395 2,220,630 754,561 (28,935,375) 104,578,821

Fund Balances

Fund balance ARIO $ Infrastructure $ New Directions $ Food Safety $ Eliminations $ 2019 $
Fund balances 6,837,099 6,517,249 2,854,589 645,052 0 16,853,989
Accumulated Remeasure-ment gains (losses) 10,237 (30,562) (6,440) (1,040) 0 (27,805)
Contributed Assets (notes 4, 5 and 11) 0 11,681,691 0 0 0 11,681,691
Total fund balances 6,847,336 18,168,378 2,848,149 644,012 0 28,507,875
Total liabilities and net assets 37,740,946 117,813,773 5,068,779 1,398,573 (28,935,375) 133,086,696

Schedule 2 - Research Trust Funds: Revenues and Expenditures and Changes in Fund Balances for the year ended March 31, 2019

Research revenues

Revenue ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2019 $
Grants - provincial (note 9) 0 0 1,350,000 500,000 1,850,000
Grants - OEGF (Kawartha and IGPC) (note 12) 0 0 378,000 0 378,000
Intellectual property (note 8) 775,079 0 0 0 775,079
Total research revenues 775,079 0 1,728,000 500,000 3,003,079

Property revenues

Revenue ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2019 $
Rental income - provincial 0 580,793 0 0 580,793
Rental income - private industry 0 1,314,501 0 0 1,314,501
Grants - provincial - payments in lieu of taxes (note 9) 0 750,000 0 0 750,000
Payments in lieu of taxes 0 195,212 0 0 195,212
Amortization of deferred capital contributions 0 2,248,447 0 0 2,248,447
Total property revenues 0 5,088,953 0 0 5,088,953

Other revenues

Revenue ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2019 $
Gain on disposal of tangible capital asset (note 11) 0 1,035,000 0 0 1,035,000
Investment income (note 13) 181,827 333,723 54,942 13,007 583,499
Total other revenues 181,827 1,368,723 54,942 13,007 1,618,499

Total revenues

Revenue ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2019 $
Total research revenue 775,079 0 1,728,00 500,000 3,003,079
Total property revenues 0 5,088,953 0 0 5,088,953
Other income 181,827 1,368,723 54,942 13,007 1,618,499
Total revenues 956,906 6,457,676 1,782,942 513,007 9,710,531

Research expenditures

Expenditure ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2019 $
Research project/ program 0 0 1,837,269 387,272 2,224,541
Intellectual property (note 8) 359,870 0 0 0 359,870
Total research expenditures 359,870 0 1,837,269 387,272 2,584,411

Property expenditures

Item ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2019 $
Payments in lieu of taxes 0 1,223,035 0 0 1,223,035
Minor capital 0 3,976,546 0 0 3,976,546
Operations and maintenance 0 1,055,817 0 0 1,055,817
Amortization of tangible capital assets 0 2,248,447 0 0 2,248,447
Total property expenditures 0 8,503,845 0 0 8,503,845

Total Expenditures

Item ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2019 $
Total research expenditures 359,870 0 1,837,269 387,272 2,584,411
Total property expenditures 0 8,503,845 0 0 8,503,845
Total expenditures 359,870 8,503,845 1,837,269 387,272 11,088,256

Excess of revenue over expenditures for the year

Item ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2019 $
Excess of (expenditures over revenues) revenues over expenditures for the year 597,036 (2,046,169) (54,327) 125,735 (1,377,725)
Net amount transferred from unclaimed expenditures 0 0 79,753 (215,750) (135,997)

Net Assets

Item ARIO (note 8) $ Infrastructure $ New Directions $ Food Safety $ 2019 $
Net assets, beginning of year 6,234,952 21,213,199 2,816,523 733,863 30,998,537
Net remeasurement gains for the year 15,348 1,831 6,200 164 23,543
Change in contributed land (note 4) 0 (1,000,483) 0 0 (1,000,483)
Net assets, end of year 6,847,336 18,168,378 2,848,149 644,012 28,507,875


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