2018–19 Agricultural Research Institute of Ontario financial statements
Independent auditor’s report
To the Members of: Agricultural Research Institute of Ontario
Opinion
We have audited the accompanying financial statements of Agricultural Research Institute of Ontario, which comprise the statement of financial position as at March 31, 2019 and the statements of revenues and expenditures and changes in fund balances, remeasurement losses and cash flows for the year then ended and Notes to the financial statements, including a summary of significant accounting policies.
In our opinion, these financial statements present fairly, in all material respects, the financial position of Agricultural Research Institute of Ontario as at March 31, 2019 and the results of its operations and its cash flows for the year then ended in accordance with Canadian public sector accounting standards.
Basis of opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Agricultural Research Institute of Ontario in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Responsibilities of management and those charged with governance for the financial statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with Canadian public sector accounting standards and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the organization's ability to continue as a going concern, disclosing, as applicable, matters related to a going concern and using the going concern basis of accounting unless management either intends to liquidate the organization or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the organization's financial reporting process.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of the auditor's responsibilities for the audit of the financial statements is located at RLB LLP’s website. This description forms part of our auditor's report.
Chartered Professional Accountants
Licensed Public Accountants
Guelph, Ontario
June 27, 2019
Statement of financial position as at March 31, 2019
| Asset | 2019 (Schedule 1) $ |
2018 $ |
|---|---|---|
| Cash | 10,054,638 | 6,662,999 |
| Investments | 27,549,149 | 27,213,712 |
| Accounts receivable (Note 14) | 176,995 | 188,426 |
| Accounts receivable — OMAFRA (TBARS) | 0 | 500,000 |
| Note receivable — North Grenville (Kemptville sale) | 10,000 | 4,000,000 |
| Total current assets | 37,790,782 | 38,565,137 |
| Tangible capital assets under construction | 16,420,639 | 8,432,364 |
| Tangible capital assets (Note 5) | 78,875,275 | 78,598,160 |
| Total assets | 133,086,696 | 125,595,661 |
| Liability | 2019 (Schedule 1) $ |
2018 $ |
|---|---|---|
| Accounts payable and accruals | 2,925,869 | 1,570,026 |
| Holdbacks payable | 395,142 | 528,076 |
| Unclaimed expenditures | 3,088,036 | 3,267,330 |
| Deferred revenue | 266,500 | 562,552 |
| Total current liabilities | 6,675,547 | 5,927,984 |
| Deferred capital funded contributions (Notes 6 and 9) | 82,286,657 | 71,842,359 |
| Deferred capital contributions (Note 7) | 15,616,617 | 16,826,781 |
| Total liabilities | 104,578,821 | 94,597,124 |
| Net assets | 2019 (Schedule 1) $ |
2018 $ |
|---|---|---|
| Fund balances | 16,853,989 | 18,367,711 |
| Accumulated remeasurement losses | (27,805) | (51,348) |
| Contributed assets (Notes 4, 5 and 11) | 11,681,691 | 12,682,174 |
| Total net assets | 28,507,875 | 30,998,537 |
| Liabilities and net assets | 2019 (Schedule 1) $ |
2018 $ |
|---|---|---|
| Total liabilities and net assets | 133,086,696 | 125,595,661 |
Statement of revenues and expenditures and changes in fund balances for year ended March 31, 2019
| Revenue | 2019 (Schedule 2) $ |
2018 $ |
|---|---|---|
| Grants — provincial (Note 9) | 1,850,000 | 500,000 |
| Grants — OEGF (Kawartha and IGPC) (Note 12) | 378,000 | 378,000 |
| Intellectual property (Note 8) | 775,079 | 1,539,667 |
| Total research revenues | 3,003,079 | 2,417,667 |
| Revenue | 2019 (Schedule 2) $ |
2018 $ |
|---|---|---|
| Grants — provincial — minor capital (Note 9) | 0 | 4,500,000 |
| Grants — provincial — Food Innovation (Note 9) | 0 | 800,000 |
| Rental income — provincial | 580,793 | 948,489 |
| Rental income — private industry | 1,314,501 | 1,570,505 |
| Deferred capital impairment (Notes 5, 6 and 7) | 0 | 765,910 |
| Deferred capital contributions on sale of tangible capital assets (Note 11) | 0 | 3,437,392 |
| Grants — provincial — payments in lieu of taxes (Note 9) | 750,000 | 750,000 |
| Payments in lieu of taxes | 195,212 | 189,430 |
| Amortization of deferred capital contributions | 2,248,447 | 2,646,124 |
| Total property revenues | 5,088,953 | 15,607,850 |
| Revenue | 2019 (Schedule 2) $ |
2018 $ |
|---|---|---|
| Gain on disposal of tangible capital asset (Note 11) | 1,035,000 | 4,197,692 |
| Investment income (Note 13) | 583,499 | 465,843 |
| Total other revenues | 1,618,499 | 4 663 535 |
| Revenue | 2019 (Schedule 2) $ |
2018 $ |
|---|---|---|
| Total research revenues | 3,003,079 | 2,417,667 |
| Total property revenues | 5,088,953 | 15,607,850 |
| Total other revenues | 1,618,499 | 4,663,535 |
| Total revenues | 9,710,531 | 22,689,052 |
| Expenditure | 2019 (Schedule 2) $ |
2018 $ |
|---|---|---|
| Research projects | 2,224,541 | 1,430,079 |
| Intellectual property (Note 8) | 359,870 | 1,005,668 |
| Total research expenditures | 2,584,411 | 2,435,747 |
| Expenditure | 2019 (Schedule 2) $ |
2018 $ |
|---|---|---|
| Payments in lieu of taxes | 1,223,035 | 1,032,852 |
| Minor capital | 3,976,546 | 4,226,092 |
| Transfer payments — University of Guelph — Guelph Turfgrass Institute (Note 10) | 0 | 5,000,000 |
| Transfer payments — University of Guelph — Food Innovation (Note 10) | 0 | 800,000 |
| Provision for forgivable loan | 0 | 3,700,000 |
| Operations and maintenance | 1,055,817 | 1,198,997 |
| Impairment of tangible capital assets (Note 5) | 0 | 765,910 |
| Amortization of tangible capital assets | 2,248,447 | 2,646,124 |
| Total property expenditures | 8,503,845 | 19,369,975 |
| Expenditure | 2019 (Schedule 2) $ |
2018 $ |
|---|---|---|
| Total research expenditures | 2,584,411 | 2,435,747 |
| Total property expenditures | 8,503,845 | 19,369,975 |
| Total expenditures | 11,088,256 | 21,805,722 |
| Item | 2019 (Schedule 2) $ |
2018 $ |
|---|---|---|
| Excess of (expenditures over revenues) revenues over expenditures for the year | (1,377,725) | 883,330 |
| Net amount transferred (to) from unclaimed expenditures | (135,997) | 736,220 |
| Net excess of (expenditures over revenues) revenues over expenditures for the year | (1,513,722) | 1,619,550 |
| Net assets | 2019 (Schedule 2) $ |
2018 $ |
|---|---|---|
| Net assets, beginning of year | 30,998,537 | 29,905,761 |
| Net remeasurement gains (losses) for the year | 23,543 | (66,580) |
| Change in contributed land (Note 4) | (1,000,483) | (460,194) |
| Net assets, end of year | 28,507,875 | 30,998,537 |
Statement of remeasurement losses for year ended March 31, 2019
| Remeasurement losses | 2019 $ |
2018 $ |
|---|---|---|
| Accumulated remeasurement (losses) gains, beginning of year | (51,348) | 15,232 |
| Unrealized gains (losses) attributable to investments | 42,850 | (56,981) |
| Amounts reclassified to the statement of operations: realized losses on investments | (19,307) | (9,599) |
| Net remeasurement gains (losses) for the year | 23,543 | (66,580) |
| Accumulated remeasurement losses, end of year | (27,805) | (51,348) |
Statement of cash flows for year ended March 31, 2019
| Operating activity | 2019 $ |
2018 $ |
|---|---|---|
| Excess of (expenditures over revenues) revenues over expenditures for the year | (1,377,725) | 883,330 |
| Operating activity | 2019 $ |
2018 $ |
|---|---|---|
| Amortization of tangible capital assets | 2,248,447 | 2,646,124 |
| Impairment of tangible capital assets | 0 | 765,910 |
| Impairment of contributed land | 0 | (460,194) |
| Completed project surplus transferred to unclaimed expenditures | (315,291) | 1,233,619 |
| Deferred capital contributions | (1,210,164) | (5,195,352) |
| Gain on disposal of tangible capital assets | (1,035,000) | (4,197,692) |
| Net remeasurement gains (losses) | 23,543 | (66,580) |
| Total items not requiring an outlay of cash | (1,666,190) | (4,390,835) |
| Operating activity | 2019 $ |
2018 $ |
|---|---|---|
| Accounts receivable (Note 14) | 11,431 | 81,246 |
| Accounts receivable — OMAFRA (TBARS) | 500,000 | (500,000) |
| Note receivable — North Grenville (Kemptville sale) | 3,990,000 | (4,000,000) |
| Investments | (335,437) | 9,910,597 |
| Accounts payable and accruals | 1,355,843 | 98,611 |
| Deferred capital funded contributions | 10,444,298 | (443,880) |
| Holdbacks payable | (132,934) | 100,234 |
| Deferred revenue | (296,052) | 223,081 |
| Total cash provided by (used in) operating activities | 13,870,959 | 1,079,054 |
| Capital activity | 2019 $ |
2018 $ |
|---|---|---|
| Additions to tangible capital assets | (3,526,045) | (813,583) |
| Proceeds on sale of tangible capital assets | 1,035,000 | 7,700,000 |
| Tangible capital assets under construction | (7,988,275) | (5,043,316) |
| Total cash provided by (used in) capital activities | (10,479,320) | 1,843,101 |
| Cash | 2019 $ |
2018 $ |
|---|---|---|
| Net increase in cash for the year | 3,391,639 | 2,922,155 |
| Cash, beginning of the year | 6,662,999 | 3,740,844 |
| Cash end of the year | 10,054,638 | 6,662,999 |
Notes to the financial statements
Note 1: Nature of organization
The Agricultural Research Institute of Ontario (ARIO) is a non-profit corporate body reporting directly to the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA). ARIO is a non-profit organization within the meaning of the Income Tax Act (Canada) and is exempt from income taxes. It was created by the ARIO Act with specific responsibilities over the co-ordination and direction of agricultural research programs in Ontario. These programs relate to a broad range of commodities and disciplines, covering all aspects of the agri-food system.
Funding for programs supported by ARIO is available from various sources. The Ontario Government, through OMAFRA, is the primary source of funding. The Ontario Government also provides funding for open research programs. Under the ARIO Act, ARIO may accept grants and donations for research. Other funds usually come from commercial sources (such as agri-business, marketing boards and producer associations) and can be either designated for specific projects or non-designated. In addition, ARIO reinvests royalties earned from ministry-funded research.
All receipts are held in trust by the Director of Research and are allocated in accordance with the terms of the funds. Transactions between OMAFRA and the below programs are recorded at the exchange value.
The current research trust funds managed by the secretariat to ARIO are:
- ARIO
- Open Competitive Research (including new directions, food safety, other)
- Infrastructure
Note 2: Summary of significant accounting policies
The financial statements have been prepared in accordance with Canadian public sector accounting standards for government not for profit organizations, including the 4200 series of standards, as issued by the Public Sector Accounting Board (PSAB for Government NPOs) and include the following significant accounting policies:
Basis of accounting
ARIO follows the deferral method of accounting for contributions. Restricted contributions are recognized as revenue of the appropriate research trust fund in the year in which the related expenses are incurred. Unrestricted contributions are recognized as revenue of the appropriate research trust fund when received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured.
Financial instruments
Measurement of financial instruments
The organization initially measures its financial assets and liabilities at fair value, except for certain non-arms length transactions.
The organization subsequently measures all its financial assets and financial liabilities at amortized cost, except for investments, which are measured at fair value. Changes in fair value are recognized in the statement of remeasurement (losses) gains.
Financial assets measured at amortized cost include cash and accounts receivable.
Financial liabilities measured at amortized cost include accounts payable and accruals, holdbacks payable and unclaimed expenditures.
The organizations 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 using straight-line amortization of 25 to 40 years for land and building assets.
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
- 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, 2019 and 2018.
There were no transfers in or out of Level 1 for the years ended March 31, 2019 and 2018.
Associated risks
Market price risk
Market price risk is the risk that the value of an instrument will fluctuate as a result of changes in market prices, whether caused by factors specific to an individual investment, its issuer or all factors affecting all instruments traded in the market. As all of ARIO’s financial instruments are carried at fair value with fair value changes recognized in the statement of remeasurement losses, all changes in market conditions will directly affect the increase (decrease) in accumulated remeasurement losses. Market price risk is managed by the investment manager through construction of a diversified portfolio of instruments traded on various markets and across various industries.
A 1% increase (decrease) in the value of the investments would increase (decrease) the asset value and the change in unrealized gains in investments by $275,491 (2018: $272,137). The price of the investments is affected by changes in market values, foreign exchange rates and interest rates impacting the underlying financial instruments held within the individual investments managed by the investment manager.
Interest rate risk
Interest rate risk refers to the adverse consequences of interest rate changes on the Institutes 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 $11,681,691 (2018: $12,682,174) are recorded in the Infrastructure Fund and represent the cost of the land transferred to ARIO from the Government of Ontario. During the year, the fair value of the land in Alfred was adjusted by an impairment of $0 (2018:$460,194) and the fair value of the land in Kemptville was adjusted by $0 (2018: $64,915) due to a sale (see Note 11). Additionally, the land in Alfred was sold this year for $1,010,000, which was the residual value of the Alfred land in contributed surplus, and part of the land in New Liskeard was sold for $25,000, with cost base of $473, reducing contributed surplus by the cost base in contributed surplus of $473. In the prior year, contributed surplus was reduced by $9,990 more than intended and, accordingly, the amount was corrected in the current year. As a result, the net change to contributed surplus at year end was $1,000,483.
Note 5: Tangible capital assets
| Land | Cost $ |
Accumulated amortization $ |
Net 2019 $ |
Net 2018 $ |
|---|---|---|---|---|
| Simcoe railway line | 0 | 0 | 0 | 9,793 |
| Regional campuses | 736,984 | 0 | 736,984 | 1,736,994 |
| Research stations | 24,651,505 | 0 | 24,651,505 | 24,642,185 |
| Total land assets | 25,388,489 | 0 | 25,388,489 | 26,388,972 |
| Building | Cost $ |
Accumulated amortization $ |
Net 2019 $ |
Net 2018 $ |
|---|---|---|---|---|
| Regional campuses | 25,118,835 | 8,997,045 | 16,121,790 | 17,001,827 |
| Research stations | 48,899,583 | 11,534,587 | 37,364,996 | 35,207,361 |
| Total building assets | 74,018,418 | 20,531,632 | 53,486,786 | 52,209,188 |
| Land and building | Cost $ |
Accumulated amortization $ |
Net 2019 $ |
Net 2018 $ |
|---|---|---|---|---|
| Total land assets | 25,388,489 | 0 | 25,388,489 | 26,388,972 |
| Total building assets | 74,018,418 | 20,531,632 | 53,486,786 | 52,209,188 |
| Total assets | 99,406,907 | 20,531,632 | 78,875,275 | 78,598,160 |
As at March 6, 2007, the titles for capital assets (land and buildings) with a carrying value of approximately $60.9 million were transferred to ARIO from the Government of Ontario. Carrying value is being used as the transfer value since the transfer took place between non arm's length parties, is non-monetary in nature and does not have commercial substance. As an agency of the Government of Ontario, ARIO reports these capital assets (and other assets and liabilities) in consolidation with OMAFRA on an annual basis.
During the year, there was $0 (2018: $460,194) impairment taken on land and $0 (2018: $305,716) impairment taken on buildings for a total impairment of $0 (2018: $765,910).
Note 6: Deferred capital funded contributions
Deferred capital contributions relating to construction of capital funded projects represents the amount of grants and other restricted funding received by ARIO for construction projects.
| Balance | 2019 $ |
2018 $ |
|---|---|---|
| Balance, beginning of the year | 71,842,359 | 72,286,239 |
| Less amortization for the year | (1,038,283) | (1,066,593) |
| Less deferred capital impairment | 0 | (127,287) |
| Add contributions received for capital purposes | 11,482,581 | 750,000 |
| Balance, end of the year | 82,286,657 | 71,842,359 |
| Funding source | 2019 $ |
2018 $ |
|---|---|---|
| Federal | 1,137,500 | 1,172,500 |
| Provincial | 71,981,121 | 61,794,811 |
| Industry | 9,168,036 | 8,875,048 |
| Total funding sources | 82,286,657 | 71,842,359 |
Note 7: Deferred capital contributions
Deferred capital contributions represent the unamortized amount of the net book value of the buildings transferred to ARIO from the Government of Ontario in 2007. The amortization of capital contributions is recorded as revenue in the statement of revenues and expenditures. The changes in the deferred capital contributions are as follows:
| Balance | 2019 $ |
2018 $ |
|---|---|---|
| Balance, beginning of the year | 16,826,781 | 22,022,133 |
| Less deferred capital contributions | 0 | (305,716) |
| Less funds recognized on sale of Kemptville | 0 | (3,310,106) |
| Less amortization for the year | (1,210,164) | (1,579,530) |
| Balance, end of the year | 15,616,617 | 16,826,781 |
Note 8: ARIO research fund
| Revenue | Seed royalty $ |
Technology royalty $ |
Other $ |
Total 2019 $ |
Total 2018 $ |
|---|---|---|---|---|---|
| Intellectual property | 613,060 | 162,019 | 0 | 775,079 | 1,539,667 |
| Investment income | 84,847 | 96,980 | 0 | 181,827 | 110,094 |
| Total revenue | 697,907 | 258,999 | 0 | 956,906 | 1,649,761 |
| Expense | Seed royalty $ |
Technology royalty $ |
Other $ |
Total 2019 $ |
Total 2018 $ |
|---|---|---|---|---|---|
| Expenses | 347,573 | 12,297 | 0 | 359,870 | 1,005,668 |
| Fund balances | Seed royalty $ |
Technology royalty $ |
Other $ |
Total 2019 $ |
Total 2018 $ |
|---|---|---|---|---|---|
| Net surplus for the year | 350 334 | 246,702 | 0 | 597,036 | 644,093 |
| Fund balance, beginning of year | 2,698,701 | 3,036,252 | 500,000 | 6,234,953 | 5,125,094 |
| Remeasurement gains (losses) | 7,439 | 7,909 | 0 | 15,348 | (34,234) |
| New Directions (Competitive Research) Program transfer | 0 | 0 | 0 | 0 | 500,000 |
| Fund balance, end of year | 3,056,474 | 3,290,863 | 500,000 | 6,847,337 | 6,234,953 |
Note 9: Grants received from the provincial government
The following grants, recorded at the exchange value, have been received from the OMAFRA and successor ministries:
| Research programs | 2019 $ |
2018 $ |
|---|---|---|
| New Directions (Competitive Research) Program | 1,350,000 | 0 |
| Food Safety Research Program | 500,000 | 500,000 |
| Total research programs | 1,850,000 | 500,000 |
| Other grants | ||
| Minor capital | 0 | 4,500,000 |
| Growing Forward 2 — Food Innovation project | 0 | 800,000 |
| New Directions (Competitive Research) — TBARS | 0 | 650,000 |
| Elora build projects | 7,500,000 | 0 |
| Payments in lieu of taxes | 750,000 | 750,000 |
| Total other grants | 8,250,000 | 6,700,000 |
| Total research programs and other grants | 10,100,000 | 7,200,000 |
The following grants, recorded at the exchange value, have been received from the Ministry of Advanced Education and Skills Development (MAESD):
| Lakehead University Project | 2019 $ |
2018 $ |
|---|---|---|
| Funding received | 0 | 500,000 |
| Capitalized — Unclaimed expenditures | 0 | (500,000) |
| Net revenue | 0 | 0 |
The following provincial government capital transfer payment grants have been partially capitalized as deferred capital funded contributions and partially recognized as revenues as follows:
| Minor capital | 2019 $ |
2018 $ |
|---|---|---|
| Funding received | 0 | 4,500,000 |
| Capitalized — deferred capital funding contribution | 0 | 0 |
| Net revenue | 0 | 4,500,000 |
| Food Innovation project | 2019 $ |
2018 $ |
|---|---|---|
| Funding received | 0 | 800,000 |
| Capitalized — Unclaimed expenditures | 0 | 0 |
| Net revenue | 0 | 800,000 |
| New Directions (Competitive Research) — TBARS | 2019 $ |
2018 $ |
|---|---|---|
| Funding received | 0 | 650,000 |
| Capitalized — Unclaimed expenditures | 0 | (650,000) |
| Net revenue | 0 | 0 |
| Elora build projects | 2019 $ |
2018 $ |
|---|---|---|
| Funding received | 7,500,000 | 0 |
| Capitalized — deferred capital funding contribution | (7,500,000) | 0 |
| Net revenue | 0 | 0 |
Note 10: Transfer payments to the University of Guelph
During 2016, ARIO entered into a funding agreement with the University of Guelph. Under the agreement, ARIO would provide maximum funds of $12,000,000 to be combined with up to $3,000,000 in industry contributions to fund the construction of a new Turfgrass Research facility on the University of Guelphs Arboretum land. The ARIO funds for this agreement come from deferred capital funded contributions which were previously received by ARIO from OMAFRA and successor ministries. At March 31, 2019 funding milestones have been met and ARIO has provided the University with $12,000,000 in funding.
During 2017, ARIO entered into a funding agreement with the University. Under the agreement, ARIO would provide maximum funds of $800,000 to fund equipment for the Guelph Food Innovation Centre. At March 31, 2019, funding milestones have been met and ARIO has provided the University with $800,000 in funding.
During 2018, ARIO entered into funding agreements with the University of Guelph for the construction of a new swine research facility at Elora and a new Agronomy Research Services Building at New Liskeard. ARIO will provide maximum funds of $12,000,000 to be combined with up to $3,000,000 in industry contributions to fund the construction of the new Swine Research facility. ARIO will provide up to $4,000,000 for the New Liskeard Agronomy building project. No industry contribution is anticipated for this project. In 2018-19, ARIO provided the University with $3,000,000 for the new swine facility and $1,000,000 for the New Liskeard agronomy building. As at March 31, 2019, ARIO has received $100,000 in industry contributions for the new swine facility from Ontario Pork. The ARIO funds for these agreements come from deferred capital funded contributions which were previously received by ARIO from OMAFRA and successor ministries.
Note 11: Gain on disposal of tangible capital asset
March 31, 2019 — Sale of Alfred and New Liskeard Land
During the prior year, the organization sold parcels of land in two locations, one in Alfred and one in New Liskeard (2018: parcels in Kemptville). All parcels of land were originally transferred to the organization and capitalized to assets and contributed surplus. There was no impairment taken on either of the assets during the year.
| Gain on disposal of tangible capital asset | Alfred $ |
New Liskeard $ |
2019 Total $ |
2018 Total $ |
|---|---|---|---|---|
| Proceeds from sale | 1,010,000 | 25,000 | 1,035,000 | 7,700,000 |
| Cost of tangible capital assets | 1,010,000 | 473 | 1,010,473 | 7,449,275 |
| Accumulated amortization | 0 | 0 | 0 | (4,011,882) |
| Net book value | 1,010,000 | 473 | 1,010,473 | 3,437,393 |
| Contributed asset | (1,010,000) | (473) | (1,010,473) | (64,915) |
| Net asset value | 0 | 0 | 0 | 3,502,308 |
| Gain on sale | 1,010,000 | 25,000 | 1,035,000 | 4,197,692 |
During the 2019 fiscal year, the Municipality of North Grenville paid $4,000,000, satisfying the terms of their promissory note and closing the final payment on the sale of the property.
Note 12: Funding agreements with third parties
ARIO, His Majesty the King in right of Ontario as represented by OMAFRA and the Integrated Grain Processors Co-operative (IGPC) have jointly signed an agreement whereby, pursuant to a Capital Grant Agreement effective June 2006 between OMAFRA and IGPC, IGPC agreed to contribute to a research and development fund in exchange for the capital grant support provided by OMAFRA through the Ontario Ethanol Growth Fund (OEGF). IGPC has agreed to contribute $280,000 annually for 10 years (for a total of $2,800,000) starting in April 2012 and ending with the final payment in April 2021. These funds are being paid directly to ARIO to be used to support research priorities in the agri-food sector in Ontario. Funds recognized to date are $1,960,000. See Schedule 2.
His Majesty the King in right of Ontario as represented by OMAFRA and Kawartha Ethanol Inc. have signed a Capital Grant Agreement effective August 1, 2008 between OMAFRA and Kawartha Ethanol whereby Kawartha Ethanol Inc. agreed to contribute to a research and development fund in exchange for the capital grant support provided by OMAFRA through the OEGF. Kawartha Ethanol Inc. has agreed to contribute $98,000 annually for 10 years (for a total of $980,000) starting April 2013 and ending with the final payment in April 2022. These funds are to be paid directly to ARIO to be used to support research priorities in the agri-food sector in Ontario. Funds recognized to date are $588,000. See Schedule 2.
Note 13: Investment income
Investment income is comprised of interest and dividend income, realized activity from sales of assets, realized activity from financial exchange, and management fees paid. The activity for the year is as follows:
| Investment income | 2019 $ |
2018 $ |
|---|---|---|
| Investment income | 620,035 | 506,185 |
| Loss on sale of investment | (19,307) | (9,599) |
| Financial exchange gain | 5,395 | 4,667 |
| Management fees | (22,624) | (35,410) |
| Net investment income | 583,499 | 465,843 |
Note 14: Corresponding figures
Prior years figures have been reclassified to conform to the current year’s presentation.
Schedule 1: Research trust funds: Financial position as at March 31, 2019
| Assets | ARIO $ |
Infrastructure $ |
New directions $ |
Food safety $ |
Eliminations $ |
2019 $ |
|---|---|---|---|---|---|---|
| Cash | 10,054,638 | 0 | 0 | 0 | 0 | 10,054,638 |
| Investments | 27,549,149 | 0 | 0 | 0 | 0 | 27,549,149 |
| Due from ARIO | 0 | 22,468,798 | 5,068,126 | 1,398,451 | (28,935,375) | 0 |
| Accounts receivable | 137,159 | 49,061 | 653 | 122 | 0 | 186,995 |
| Total current assets | 37,740,946 | 22,517,859 | 5,068,779 | 1,398,573 | (28,935,375) | 37,790,782 |
| Tangible assets under construction | 0 | 16,420,639 | 0 | 0 | 0 | 16,420,639 |
| Tangible capital assets (Note 5) | 0 | 78,875,275 | 0 | 0 | 0 | 78,875,275 |
| Total tangible assets | 0 | 95,295,914 | 0 | 0 | 0 | 95,295,914 |
| Total assets | 37,740,946 | 117,813,773 | 5,068,779 | 1,398,573 | (28,935,375) | 133,086,696 |
| Liabilities | ARIO $ |
Infrastructure $ |
New directions $ |
Food safety $ |
Eliminations $ |
2019 $ |
|---|---|---|---|---|---|---|
| Due to other research trust funds | 28,935,375 | 0 | 0 | 0 | (28,935,375) | 0 |
| Accounts payable and accruals | 643,735 | 1,573,621 | 606,175 | 102,338 | 0 | 2,925,869 |
| Holdbacks payable | 0 | 0 | 285,150 | 109,992 | 0 | 395,142 |
| Unclaimed expenditures | 1,314,500 | 0 | 1,231,305 | 542,231 | 0 | 3,088,036 |
| Deferred revenue | 0 | 168,500 | 98,000 | 0 | 0 | 266,500 |
| Total current liabilities | 30,893,610 | 1,742,121 | 2,220,630 | 754,561 | (28,935,375) | 6,675,547 |
| Deferred capital funded contributions (Note 6 and 9) | 0 | 82,286,657 | 0 | 0 | 0 | 82,286,657 |
| Deferred capital contributions (Note 7) | 0 | 15,616,617 | 0 | 0 | 0 | 15,616,617 |
| Total deferred capital | 0 | 97,903,274 | 0 | 0 | 0 | 97,903,274 |
| Total liabilities | 30,893,610 | 99,645,395 | 2,220,630 | 754,561 | (28,935,375) | 104,578,821 |
| Fund balance | ARIO $ |
Infrastructure $ |
New directions $ |
Food safety $ |
Eliminations $ |
2019 $ |
|---|---|---|---|---|---|---|
| Fund balances | 6,837,099 | 6,517,249 | 2,854,589 | 645,052 | 0 | 16,853,989 |
| Accumulated remeasurement gains (losses) | 10,237 | (30,562) | (6,440) | (1,040) | 0 | (27,805) |
| Contributed assets (Notes 4, 5 and 11) | 0 | 11,681,691 | 0 | 0 | 0 | 11,681,691 |
| Total fund balances | 6,847,336 | 18,168,378 | 2,848,149 | 644,012 | 0 | 28,507,875 |
| Total liabilities and net assets | 37,740,946 | 117,813,773 | 5,068,779 | 1,398,573 | (28,935,375) | 133,086,696 |
Schedule 2: Research trust funds: Revenues and expenditures and changes in fund balances for the year ended March 31, 2019
| Revenue | ARIO $ |
Infrastructure $ |
New directions $ |
Food safety $ |
2019 $ |
|---|---|---|---|---|---|
| Grants — provincial (Note 9) | 0 | 0 | 1,350,000 | 500,000 | 1,850,000 |
| Grants — OEGF (Kawartha and IGPC) (Note 12) | 0 | 0 | 378,000 | 0 | 378,000 |
| Intellectual property (Note 8) | 775,079 | 0 | 0 | 0 | 775,079 |
| Total research revenues | 775,079 | 0 | 1,728,000 | 500,000 | 3,003,079 |
| Revenue | ARIO $ |
Infrastructure $ |
New directions $ |
Food safety $ |
2019 $ |
|---|---|---|---|---|---|
| Rental income — provincial | 0 | 580,793 | 0 | 0 | 580,793 |
| Rental income — private industry | 0 | 1,314,501 | 0 | 0 | 1,314,501 |
| Grants — provincial — payments in lieu of taxes (Note 9) | 0 | 750,000 | 0 | 0 | 750,000 |
| Payments in lieu of taxes | 0 | 195,212 | 0 | 0 | 195,212 |
| Amortization of deferred capital contributions | 0 | 2,248,447 | 0 | 0 | 2,248,447 |
| Total property revenues | 0 | 5,088,953 | 0 | 0 | 5,088,953 |
| Revenue | ARIO $ |
Infrastructure $ |
New directions $ |
Food safety $ |
2019 $ |
|---|---|---|---|---|---|
| Gain on disposal of tangible capital asset (Note 11) | 0 | 1,035,000 | 0 | 0 | 1,035,000 |
| Investment income (Note 13) | 181,827 | 333,723 | 54,942 | 13,007 | 583,499 |
| Total other revenues | 181,827 | 1,368,723 | 54,942 | 13,007 | 1,618,499 |
| Revenue | ARIO $ |
Infrastructure $ |
New directions $ |
Food safety $ |
2019 $ |
|---|---|---|---|---|---|
| Total research revenue | 775,079 | 0 | 1,728,00 | 500,000 | 3,003,079 |
| Total property revenues | 0 | 5,088,953 | 0 | 0 | 5,088,953 |
| Other income | 181,827 | 1,368,723 | 54,942 | 13,007 | 1,618,499 |
| Total revenues | 956,906 | 6,457,676 | 1,782,942 | 513,007 | 9,710,531 |
| Expenditure | ARIO $ |
Infrastructure $ |
New directions $ |
Food safety $ |
2019 $ |
|---|---|---|---|---|---|
| Research project/program | 0 | 0 | 1,837,269 | 387,272 | 2,224,541 |
| Intellectual property (Note 8) | 359,870 | 0 | 0 | 0 | 359,870 |
| Total research expenditures | 359,870 | 0 | 1,837,269 | 387,272 | 2,584,411 |
| Item | ARIO $ |
Infrastructure $ |
New directions $ |
Food safety $ |
2019 $ |
|---|---|---|---|---|---|
| Payments in lieu of taxes | 0 | 1,223,035 | 0 | 0 | 1,223,035 |
| Minor capital | 0 | 3,976,546 | 0 | 0 | 3,976,546 |
| Operations and maintenance | 0 | 1,055,817 | 0 | 0 | 1,055,817 |
| Amortization of tangible capital assets | 0 | 2,248,447 | 0 | 0 | 2,248,447 |
| Total property expenditures | 0 | 8,503,845 | 0 | 0 | 8,503,845 |
| Item | ARIO $ |
Infrastructure $ |
New directions $ |
Food safety $ |
2019 $ |
|---|---|---|---|---|---|
| Total research expenditures | 359,870 | 0 | 1,837,269 | 387,272 | 2,584,411 |
| Total property expenditures | 0 | 8,503,845 | 0 | 0 | 8,503,845 |
| Total expenditures | 359,870 | 8,503,845 | 1,837,269 | 387,272 | 11,088,256 |
| Item | ARIO $ |
Infrastructure $ |
New directions $ |
Food safety $ |
2019 $ |
|---|---|---|---|---|---|
| Excess of (expenditures over revenues) revenues over expenditures for the year | 597,036 | (2,046,169) | (54,327) | 125,735 | (1,377,725) |
| Net amount transferred from unclaimed expenditures | 0 | 0 | 79,753 | (215,750) | (135,997) |
| Item | ARIO (Note 8) $ |
Infrastructure $ |
New directions $ |
Food safety $ |
2019 $ |
|---|---|---|---|---|---|
| Net assets, beginning of year | 6,234,952 | 21,213,199 | 2,816,523 | 733,863 | 30,998,537 |
| Net remeasurement gains for the year | 15,348 | 1,831 | 6,200 | 164 | 23,543 |
| Change in contributed land (Note 4) | 0 | (1,000,483) | 0 | 0 | (1,000,483) |
| Net assets, end of year | 6,847,336 | 18,168,378 | 2,848,149 | 644,012 | 28,507,875 |