Agricultural Research Institute of Ontario Annual Report 2014-15

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Ministry mandate and role of ARIO

The Government of Ontario's priorities during 2014-15 included Investing in Infrastructure, Investing in People, and Helping Business Succeed.

Ministry Mandate

The Ministry of Agriculture, Food and Rural Affairs works to advance the government's priorities through its efforts to promote a more competitive and productive agri-food and agri-products sector, economic growth and opportunities for rural Ontario.

The Ontario Ministry of Agriculture, Food and Rural Affairs "OMAFRA" invests significantly in agri-food research, technology transfer and analytical and diagnostic services to achieve their vision. A strategic and coordinated research priority setting system, combined with modern world-class research infrastructure/platforms are keys to delivering research results that help drive innovation.

Role of the Agricultural Research Institute of Ontario

The Agricultural Research Institute of Ontario ("ARIO") is a corporate body whose duties and responsibilities are defined within the Agricultural Research Institute of Ontario Act R.S.O. 1990, c A.13.

ARIO is a Board governed operational services agency of the Crown reporting to the Minister of Agriculture, Food and Rural Affairs. The ARIO contributes by promoting economic growth, sustainability and profitability of the agri-food and agri-products sector across the entire province by providing strategic advice on research, and by continuing implementation of the research infrastructure strategy. The ARIO is an important component of the agri-food research and innovation system in the province.

ARIO fills a unique role in providing advice on strategic directions for research priorities/ activities that contribute to prosperous, competitive and sustainable agricultural, food and rural sectors in Ontario. In addition, ARIO owns the provincial government's agriculture & food research infrastructure (currently 17 research stations), and has the responsibility for operating and managing these assets in support of Ontario's agriculture and food sector. The Institute 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 ("the Act"). ARIO's mandate, as defined by the Act, is to select and recommend areas of research for the betterment of agriculture, veterinary medicine and household sciences and to increase production efficiency and marketing of agricultural products by stimulating interest in research.

ARIO Mission Statement:

ARIO, is classified as a Board Governed Operational Services Agency reporting to the Minister of Agriculture, Food and Rural Affairs, and is dedicated to the strategic use of science and innovation to enhance the sustainability and profitability of Ontario's agri-food and rural sectors.

ARIO is comprised of up to 15 members appointed by the Minister of Agriculture, Food and Rural Affairs.

2014-15 ARIO Members
Member Appointment Date Expiry Date
Mr. Stewart Cressman (Chair) Aug. 31, 2005 Aug. 30, 2015
Dr. Larry Milligan (Vice-Chair) July 13, 2007 Oct. 1, 2014*
Dr. Rebecca Baker Oct. 26, 2009 Nov. 18, 2015
Dr. Moni Eino July 17, 2007 Oct. 1, 2014*
Ms. Rose Gage Sept. 10, 2014 Sept. 9, 2017
Mr. Greg Hannam Dec. 14, 2004 May 30, 2014*
Mr. Paul Henderson Dec. 23, 2008 Dec. 22, 2016
Mr. Adrian Jaques July 22, 2014 July 21, 2017
Ms. Elizabeth Johnston Sept. 22, 2009 Sep. 21, 2015
Dr. Gord Surgeoner June 2, 2005 Nov. 13, 2016

*Completed term and left ARIO during 2014-15

AAFC ex officio representative
Dr. Denis Petitclerc

Director of Research, ARIO:
Rena Hubers to October 6, 2014
Christine Primeau from October 6, 2014

Comptroller
Heather Harrison, CPA, CMA

Secretariat support to ARIO is provided by the Research and Innovation Branch staff of OMAFRA:

Mike Toombs, Director
Debbie Ramsay, Manager - Research Program Coordination
Jeff Schieck, Manager - Finance, Infrastructure and Administration
Oswald Zachariah, Manager - Innovation and Knowledge Management

Letter from the Chair

Guelph, Ontario
July 24, 2015

The Honourable Jeff Leal
Minister of Agriculture, Food and Rural Affairs
Legislative Buildings
Toronto, Ontario M7A 1A3

Dear Minister Leal,

I am pleased to submit the 51st annual report of the Agricultural Research Institute of Ontario (ARIO) for the fiscal year April 1, 2014 to March 31, 2015. This past year ARIO has seen considerable progress on several significant research infrastructure re-development projects that are detailed in this report.

Two of the most visible and important achievements this past year were the construction of the new dairy research facility at Elora, and the start of construction of a new 3700 sq. metre pre-commercial research greenhouse complex at Vineland. The Grand Opening for the dairy research facility at Elora was held in late May, 2015, and the greenhouse is expected to be completed early fall 2015.

During the past year ARIO has continued to work to advance other components of the infrastructure strategy and build partnerships across the agri-food value chain, emphasizing the importance of research and innovation as the way to build and maintain competitive advantage and move the sector forward. The agri-food and agri-products sector continues to be one of the largest manufacturing sectors in the province and remains a cornerstone of Ontario's economic strength and success.

Together, with industry partners and the research community, we continue to focus on targeted investment in the agri-food and agri-products research platforms necessary to drive innovation and technology transfer that benefit Ontario's economy, position us as a global leader in our sector, and bring high-quality safe agri-food products to the rest of the world.

Sincerely,

Stewart Cressman,
Chair, Agricultural Research Institute of Ontario

Chair and Director's report

We are pleased to provide an update and some highlights from the 2014-15 fiscal year for the Agricultural Research Institute of Ontario (ARIO) and agri-food research and innovation in Ontario.

Research Infrastructure Strategy

ARIO's research infrastructure strategy provides an approach for modernizing Ontario's aging network of agri-food and agri-products research infrastructure. Implementation of ARIO's infrastructure strategy will result in a system of modern, state of the art, integrated, multi-disciplinary research and innovation platforms focused on consumer, market and economic outcomes. Benefits include, driving innovation through the creation of new and value-added products, developing solutions to current and emerging issues, and validating new technologies and approaches to Ontario conditions. ARIO's strategy encourages industry participation and leadership where industry works with government to deliver the sectors highest research priorities and needs. Research and innovation are critical to maintaining and strengthening the agri-food and agri-products sectors competitiveness both provincially and globally. Modernized, relevant research infrastructure enables scientific excellence, knowledge dissemination and industry adoption all of which are necessary to the economic growth of the agri-food and agri-products sector for the province.

ARIO continues to advance the strategy proposed in the 2008 recommendations and has achieved several significant milestones. Considerable progress has been made, and continues on the first two centres of the modernization strategy for Ontario's network of agri-food and agri-products research; the Vineland Research and Innovation Centre (VRIC) located at the Vineland research station, and the Livestock Research and Innovation Centre at Elora. Construction of the new dairy facility at Elora continued despite weather delays and the Grand Opening was held May 28th, 2015 with over 3000 visitors attending the event. Construction of the new research greenhouse complex at the Vineland research station began in 2014-15 and is expected to be completed in the early fall of 2015.

Along with these two very exciting milestone achievements, ARIO continues to advance other components of the Infrastructure Strategy and has been working with the ministry, industry and the various stakeholder groups involved to develop plans to consolidate Beef research at New Liskeard and Elora, and to relocate Turfgrass and Agroforestry research to the University of Guelph and the Elora research station. Some significant upgrades have also been made in the Field Crops centre with tiling upgrades to the research land base at Winchester and Huron stations respectively.

In addition, industry consultations to identify future needs and develop plans for focused investment continue in the areas of Bio economy, Field Crops, and Food for Health as put forward in ARIO's infrastructure strategy recommendations to the Minister of OMAFRA.

Minor Capital Program

The minor capital program allocates funds across the ARIO portfolio for repairs, life cycle renovations and program-related improvements. The program is funded through an annual transfer payment from OMAFRA and is supplemented by revenues generated by the ARIO. External stakeholders continue to contribute funding to several of the large renovation and capital projects and to some dedicated research field equipment purchases. The minor capital funding from OMAFRA continues to allow ARIO to make significant headway in addressing accumulated deferred maintenance and ongoing life cycle building and program maintenance upgrades.

Program focus for 2014-15 continued to be on completing a number of existing large renovation projects along with a significant investment at the Vineland research station in upgrading the station base infrastructure (e.g. electrical, underground water mains etc.)

Safety (human and animal), regulatory, building integrity and equipment failure issues that affected building and program operations across the entire network of ARIO facilities were addressed on a case by case basis as they arose throughout the year.

The U of G continues to deliver ARIO's annual minor capital program at all locations except the Vineland research station. VRIC has taken over administration of the minor capital program for the Vineland research station as part of their assumption of the responsibility for overall operations and site management.

ARIO supports renewal and refurbishment of the physical infrastructure on its properties and enhancement of capacity through the minor capital program and other funding. The University of Guelph, VRIC and other stakeholders are strongly encouraged to seek out additional funding to support these construction projects.

Research Programs

The ministry's open research programs (New Directions and Food Safety) administered by ARIO continue to be highly responsive to emerging, high priority research needs. The 2014-15 research cycles have seen projects approved related to climate change, trade agreements, precision agriculture and food safety.

In addition, a unique collaborative research initiative with the ministère de l'Agriculture, des Pêcheries et de l'Alimentation du Québec (MAPAQ) was launched in May 2014 under the Ontario-Quebec Trade and Cooperation Agreement to address pest and water management issues of relevance to both the Ontario and Quebec agri-food sectors. The competition has been an excellent example of government, academic and industry collaboration with a goal of addressing issues of mutual interest in Ontario and Quebec. The program also provides unique graduate student training opportunities through internships in the cooperating province. The response exceeded expectations, attracting a large number of applicants from a broad array of institutions and disciplines. Six projects were funded addressing water and pest management issues of importance to the Ontario and Quebec agri-food sectors:

  • Water Management:
    • Novel technologies for water use optimization in food processing
    • Managing subsurface drainage water to optimize crop productivity, nutrient use and water availability
    • Current groundwater budget and expected trends under climate change
  • Integrated Pest Management:
    • Integrated strategies for turfgrass with improved environmental performance
    • Ecology and biology of the brown marmorated stink bug
    • Novel bio-based methods to supress fungal diseases in greenhouse crops

The Food Safety Research Program supports a science-based food safety system within Ontario and program priorities support research areas within the Emergency Management research theme. Four projects were approved this year. Highlights include:

  • Detection and Surveillance - Method validation for E. coli detection in food.
  • Prevention and Control of Disease - Pathogen control in fresh produce; Validation of dry fermented sausage production processes; alternative antibiotics for Salmonella control in swine.

The New Directions Research Program provides targeted research funding for key ministry priority areas and emerging issues in support of a profitable and sustainable agri-food sector and strong rural communities. Nine projects were funded in three priority areas. Highlights include:

  • Opportunities Associated with International Trade Agreements - Evaluation of export and import competitiveness/opportunities related to trade agreements.
  • Climate Change - Landscape Assessment - Alternative best management practices under a changing climate; Agro-climatic risk-opportunity assessment; modelling relationships between climate and crop yield.
  • Precision Agriculture in Crop Production - Application of novel technologies in agriculture (e.g. remote sensing, simulation modelling).

ARIO Research Infrastructure

Researchers continue to benefit greatly from access to the ARIO network of research stations through Tier I and Tier II funding. Unlike Tier I funding, there is no project operating funds provided to researchers for Tier II projects. Rather, Tier II funding provides important support through subsidized access to research field plots and livestock. This is a highly valued resource for researchers, and it helps maximize the utilization of ARIO's physical research infrastructure. Examples of Tier II projects that began in 2014-15 include:

  • Plant Production Systems:
    • Development of asparagus hybrids and methodologies to improve seed production
    • An alternative approach to managing invasive herbicide resistant weeds
    • Sustainable turfgrass management through testing of novel fertilizers, seed mixes and pest control options
  • Animal Production Systems:
    • Evaluation of a novel supplement for developing an alternative to dietary antimicrobials in poultry
    • Encapsulated probiotic and bacteriophages as an alternative to antibiotics in preventing salmonella infection in pigs
    • Understanding underlying mechanisms for feather-pecking behaviour in laying hens

Research Priority Setting

Vineland Research & Innovation Centre (VRIC) continues to engage the horticulture sector in Ontario to establish industry research priorities for consideration within the OMAFRA Research Advisory Network.

The Livestock Research Innovation Corporation (LRIC) has launched research calls on behalf of some livestock groups, and continues to support the development of research priorities/strategies with the livestock commodities.

The Research Management System (RMS) continues to be an effective platform for research program administration. Work is underway to develop a web-based search portal to improve public access to ministry funded research. In addition, the RMS is being enhanced to capture research projects funded independently of our regular Open Research Programs (e.g. the joint Quebec-Ontario program noted above). These initiatives further support the ministry's goal of Effective knowledge management and research communication, translation and transfer.

Alfred and Kemptville Campuses

In March 2014, the U of G announced that they would be ending diploma education program delivery at the Alfred and Kemptville campuses effective May 2015. Two consultants were hired in July 2014 to explore options and provide recommendations for sustainable paths forward for each campus. The consultant reports were released in December 2014.

After review and analysis of the reports the government announced that they would

  • Ensure the current cohort of Alfred Campus students finish their studies and accepting a new intake of students for the 2015-2016 school year;
  • Work to ensure both Kemptville and Alfred campuses remain positive economic assets for the communities they serve;
  • Work with the municipality of North Grenville to provide resources and support and establish a working group to explore new models for delivering agricultural learning, training and instruction at the Kemptville Campus;
  • Maintain the Kemptville Campus facility for public use as the government enters into negotiation with North Grenville regarding the possible transfer the property to the municipality; and,
  • Assist local communities to develop a strategic approach to long-term ownership of the Alfred Campus, crafted to maximize the economic potential of the facility.

Negotiations with stakeholders and further analyses are continuing.

Staffing changes

Rena Hubers retired as Director of Research in October 2014 and was replaced by Christine Primeau.

ARIO has no staff of its own. Under the authority of subsection 9(4) of the Agricultural Research Institute of Ontario Act R.S.O. 1990, c A.13., secretariat support for the Institute is provided by ministry staff. A realignment of responsibilities resulted in the transfer of controllership functions to the ministry's financial administration staff. As a result of this realignment, Heather Harrison was appointed Comptroller of ARIO replacing Rob Cunnington in April 2014.

This past year saw several significant milestone accomplishments related to the Infrastructure Strategy along with continued effective property management and research program delivery. Next year promises more of the same and we are very much looking forward to the year ahead.

We would like to thank all those who support agri-food research and innovation across the province - industry, academia and the various levels of government. Together, we can, and are, making a difference.

Stewart Cressman,
Chair, Agricultural Research Institute of Ontario

Christine Primeau, Director of Research
Agricultural Research Institute of Ontario

Financial Information

Management's Responsibility for Financial Reporting

The accompanying financial statements of the Agricultural Research Institute of Ontario (ARIO) have been prepared in accordance with Canadian generally accepted accounting principles. Management is responsible for the accuracy, integrity, and objectivity of the information contained in the financial statements.

The preparation of financial statements necessarily involves the use of estimates based on management's best judgment, particularly when transactions affecting the current accounting period cannot be finalized with certainty until future periods. These financial statements have been prepared within reasonable limits of materiality with information available up to June 30, 2015.

In discharging its responsibility for the integrity of the financial statements, management maintains financial and management control systems and practices designed to provide reasonable assurance that transactions are authorized, assets are safeguarded, and proper records are maintained.

The financial statements have been examined by RLB LLP, independent external auditors appointed by the Ontario Ministry of Agriculture, Food and Rural Affairs on behalf of ARlO. The external auditors' responsibility is to express an opinion on whether the financial statements are presented fairly in accordance with generally accepted accounting principles. The Auditors' Report outlines the scope of their examination and opinion.

On behalf of management:

Christine Primeau
Director of Research

Heather Harrison, CPA, CMA
Comptroller

Independent auditor'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, 2015 and the statements of revenues and expenditures and changes in fund balances, remeasurement gains (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, 2015 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 15, 2015

Chartered Professional Accountants
Licensed Public Accountants

Statement of financial position as at March 31, 2015

Assets

Asset

2015 $ (schedule 1)

2014 $
Cash
10,734,631
1,494,683
Investments
29,575,572
29,856,175
Accounts receivable
174,690
154,906
Total current assets
40,484,893
31,505,764
Capital assets under construction
23,126,396
22,155,506
Capital assets (note 5)
58,372,649
59,059,056
Total Assets
121,983,938
112,720,326

Liabilities

Liability 2015 $ (schedule 1) 2014 $
Accounts payable and accruals
1,615,704
1,736,885
Holdbacks payable
641,479
458,609
Unclaimed expenditures
3,314,244
5,798,706
Current deferred revenue
283,091
381,091
Total current liabilities
5,854,518
8,375,291
Deferred capital funded contributions (note 6)
59,322,724
49,273,486
Deferred capital contributions (note 7)
30,181,643
32,188,072
Total Liabilities
95,358,885
89,836,849

Net Assets

Net Asset 2015 $ (schedule 1) 2014 $
Fund balances
12,587,770
8,879,681
Accumulated remeasurement gains (losses)
0
(33,487)
Contributed assets (note 4)
14,037,283
14,037,283
Total net assets
26,625,053
22,883,477

Total liabilities and net assets

Liabilities and net assets 2015 $ (schedule 1) 2014 $
Total liabilities and net assets
121,983,938
112,720,326

Statement of revenues and expenditures and changes in fund balances for year ended March 31, 2015

Research revenues

Revenue 2015 $ (schedule 2) 2014 $
Grants - provincial (note 9)
1,850,000
2,980,000
Grants - other
378,000
378,000
Intellectual property
1,384,318
1,117,877
Total research revenues
3,612,318
4,475,877

Property revenues

Revenue 2015 $ (schedule 2) 2014 $
Grants - provincial - minor capital (note 9)
5,100,000
4,131,184
Rental income - provincial
837,787
834,302
Rental income - private industry
781,032
677,380
Transfer payments - payments in lieu of taxes (note 9)
750,000
750,000
Payments in lieu of taxes
210,069
187,754
Amortization of deferred capital contributions
2,457,191
2,394,158
Total property revenues
10,136,079
8,974,778

Other revenues

Revenue 2015 $ (schedule 2) 2014 $
Investment income
474,381
207,631

Total revenues

Revenue 2015 $ (schedule 2) 2014 $
Total research revenues
3,612,318
4,475,877
Total property revenues
10,136,079
8,974,778
Total investment income
474,381
207,631
Total Revenues
14,222,778
13,658,286

Research expenditures

Expenditure 2015 $ (schedule 2) 2014 $
Research project\program
3,629,183
2,303,064
Intellectual property
1,048,144
708,370
Total research expenditures
4,677,327
3,011,434

Property expenditures

Expenditure 2015 $ (schedule 2) 2014 $
Payments in lieu of taxes
983,069
884,271
Minor capital
4,066,418
3,368,690
Operations and maintenance
769,204
733,495
Loss on disposal of capital asset
51,888
0
Amortization of capital assets
2,457,191
2,394,158
Total property expenditures
8,327,770
7,380,614

Other expenditures

Expenditure 2015 $ (schedule 2) 2014 $
Other expenditures
9,229
12,448

Total expenditures

Expenditure 2015 $ (schedule 2) 2014 $
Total research expenditures
4,677,327
3,011,434
Total property expenditures
8,327,770
7,380,614
Total other expenditures
9,229
12,448
Total expenditures
13,014,326
10,404,496

Excess of revenue over expenditures for the year

Item 2015 $ (schedule 2) 2014 $
Excess of revenue over expenditures for the year
1,208,452
3,253,790
Net amount transferred from (to) unclaimed expenditures
2,499,637
(2,916,379)
Net excess of revenue over expenditures for the year
3,708,089
337,411

Fund balances

Fund balances 2015 $ (schedule 2) 2014 $
Fund balances, beginning of year
22,883,477
22,522,742
Net remeasurement gains for the year
33,487
23,324
Fund balances, end of year
26,625,053
22,883,477

Statement of remeasurement gains (losses) for year ended March 31, 2015

Remeasurement gains (losses) 2015 $ 2014 $
Accumulated remeasurement losses, beginning of year
(33,487)
(56,811)
Unrealized gains attributable to temporary investments
16,987
69,483
Amounts reclassified to the statement of operations: realized gains (losses) on temporary investments
16,500
(46,159)
Net remeasurement gains for the year
33,487
23,324
Accumulated remeasurement gains (losses), end of year
0
(33,487)

Statement of cash flows for year ended March 31, 2015

Cash provided by (used in) operating activities

Operating activity 2015 $ 2014 $
Excess of revenue over expenditures for the year
1,208,452
3,253,790

Items not requiring an outlay of cash

Operating activity 2015 $ 2014 $
Amortization
2,457,191
2,394,158
Completed project surplus transferred to unclaimed expenditures
15,175
0
Deferred capital contributions
(2,006,429)
(2,054,032)
Loss on disposal of capital
51,888
126,104
Net remeasurement gains
33,487
23,324
Total items not requiring an outlay of cash
1,759,764
3,743,344

Changes in non-cash working capital

Operating activity 2015 $ 2014 $
Accounts receivable
(19,784)
17,139
Investments
280,603
(17,528,675)
Accounts payable and accruals
(121,181)
216,859
Deferred capital funded contributions
10,049,238
12,210,090
Holdbacks payable
182,870
40,836
Deferred revenue
(98,000)
378,026
Total cash provided by (used in) operating activities
12,033,510
(922,381)

Cash provided by (used in) investing activities

Investing activity 2015 $ 2014 $
Additions to capital assets
0
(1,568,815)
Capital assets under construction
(2,793,562)
0
Total cash provided by (used in) investing activities
(2,793,562)
(1,568,815)

Net change in cash for the year

Cash 2015 $ 2014 $
Net increase (decrease) in cash for the year
9,239,948
(2,491,196)
Cash, beginning of the year
1,494,683
3,985,879
Cash end of the year
10,734,631
1,494,683

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.

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'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 gains (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.

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.

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:

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's financial instruments are all classified as Level 1 as at March 31, 2015 and 2014.

There were no transfers in or out of Level 1 for the years ended March 31, 2015 and 2014.

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'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 $295,756 (2014 - $298,562). 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'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'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 $14,037,283 (2014 - $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 - Capital Assets

Land assets

Land Cost $ Accumulated Amortization $ Net 2015 $ Net 2014 $
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

Building Cost $ Accumulated Amortization $ Net 2015 $ Net 2014 $
Regional campuses
38,330,296
10,645,582
27,684,714
29,300,901
Research stations
23,860,583
7,241,574
16,619,009
15,689,229
Total building assets
62,190,879
17,887,156
44,303,723
44,990,130

Total land and building assets

Land and building Cost Accumulated Amortization Net 2015 $ Net 2014 $
Total land assets
14,068,926
0
14,068,926
14,068,926
Total building assets
62,190,879
17,887,156
44,303,723
44,990,130
Total assets
76,259,805
17,887,156
58,372,649
59,059,056

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, capital additions with a carrying value of $0 (2014 - $1,200,000) 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.

Balance 2015 $ 2014 $
Balance, beginning of the year
49,273,486
37,063,396
Less amortization for the year
(450,762)
(340,125)
Add contributions received for capital purposes
10,500,000
12,550,215
Balance, end of the year
59,322,724
49,273,486

Funding Sources

Funding source 2015 $ 2014 $
Federal
1,277,500
1,312,500
Provincial
53,615,001
43,440,544
Industry
4,430,223
4,520,442
Total funding sources
59,322,724
49,273,486

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 2015 $ 2014 $
Balance, beginning of the year
32,188,072
34,242,104
Less amortization for the year
(2,006,429)
(2,054,032)
Balance, end of the year
30,181,643
32,188,072

Note 8 - ARIO research fund

Revenue

Revenue Seed Royalty $ Technology Royalty $ Unpledged Equity $ Total 2015 $ Total 2014 $
Intellectual property
1,151,581
232,737
0
1,384,318
1,117,877
Investment income
64,966
75,915
0
140,881
100,876
Total revenue
1,216,547
308,652
0
1,525,199
1,218,753

Expenses

Expense Seed Royalty $ Technology Royalty $ Unpledged Equity $ Total 2015 $ Total 2014 $
Expenses
1,023,050
34,323
0
1,057,373
720,818

Fund balances ($)

Fund balances Seed Royalty $ Technology Royalty $ Unpledged Equity $ Total 2015 $ Total 2014 $
Net surplus for the year
193,497
274,329
0
467,826
497,935
Fund balance, beginning of year
1,959,072
2,188,746
0
4,147,818
3,645,291
Remeasurement losses
3,119
3,689
0
6,808
4,592
Interfund transfers (note 10)
(450,000)
(450,000)
0
(900,000)
0
Fund balance, end of year
1,705,688
2,016,764
0
3,722,452
4,147,818

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 and other grants

Programs and other grants 2015 $ 2014 $
New Directions research program
1,350,000
2,480,000
Food Safety research program
500,000
500,000
Minor capital
5,100,000
4,500,000
Elora Livestock Environmental and Energy Complex
10,500,000
10,981,400
Payments in lieu of taxes
750,000
750,000
Total research programs and other grants
18,200,000
19,211,400

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 2015 $ 2014 $
Funding received
5,100,000
4,500,000
Capitalized - deferred capital funding contribution
0
(368,816)
Net revenue
5,100,000
4,131,184

Elora Livestock Environmental and Energy Complex

Elora Livestock Environmental and Energy Complex 2015 $ 2014 $
Funding received
10,500,000
10,981,400
Capitalized - deferred capital funding contribution
(10,500,000)
(10,981,400)
Net revenue
0
0

Note 10 - Interfund transfers

During the year, ARIO allocated $900,000 from current ARIO research funds in order to fund a new initiative, the "Quebec-Ontario Cooperation for Agri-Food Research". Funds are available to approved projects under two priority areas 1) Integrated pest management for economically important crops and 2) Optimizing water use in terms of quality and quantity in agricultural production and food production.

Schedule 1 - Research trust funds: financial position as at March 31, 2015

Assets

Asset ARIO $ Infrustructure $ New Directions $ Food Safety $ Eliminations $ 2015 $
Cash
10,734,631
0
0
0
0
10,734,631
Investments
29,575,572
0
0
0
0
29,575,572
Due from ARIO
0
29,154,991
5,606,879
1,019,502
(35,781,372)
0
Accounts receivable
111,478
60,978
1,816
418
0
174,690
Total current assets
40,421,681
29,215,969
5,608,695
1,019,920
(35,781,372)
40,484,893
Capital assets under construction
0
23,126,396
0
0
0
23,126,396
Capital assets (note 5)
9,793
58,362,856
0
0
0
58,372,649
Total Assets
40,431,474
110,705,221
5,608,695
1,019,920
(35,781,372)
121,983,938

Liabilities

Liability ARIO $ Infrustructure $ New Directions $ Food Safety $ Eliminations $ 2015 $
Due to other research trust funds
35,781,372
0
0
0
(35,781,372)
0
Accounts payable and accruals
927,650
0
574,024
114,030
0
1,615,704
Holdbacks payable
0
0
602,382
39,097
0
641,479
Unclaimed expenditures
0
0
2,657,801
656,443
0
3,314,244
Deferred revenue
0
3,091
280,000
0
0
283,091
Total current liabilities
36,709,022
3,091
4,114,207
809,570
(35,781,372)
5,854,518
Deferred capital funded contributions (note 6)
0
59,322,724
0
0
0
59,322,724
Deferred capital contributions (note 7)
0
30,181,643
0
0
0
30,181,643
Total liabilities
36,709,022
89,507,458
4,114,207
809,570
(35,781,372)
95,358,885

Fund balances

Fund balance ARIO $ Infrustructure $ New Directions $ Food Safety $ Eliminations $ 2015 $
Fund balances
3,722,452
7,160,480
1,494,488
210,350
0
12,587,770
Contributed assets (note 4)
0
14,037,283
0
0
0
14,037,283
Total fund balances
3,722,452
21,197,763
1,494,488
210,350
0
26,625,053
Total liabilities and fund balances
40,431,474
110,705,221
5,608,695
1,019,920
(35,781,372)
121,983,938

Schedule 2 - Research trust funds: revenues and expenditures for the year ended March 31, 2015

Research revenues

Revenue ARIO $ Infrustructure $ New Directions $ Food Safety $ Eliminations $ 2015 $
Grants - provincial (note 9)
0
0
1,350,000
500,000
0
1,850,000
Grants - other
0
0
378,000
0
0
378,000
Intellectual property
1,384,318
0
0
0
0
1,384,318
Total research revenue
1,384,318
0
1,728,000
500,000
0
3,612,318

Property revenues

Revenue ARIO (note 8) $ Infrustructure $ New Directions $ Food Safety $ Eliminations $ 2015 $
Grants - provincial - minor capital (note 9)
0
5,100,000
0
0
0
5,100,000
Rental income - provincial
0
837,787
0
0
0
837,787
Rental income - private industry
0
781,032
0
0
0
781,032
Transfer payments - payments in lieu of taxes (note 9)
0
750,000
0
0
0
750,000
Payments in lieu of taxes
0
210,069
0
0
0
210,069
Amortization of deferred capital contributions
0
2,457,191
0
0
0
2,457,191
Total property revenues
0
10,136,079
0
0
0
10,136,079

Other revenues

Item ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ Eliminations $ 2015 $
Investment income
140,881
263,936
56,804
12,760
0
474,381

Total revenues

Revenue ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ Eliminations $ 2015 $
Total research revenue
1,384,318
0
1,728,000
500,000
0
3,612,318
Total property revenues
0
10,136,079
0
0
0
10,136,079
Investment income
140,881
263,936
56,804
12,760
0
474,381
Total revenues
1,525,199
10,400,015
1,784,804
512,760
0
14,222,778

Research expenditures

Expenditure ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ Eliminations $ 2015 $
Research project/program
0
0
3,080,101
549,082
0
3,629,183
Intellectual property
1,048,144
0
0
0
0
1,048,144
Total research expenditures
1,048,144
0
3,080,101
549,082
0
4,677,327

Property expenditures

Item ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ Eliminations $ 2015 $
Payments in lieu of taxes
0
983,069
0
0
0
983,069
Minor capital
0
4,066,418
0
0
0
4,066,418
Operations and maintenance
0
769,204
0
0
0
769,204
Loss on disposal of capital asset
0
51,888
0
0
0
51,888
Amortization of capital assets
0
2,457,191
0
0
0
2,457,191
Total property expenditures
0
8,327,770
0
0
0
8,327,770

Other expenditures

Item ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ Eliminations $ 2015 $
Other expenses
9,229
0
0
0
0
9,229

Total expenditures

Item ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ Eliminations $ 2015 $
Total research expenditures
1,048,144
0
3,080,101
549,082
0
4,677,327
Total property expenditures
0
8,327,770
0
0
0
8,327,770
Other expenditures
9,229
0
0
0
0
9,229
Total expenditures
1,057,373
8,327,770
3,080,101
549,082
0
13,014,326

Excess of revenue over expenditures for the year

Item ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ Eliminations $ 2015 $
Excess of revenues over expend-itures
467,826
2,072,245
(1,295,297)
(36,322)
0
1,208,452
Net amount transferred from unclaimed expend-itures
0
0
2,129,767
369,870
0
2,499,637
Net excess of revenue over expend-itures for the year


467,826

2,072,245
834,470
333,548
0
3,708,089

Fund balances

Fund balances ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ Eliminations $ 2015 $
Fund balances, beginning of year
4,147,818
19,103,358
(243,655)
(124,044)
0
22,883,477
Interfund transfers (note 10)
(900,000)
0
900,000
0
0
0
Net remeasur-ement gains for the year
6,808
22,160
3,673
846
0
33,487
Fund balances, end of year
3,722,452
21,197,763
1,494,488
210,350
0
26,625,053

For more information:
E-mail: research.omafra@ontario.ca
Author: Wilma Macfarlane, ARIO Liason/RIB
Creation Date: 10 February 2015
Last Reviewed: 26 May 2015