Agricultural Research Institute of Ontario Annual Report 2016-17

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Ministry Mandate and Role of ARIO

Ministry Mandate

The Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) 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.

Ministry priorities in the 2016-17 year included a focus on:

  • protection and assurance in the agri-food system (food safety, animal, plant and human health)
  • stewardship of Ontario's capacity to produce food (soil & water quality, climate change)
  • fostering economic sustainability and growth of the agri-food sector and rural Ontario

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. reporting to the Minister of Agriculture, Food and Rural Affairs.

In 2016 an externally led Mandate Review of the ARIO found that ARIO's mandate remains strongly aligned to the Government of Ontario's goals and priorities and did not recommend any changes to the mandate which continued to concentrate its efforts in the following four ways:

  1. Providing strategic advice to the Minister on agri-food and agri-products research and innovation by continuing to advise the Minister on research priorities and issues related to the ministry's mandate to support growth of the agri-food sector, the Northern Growth Plan including expansion of agriculture in the north, enhancing sustainability efforts, promoting world crops, and driving economic growth across the value chain throughout the agri-food and agri-producsts sectors;
  2. Leading the ARIO's Infrastructure Strategy initiative to modernize the province's agri-food and agri-products research and innovation infrastructure platforms; which are key to delivering research and innovation that drives economic sustainability and growth;
  3. Promoting the Ontario agri-food and agri-products research and innovation system; and,
  4. Providing administrative and managerial oversight of open research programs (e.g. New Directions, Food Safety), and the 17 ARIO owned research properties.

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

2016-17 ARIO Members

Member Appointment Date Expiry Date
Mr. Stewart Cressman (Chair) Aug. 31, 2005 Aug. 30, 2018
Dr. Rebecca Baker Oct. 26, 2009 Nov. 18, 2018
Ms. Rose Gage Sept. 10, 2014 Sept. 9, 2017
Mr. Paul Henderson Dec. 23, 2008 Mar. 12, 2020
Mr. Adrian Jaques July 22, 2014 July 21, 2017
Ms. Elizabeth Johnston Sept. 22, 2009 Sep. 21, 2018
Dr. Gord Surgeoner June 2, 2005 Mar. 12, 2020

AAFC ex officio representative:

Dr. Denis Petitclerc

Director of Research, ARIO:

Christine Primeau

Comptroller:

Gary Burlakoff, CPA, CMA

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

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

Letter from the Chair

June 30, 2017

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 53rd Annual Report of the Agricultural Research Institute of Ontario (ARIO) for the 2016-17 fiscal year.

During the past year, ARIO has continued advancing components of the infrastructure renewal strategy and building 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. Some highlights of our work in the past year included planning and design work on the relocation of the Guelph Turfgrass Institute, purchasing additional land and planning for additional beef research facilities at Elora, and continuing with investments in field crops capacity in the New Liskeard, Winchester and Huron research stations.

We are very pleased with progress to date, and look forward to another exciting year ahead as we continue to develop, design and implement the next phases of the Infrastructure Strategy. Together, with industry partners and the research community, we continue to focus on targeted investment in the agri-food and agri-products research sector that benefit Ontario's economy and provide the modern, efficient state of the art research platforms that will enable the agriculture and food sector to make strides towards meeting the Premier's goal of doubling the agri-food industry's growth rate and creating 120,000 new jobs by the year 2020.

ARIO continues to advocate on behalf of the agri-food and agri-products sector and provide advice to the you on research and innovation priorities in support of its mandate, including the renewal of the long standing OMAFRA/University of Guelph Agreement, implementation of the Northern Growth Plan and expansion of agriculture in the north, promoting world crops, and, enhancing sustainability by driving economic growth across the entire agri-food and agri-products value chain.

The agri-food and agri-products sector continues to be a cornerstone of Ontario's economic strength and success and we continue to be excited about the investments we are making that will support agriculture in this province long into the future.

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 2016-17 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 is 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 has continued to implement the approved infrastructure strategy to modernize agri-food research and innovation infrastructure during the past year, working to advance additional components of the infrastructure strategy such as the continued revitalization and expansion of the Elora Livestick Research and Innovation Centre (LRIC) with the acquisition of additional lands (over 710 acres) necessary to support current needs and future state of the art research facilities supporting the livestock, field crops, turf grass and agroforestry sectors. Other developments at Elora include working with the University and the Beef Farmers of Ontario in the development of detailed design plans to build new cow-calf research facilities and working with the swine industry to design the new swine research facility that will enable relocation from Arkell.

In addition, June, 2016 saw the grand opening of a new state of the art research greenhouse complex at Vineland which is unique in North America as one of only a few research specific greenhouse infrastructure platforms, providing opportunities for pre-commercial and commercial scale evaluation, economic analysis, demonstration and training. And finally, the fall of 2016 saw the beginning of the relocation of the Guelph Turfgrass Institute to the University as well as the design of new field crop services buildings for New Liskeard and Winchester with construction expected to start in the coming year.

The ongoing work and completion of these major projects is evidence of how the ARIO infrastructure strategy is working effectively to create state of the art research infrastructure in the province with strong industry participation in research planning, program oversight and capital investment.

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. The minor capital funding from OMAFRA continues to allow ARIO to manage its network of research propoerties across the province, addressing repairs, maintenance and ongoing life cycle building and program upgrades.

Program focus for 2016-17 continued to be on completing a number of existing large projects. These included a significant investment at the Vineland research station in upgrading the station base infrastructure (e.g. electrical, underground irrigation systems and water mains), construction of a new state of the art irrigation system at the Muck research station, replacing electrical transformers at Kemptville, replacing and upgrading the mechanical ventilation system in the Ridgetown Vet Tech Building, renovations to ventilation, lighting and flooring systems at Arkell swine and poultry, and major equipment purchases to enhance the crops research capability at the Winchester station. In addition to these large projects, the program continued to fund a wide range of smaller maintenance and upgrade projects to maintain and improve the capability and research capacity of the entire ARIO Infrastructure portfolio.

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

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

ARIO continues to support the renewal and refurbishment of the physical infrastructure on its properties, and the enhancement of capacity through the minor capital program and through implementation of the major capital Infrastructure Strategy.

Research Programs

The ministry's open research programs (New Directions and Food Safety) administered by ARIO continue to be responsive to emerging and high priority research needs.

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. Two projects were approved this year. Highlights include:

  • Detection and Surveillance - In-field detection of parasites on fresh produce using next generation sequencing.
  • Prevention and Control of Disease - Evaluating the risks of violative drug residues in poultry from extra-label drug combinations in feed.

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 got underway in early 2016-17 in three priority areas. Highlights include:

  • Rural Infrastructure for a Changing Climate - Asset management frameworks for rural infrastructure; Intercommunity service sharing as a means of increasing the adaptive capacity of rural municipalities.
  • Antimicrobial Resistance -Monitoring antimicrobial use on swine farms; Scoping review on best practices and interventions to enhance antimicrobial stewardship in animal production in Ontario.
  • Soil Health and Carbon Sequestration - Evaluation of practices related to soil carbon and soil health (e.g. rotation and tillage practices, biochar amendments).

There was no call for proposals launched under the New Direction Research Program in 2016-17. Two calls were developed relating to Honey Bee Health and Northern Livestock but the launch of the programs was delayed until early in the 2017-18 fiscal year.

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 at the stations. 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 2016-17 include:

  • Plant Production Systems:
    • Integrated crop protection for root, bulb brassica and leafy vegetable crops
    • Irrigation and nitrogen management to enhance corn production in southern Ontario
    • Improving production management practices of vegetable and speciality crops
  • Animal Production Systems:
    • Investigating the effects of finishing space allowance in standard and enriched rearing cages on performance, health and welfare of layer pullets
    • Nutritional means to enhance gastrointestinal and skeletal development in pullets
    • Evaluation of commercial diet formulations on the growth, feed efficiency, carcass composition and phosphorus output of Ontario rainbow trout
    • Investigation of an optimal weaning strategy for dairy calves individually fed with an automated milk feeding system

Of special note, in 2016 eighteen advanced lysimeters were installed at the Elora Research Station with $2 million in infrastructure funding from the Canadian Foundation for Innovation and the Ontario Ministry of Research, Innovation and Science, awarded to a UofG research team led by Professor Claudia Wagner-Riddle. This unique lysimeter infrastructure will help in long-term research and monitoring of the impacts of cropping systems on soil health and water quality.

Research Priority Setting

Research priorities in OMAFRA's seven theme areas continue to be reviewed annually under the OMAFRA Research Advisory Network (ORAN).

The Vineland Research and Innovation Centre continues to engage the horticulture sector in Ontario to establish industry research priorities for consideration within ORAN.

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

Knowledge Translation and Transfer

At the end of 2016, an internal review of Knowledge Translation and Transfer (KTT) activities over the past nine years yielded very encouraging results concerning the impact of efforts to move research from knowledge production to use. The report shows that significant progress has been made in research synthesis, plain language presentation of complex research, training of researchers and collaborators in techniques for knowledge mobilization, and research project awareness.

Also, The Research Management System (RMS) continues to be an extremely 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 2016, a web-based search protal was introducted providing public access to ministry funded research.

Summary

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 with our partners we are making strides in support of the Premier's goal of doubling the agri-food industry's growth rate and creating 120,000 new jobs by the year 2020.

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 (ARlO) 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 and including June 19, 2017.

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 and Food 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

Gary Burlakoff, 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, 2017 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, 2017 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 19, 2017

RLB LLP

Chartered Professional Accountants
Licensed Public Accountants

Statement of financial position as at March 31, 2016

Assets

Asset 2017 $ (schedule 1) 2016 $
Cash
3,740,844
0
Investments
37,124,309
32,421,349
Accounts receivable
269,672
251,583
Prepaid Land Deposits (note 4)
0
250,000
Cash and investments restricted for land purchase (note 4)
0
13,018,125
Total current assets
41,134,825
45,941,057
Tangible capital assets under construction
3,389,048
0
Tangible capital assets (note 5)
84,698,918
79,874,364
Total Assets
129,222,791
125,815,421

Liabilities

Liability 2017 $ (schedule 1) 2016 $
Accounts payable and accruals
1,471,415
1,622,680
Holdbacks payable
427,842
602,853
Unclaimed expenditures
2,769,930
3,447,638
Deferred revenue
339,471
380,736
Total current liabilities
5,008,658
6,053,907
Deferred capital funded contributions (note 7)
72,286,239
62,676,471
Deferred capital contributions (note 8)
22,022,133
28,226,201
Total Liabilities
99,317,030
96,956,579

Net Assets

Net Asset 2017 $ (schedule 1) 2016 $
Fund balances
16,683,246
14,852,366
Accumulated remeasurement gains (losses)
15,232
(30,807)
Contributed assets (note 4 and 5)
13,207,283
14,037,283
Total net assets
29,905,761
28,858,842

Total liabilities and net assets

Liabilities and net assets 2017 $ (schedule 1) 2017 $
Total liabilities and net assets
129,222,791
125,815,42

Statement of revenues and expenditures and changes in fund balances for year ended March 31, 2017

Research revenues

Revenue 2017 $ (schedule 2) 2016 $
Grants - provincial (note 9)
1,850,000
1,850,000
Grants - federal
0
2,000,000
Grants - other
378,000
378,000
Intellectual property (note 8)
1,521,773
1,451,748
Total research revenues
3,749,773
5,679,748

Property revenues

Revenue 2017 $ (schedule 2) 2016 $
Grants - provincial - minor capital (note 9)
4,260,952
5,100,000
Recognized capital contributions - OMAFRA (note 10)
0
0
Rental income - provincial
836,868
837,463
Rental income - private industry
1,306,250
754,223
Grant - provincial - prior year funding (note 11)
0
2,150,000
Deferred capital impairment (notes 4, 6 and 7)
6,000,403
0
Grants -provincial - payments in lieu of taxes (note 10)
750,000
750,000
Payments in lieu of taxes
206,852
212,326
Amortization of deferred capital contributions
3,046,549
2,961,695
Total property revenues  
19,765,707

Other revenues

Revenue 2017$ (schedule 2) 2016 $
Investment income
408,541
441,171

Total revenues

Revenue 2017 $ (schedule 2) 2016 $
Total research revenues
3,749,773
5,679,748
Total property revenues
16,407,874
19,765,707
Total investment income
408,541
441,171
Total Revenues
20,566,188
25,886,626

Research expenditures

Expenditure 2017 $ (schedule 2) 2016 $
Research project\program
2,522,338
2,584,521
Intellectual property (note 8)
956,074
940,361
Total research expenditures
3,478,412
3,524,882

Property expenditures

Expenditure 2017 $ (schedule 2) 2016 $
Payments in lieu of taxes
965,206
972,355
Minor capital (note 11)
4,684,373
8,216,828
Transfer payments - University of Guelph (note 10)
0
7,000,000
Operations and maintenance
942,529
805,878
Loss on disposal of tangible capital asset
327,253
12,985
Impairment of tangible capital assets (note 5)
6,000,403
0
Amortization of tangible capital assets
3,046,549
2,961,695
Total property expenditures
15,966,313
19,969,741

Total expenditures

Expenditure 2017 $ (schedule 2) 2016 $
Total research expenditures
3,478,412
3,524,882
Total property expenditures
15,966,313
19,969,741
Total expenditures
19,444,725
23,494,623

Excess of revenue over expenditures for the year

Item 2017 $ (schedule 2) 2016 $
Excess of revenue over expenditures for the year
1,121,463
2,392,003
Net amount transferred (to) from unclaimed expenditures
709,417
(127,407)
Net excess of revenues over expenditures for the year
1,830,880
2,264,596

Fund balances

Fund balances 2017 $ (schedule 2) 2016 $
Fund balances, beginning of year
28,858,842
26,625,053
Net remeasurement gains (losses) for the year
46,039
(30,807)
Impairment of contributed land (note 5)
(830,000)
0
Fund balances, end of year
29,905,761
28,858,842

Statement of remeasurement gains (losses) for year ended March 31, 2017

Remeasurement gains (losses) 2017 $ 2016 $
Accumulated remeasurement (losses) gains, beginning of year
(30,807)
0
Unrealized gains (losses) attributable to temporary investments
117,784
(30,528)
Amounts reclassified to the statement of operations: realized losses (gains)on temporary investments
(71,745)
(279)
Net remeasurement gains (losses) for the year
46,039
(30,807)
Accumulated remeasurement gains (losses), end of year
15,232
(30,807)

Statement of cash flows for year ended March 31, 2017

Cash provided by (used in) operating activities

Operating activities 2017 $ 2016 $
Excess of revenue over expenditures for the year
1,121,463
2,392,003

Items not requiring an outlay of cash

Operating activities 2017 $ 2016 $
Amortization of tangible capital assets
3,046,549
2,961,695
Impairment of tangible capital assets
6,00,403
0
Impairment of contributed land
(830,000)
0
Completed project surplus transferred to unclaimed expenditures
31,709
5,988
Deferred capital contributions
(6,204,068)
(1,955,442)
Tangible capital assets under construction
0
(1,350,000)
Loss on disposal of tangible capital assets
327,253
12,985
Net remeasurement gains (losses)
46,039
(30,807)
Total items not requiring an outlay of cash
3,539,348
2,036,422

Changes in non-cash working capital

Operating activities 2017 $ 2016 $
Accounts receivable
(18,090)
(76,893)
Investments
(4,702,960)
(2,845,777)
Accounts payable and accruals
(151,265)
6,976
Deferred capital funded contributions
9,609,768
3,353,747
Prepaid land deposits
250,000
(250,000)
Holdbacks payable
(175,011)
(38,626)
Deferred revenue
(41,265)
97,645
Total cash provided by (used in) operating activities
8,310,525
2,283,494

Cash provided by (used in) capital activities

Capital activities 2017 $ 2016 $
Additions to tangible capital assets
(14,198,758)
0
Tangible capital assets under construction
(3,389,048)
0
Total cash provided by (used in) capital activities
(17,587,806)
0

Net (decrese) increase in cash for the year

Cash 2017 $ 2016 $
Net (decrease) increase in cash for the year
(9,277,281)
2,283,494
Cash, beginning of the year
13,018,125
10,743,631
Cash end of the year
3,740,844
13,018,125

Cash consists of:

Cash 2017 $ 2016 $
Cash
3,740,844
0
Cash restricted for land purchases
0
13,018,125
Cash end of the year
3,740,844
13,018,125

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, accounts receivable and cash and investments restricted for land purchase.

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.

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's financial instruments are all classified as Level 1 as at March 31, 2017 and 2016.

There were no transfers in or out of Level 1 for the years ended March 31, 2017 and 2016.

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 $371,243 (2016 - $324,213). 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 $13,207,283 (2016 - $14,037,283) 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 $830,000.

Note 5 - Tangible capital assets

Land assets

Land Cost $ Accumulated Amortization $ Net 2017 $ Net 2016 $
Simcoe railway line
9,793
0
9,793
9,793
Regional campuses
2,262,104
0
2,262,104
3,092,104
Research stations
24,642,184
0
24,642,184
10,967,029
Total land assets
26,914,081
0
26,914,081
14,068,926

Building assets

Building Cost $ Accumulated Amortization $ Net 2017 $ Net 2016 $
Regional campuses
31,754,526
10,891,913
20,862,613
26,124,202
Research stations
46,009,412
9,087,188
36,922,224
39,681,236
Total building assets
77,763,938
19,979,101
57,784,837
65,805,438

Total land and building assets

Land and building Cost Accumulated Amortization Net 2017 $ Net 2016 $
Total land assets
26,914,081
0
14,068,926
14,068,926
Total building assets
77,763,938
20,839,407
65,805,438
65,805,438
Total assets
104,678,019
19,979,101
84,698,918
79,874,364

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 $830,000 on land and $5,170,403 on buildings for a total of $6,000,403.

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 2017 $ 2016 $
Balance, beginning of the year
62,676,471
59,322,724
Less amortization for the year
(1,121,328)
(1,006,253)
Less deferred capital impairment
(891,556)
0
Less funds recognized
0
(9,150,000)
Add contributions received for capital purposes
11,622,652
13,510,000
Balance, end of the year
72,286,239
62,676,471

Funding Sources

Funding source 2017 $ 2016 $
Federal
1,207,500
1,242,500
Provincial
62,764,098
53,657,716
Industry
8,314,641
7,776,255
Total funding sources
72,286,239
62,676,471
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 2017 $ 2016 $
Balance, beginning of the year
28,226,201
30,181,643
Less deferred capital impairment
(4,278,847)
0
Add prior year amortization adjustments
2,480
0
Less funds recognized
0
0
Less amortization for the year
(1,927,701)
(1,955,442)
Balance, end of the year
22,022,133
28,226,201
Note 8 - ARIO research fund

Revenue

Revenue Seed Royalty $ Technology Royalty $ Unpledged Equity $ Total 2017 $ Total 2016 $
Intellectual property
1,207,176
314,597
0
1,521,773
1,451,748
Investment income
82,800
95,302
0
178,102
118,331
Total revenue
1,289,976
409,899
0
1,699,875
1,570,079

Expenses

Expense Seed Royalty $ Technology Royalty $ Unpledged Equity $ Total 2017 $ Total 2016 $
Expenses
932,209
23,865
0
940,361
940,361

Fund balances ($)

Fund balances Seed Royalty $ Technology Royalty $ Unpledged Equity $ Total 2017 $ Total 2016 $
Net surplus for the year
357,767
386,034
0
743,801
629,718
Fund balance, beginning of year
2,012,615
2,330,070
0
4,342,685
629,718
Remeasurement gains (losses)
17,893
20,715
0
38,608
(9,485)
Fund balance, end of year
2,388,275
2,736,819
0
5,125,094
4,342,685
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

Research Programs 2017 $ 2016 $
New Directions research program
1,350,000
1,350,000
Food Safety research program
500,000
500,000
Total Research Programs
1,850,000
1,850,000
Other Grants
2017$
2016$
Minor capital
4,260,952
5,100,000
Elora Livestock Environmental and Energy Complex
10,510,0000
10,010,000
Payments in lieu of taxes
750,000
750,000
Total Other Grants
15,520,952
15,860,000
Total research programs and other grants
17,370,952
17,710,000

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 2017 $ 2016 $
Funding received
4,650,000
5,100,000
Capitalized - Deferred Capital Funding Contribution
(389,048)
(0
Net revenue
4,260,952
5,100,000

Elora Livestock Environmental and Energy Complex

Elora Livestock Environmental and Energy Complex 2016 $ 2016 $
Funding received
10,510,000
10,010,000
Capitalized - Deferred Capital Funding Contribution
(10,510,000)
(10,010,000)
Net revenue
0
0
Note 10 - Transfer payments to the University of Guelph

During the prior year, 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'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, 2016, two of the funding milestones had been met and ARIO had provided the University with $7,000,000 in funding. Should the project not go forward, that funding would be required to be repaid to ARIO.

Note 11 - Prior year operating funding

During the prior year, ARIO reclassified $2,150,000 of expenditures previously recorded as capital assets under construction. These funds were previously received by ARIO from the Ontario Ministry of Agriculture, Food and Rural Affairs and successor ministries. It was determined that these expenditures should not be capitalized and are therefore being recorded as operating expenses in the current fiscal period.

Schedule 1 - Research trust funds: schedule of financial position as at March 31, 2017

Assets

Assets Current ARIO $ Infrustructure $ New Directions $ Food Safety $ Eliminations $ 2017 $
Cash
3,740,844
0
0
0
0
3,740,844
Investments
37,124,309
0
0
0
0
37,124,309
Due from ARIO
0
27,221,392
6,651,661
1,135,339
(35,008,392)
0
Accounts receivable
213,833
51,945
3,333
561
0
269,672
Total current assets
41,078,986
273,337
6,654,994
1,135,900
(35,008,392)
41,134,825
Tangible assets under construction
0
3,389,048
0
0
0
3,389,048
Tangible capital assets (note 5)
0
84,698,918
0
0
0
84,698,918
Total tangiblet assets
0
88,087,966
0
0
0
88,087,966
Total Assets
41,078,986
115,361,303
6,654,994
1,135,90
(35,008,392)
129,222,791

Liabilities

Liabilities Current ARIO $ Infrustructure $ New Directions $ Food Safety $ Eliminations $ 2017 $
Due to other research trust funds
35,008,392
0
0
0
(35,008,392)
0
Accounts payable and accruals
945,500
0
443,529
82,386
0
1,471,415
Holdbacks payable
0
0
277,993
149,849
0
427,842
Unclaimed expenditures
0
0
2,095,079
674,851
0
2,769,930
Deferred revenue
0
59,471
280,000
0
0
339,471
Total current liabilities
35,953,892
59,471
3,096,601
907,086
(35,008,392)
5,008,658
Deferred capital funded contributions (note 6)
0
72,286,239
0
0
0
72,286,239
Deferred capital contributions (note 7)
0
22,022,133
0
0
0
22,022,133
Total deferred capital
0
94,308,372
0
0
0
94,308,372
Total liabilities
35,953,892
94,367,843
3,096,601
907,086
(35,008,392)
99,317,030

Fund balances

Fund balance ARIO $ Infrastructure $ New Directions $ Food Safety $ Eliminations $ 2017 $
Fund balances
5,095,972
7,797,408
3,560,731
229,135
0
16,683,246
Accumulated Remeasurement gains (losses)
29,122
(11,231)
(2,338)
(321)
0
15,232
Contributed assets (notes 4 and 5)
0
13,207,283
0
0
0
13,207,283
Total fund balances
5,125,0944
20,993,460
3,558,393
228,814
0
29,905,761
Total assets and liabilities
41,078,986
115,361,303
654,994
1,135,900
(35,008,392)
129,222,791

Schedule 2 - Research trust funds: schedule of revenues and expenditures and changes in fund balances for the year ended March 31, 2017

Research revenues

Revenue ARIO (note 9)$ Infrastructure $ New Directions $ Food Safety $ 2017 $
Grants - provincial (note 9)
0
0
1,350,000
500,000
1,850,000
Grants - other
0
0
378,000
0
378,000
Intellectual property (note 9)
1,521,773
0
0
0
1,521,773
Total research revenue
1,521,773
0
1,728,000
500,000
3,749,773

Property revenues

Revenue ARIO (note 9)$ Infrastructure $ New Directions $ Food Safety $ 2017
Grants - provincial - minor capital (note 9)
0
4,260,952
0
0
4,260,952
Rental income - provincial
0
836,868
0
0
836,868
Rental income - private industry
0
1,306,250
0
0
1,306,250
Deferred capital impairment (notes 4, 6 & 7)
0
6,000,403
0
0
6,000,403
Grants - provincial - payments in lieu of taxes (note 10)
0
750,000
0
0
750,000
Payments in lieu of taxes
0
206,852
0
0
206,852
Amortization of deferred capital contributions
0
3,046,549
0
0
3,046,549
Total property revenues
0
16,407,874
0
0
16,407,874

Other revenues

Item ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ 2017 $
Investment income
178,102
149,356
69,886
11,197
408,541

Total revenues

Revenue ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ 2017 $
Total research revenue
1,521,773
0
1,728,000
500,000
1,728,000
Total property revenues
0
16,407,874
0
0
16,407,874
Total investment income
178,102
149,356
69,886
11,197
408,541
Total revenues
1,699,875
16,557,230
1,797,886
511,197
20,566,188

Research expenditures

Expenditure ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ 2017 $
Research project/program
0
0
1,984,757
537,581
2,522,338
Intellectual property (note 8)
956,074
0
0
0
956,074
Total research expenditures
956,074
0
1,984,757
537,581
3,478,412

Property expenditures

Item ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ 2017 $
Payments in lieu of taxes
0
965,206
0
0
965,206
Minor capital (note 11)
0
4,684,373
0
0
4,684,373
Operations and maintenance
0
942,529
0
0
942,529
Loss on disposal of tangible capital asset
0
327,253
0
0
327,253
Impairment of tangible capital assets (note 5)
0
6,000,403
0
0
6,000,403
Amortization of tangible capital assets
0
3,046,549
0
0
3,046,549
Total property expenditures
0
15,966,313
0
0
15,966,313

Total expenditures

Item ARIO (note 9) Infrastructure $ New Directions $ Food Safety $ 2017 $
Total research expenditures
956,074
0
1,984,757
537,581
3,478,412
Total property expenditures
0
15,966,313
0
0
15,966,313
Total expenditures
956,074
15,966,313
1,984,757
537,581
19,444,725

Excess (shortfall) of revenue over expenditures for the year

Item ARIO (note 9) Infrastructure $ New Directions $ Food Safety $ 2017 $
Excess (shortfall)of revenues over expenditures for the year
743,801
590,917
(186,871)
(26,384)
1,121,463
Net amount transferred (to) from unclaimed expenditures
0
0
731,309
(21,892)
709,417

Fund balances

Item ARIO (note 8) Infrastructure $ New Directions $ Food Safety $ 2017 $
Fund balances, beginning of year
4,342,685
21,228,052
3,011,438
276,667
28,858,842
Net remeasurement, gains (losses) for the year
38,608
4,491
2,517
423
46,039
Impairment of contributed land (note 5)
0
(830,000)
0
0
(830,000)
Fund balances, end of year
5,125,094
20,993,460
3,558,393
228,814
29,905,761

 


For more information:
E-mail: research.omafra@ontario.ca
Author: Sharon Gerrie, Research and Intellectual Property Agreements
Creation Date: 28 September 2016
Last Reviewed: 13 October 2016