Agricultural Research Institute of Ontario Annual Report 2015-16
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The Government of Ontario's priorities during 2015-16 included Investing in Infrastructure, Investing in People, and Helping Business Succeed.
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.
"OMAFRA" invests significantly in agri-food research, technology transfer and analytical and diagnostic services to achieve this 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 in part "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.
2015-16 ARIO Members
AAFC ex officio representative:
Director of Research, ARIO:
Secretariat support to ARIO is provided by the Research and Innovation Branch staff of OMAFRA:
June 30, 2016
The Honourable Jeff Leal
Dear Minister Leal,
I am pleased to submit the 52nd annual report of the Agricultural Research Institute of Ontario (ARIO) for the 2015-16 fiscal year. This past year ARIO has seen the completion of several significant research infrastructure re-development projects.
Two of the most visible and important achievements this past year were the commissioning and grand opening of the new dairy research facility at Elora on May 28, 2015, and the grand opening of the new 3700 sq. metre pre-commercial research greenhouse complex at Vineland on June 3, 2016.
During the past year, ARIO has continued working towards advancing other components of the infrastructure 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. Work continues on the relocation of the Guelph Turfgrass Institute, adding 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. 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.
We are very pleased with progress to date, and look forward to another exciting year ahead as we continue to develop 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 ag 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.
We are pleased to provide an update and some highlights from the 2015-16 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 continues to implement the approved infrastructure strategy to modernize agri-food research and innovation infrastructure. Significant milestones within the infrastructure strategy were achieved in 2015-16 with the grand opening and commissioning of the new dairy research facility at the Livestock Research and Innovation Centre (LRIC) in Elora and completion of the new state of the art greenhouse complex at Vineland Research Innovation Centre (VRIC) in Vineland.
During the past year, ARIO has continued work to advance other components of the infrastructure strategy such as the expansion of LRIC in Elora through the acquisition of additional lands to enable the implementation of future state of the art research facilities supporting beef, swine, poultry, field crops, turf grass and agroforestry sectors. ARIO has also achieved meaningful progress with its partners in northern Ontario throughout 2015-16 which will support a more sustainable and efficient research system in the north that encourages investments, industry collaboration and aligns with shared industry and government priorities. Through the ARIO research infrastructure stations in New Liskeard and Emo, OMAFRA and ARIO are working directly with industry and northern stakeholders to focus research in targeted areas that provide meaningful outcomes and solutions for Northern producers.
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. 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 2015-16 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 water mains etc.), construction of a new state of the art irrigation system at the Muck research station, refurbishing the Ridgetown Vet Tech Building, a refresh of the space utilized in the Administration Building at Alfred by La Cité, 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 entire 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. VRIC has taken over the administration of the minor capital program for the Vineland research station as part of their responsibility for the overall operations and site management.
ARIO supports the 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.
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 2015-16 research cycles have seen projects approved related to climate change, trade agreements, precision agriculture and food safety.
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:
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:
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 2015-16 include:
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). 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.
Throughout 2015-16 the government continued to follow through on efforts that
Negotiations with stakeholders and further analyses are continuing.
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 wupport of the Premier's goal of doubling the agri-food industry's growth rate and creating 120,000 new jobs by the year 2020
Christine Primeau, Director of Research
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 and including June 23, 2016.
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:
Heather Harrison, CPA, CMA
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, 2016 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.
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.
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, 2016 and the results of its operations and its cash flows for the year then ended in accordance with Canadian public sector accounting standards.
Chartered Professional Accountants
Total liabilities and net assets
Excess of revenue over expenditures for the year
Cash provided by (used in) operating activities
Items not requiring an outlay of cash
Changes in non-cash working capital
Cash provided by (used in) capital activities
Net increase in cash for the year
Cash consists of:
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:
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.
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.
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.
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 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 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
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, 2016 and 2015.
There were no transfers in or out of Level 1 for the years ended March 31, 2016 and 2015.
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 $324,213 (2015 - $295,756). 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 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 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 - Land purchases
During the year, ARIO entered into agreements to purchase three plots of land. As at March 31, 2016, those agreements had not closed, but the agreements were fully signed and accepted by both ARIO and the sellers. The funds for these land purchases were, therefore, committed and subsequent to year end, the agreements will close with $13,018,125 being paid by ARIO to the sellers. At year end, a total of $250,000 has been paid in the form of deposits to the three sellers.
Note 5 - Contributed assets
Contributed assets of $14,037,283 (2015 - $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 6 - Tangible capital assets
Total land and building assets
As at March 6, 2007, the titles for capital assets (land and buildings) with a carrying value of approximately $60.9 million were transferred to ARIO from the Government of Ontario. Carrying value is being used as the transfer value since the transfer took place between non arm's length parties, is non-monetary in nature and does not have commercial substance. As an agency of the Government of Ontario, ARIO reports these capital assets (and other assets and liabilities) in consolidation with the Ministry of Agriculture, Food and Rural Affairs on an annual basis.
Note 7 - Deferred capital funded contributions
Deferred capital contributions relating to construction of capital funded projects represents the amount of grants and other restricted funding received by ARIO for construction projects.
Note 8 - Deferred capital contributions
Deferred capital contributions represent the unamortized amount of the net book value of the buildings transferred to ARIO from the Government of Ontario in 2007. The amortization of capital contributions is recorded as revenue in the statement of revenues and expenditures. The changes in the deferred capital contributions are as follows:
Note 9 - ARIO research fund
Fund balances ($)
Note 10 - 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
The following Provincial Government capital transfer payment grants have been partially capitalized as Deferred Capital Funded Contributions and partially recognized as Revenues as follows:
Elora Livestock Environmental and Energy Complex
Note 11 - Transfer payments to the University of Guelph
During the 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 year end, 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 12 - Prior year operating funding
During the 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.
Excess of revenue over expenditures for the year
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