Grain Financial Protection Board business plan for the fiscal years 2024–2027

Executive summary

As the newly appointed Grain Financial Protection Board (GFPB/board) chair as of November 3, 2023, I am pleased to present its business plan for fiscal years 2024–2027.

The GFPB will continuing to administer the four funds (grain corn, soybeans, wheat and canola) in a sound manner, and thus, provide producers/owners with an effective risk management tool that allows them to remain competitive. The board has outlined four strategic priorities for 2024–2027:

• To ensure long-term sustainability of the funds administered by the board;
• To continue to review, investigate and adjudicate claims in a fair and equitable manner;
• To grant, refuse and recover claim payments under the Farm Products Payments Act (FPPA), as appropriate; and
• To ensure appropriate agreements are reviewed, understood and in place to fulfill the mandate.

Since 2019, the ministry is leading a review of Ontario's legislation governing the financial protection programs (Grain Financial Protection Program and the Ontario Beef Cattle Financial Protection Program). New legislation “Protecting Farmers from Non-Payment Act” was passed in Spring 2023 as a result of the consultation with industry stakeholders is not yet operational. The new legislation will be proclaimed and operationalized following further consultation with industry and the drafting of new regulation. The ministry is targeting a late fall 2024 effective date for the new regulation coming into effect and the proclamation of the new legislation. Once changes are finalized and approved, the ministry will discuss with the board any changes that may impact the board which will be incorporated into the board's 2024/25 annual report and 2025–28 business plan. The board is currently operating under the FPPA until the new act is proclaimed and the regulations are approved and operationalized per the minister.

In 2021–22 fiscal, the board conducted an actuarial review in line with its good governance practice to complete a review approximately every five years. This initiative involved an independent third party vendor, to determine how potential claim payments and/or expenditures may impact the funds. Given the changes in the cost-share model that occurred in 2020 and the increased program delivery expenses coming out of the funds, it was a good time for an actuarial review to examine any impact to the funds. The last review occurred in 2016–17 fiscal. A summary of the results is on page 19. The results indicated that the funds are highly dependent upon revenue (check-off fees and investment income).

The board has committed to engaging an actuary in 2024–25 fiscal year due to environment changes that have occurred (i.e. interest rates; commodity prices). In the meantime, the board will continue to monitor all the funds to ensure they are growing or maintained at an appropriate level. Once consultations on the proposed regulatory amendments is complete, the board will finalize next steps and timing to engage an actuary as the actuary review.

Changes to interest rates affects the board's revenues. With the increase in investment interest rates since March 2022 the board has capitalized on strong rates for some short term investments (i.e. 1 to 3 year terms). As a result of this, the board's investment income over the prior year have provided a higher rate of return. While interest rates are rising in the short term, there is an inverted investment curve at indicating lower rates for longer terms (i.e. 3 to 5 years). The board's investment projections do anticipate a slight decrease to be expected in investment income returns for fiscal 2026 and into fiscal 2027. The board's strategy with investments considers a laddering approach when possible to reduce the influence of interest changes and to maximize revenue returns. The board will continue to review investments on a quarterly basis and make adjustments as needed.

Overall, based on the board's projections for 2024–2027, we anticipate generating enough revenue to cover the expenses (administrative program delivery and board support service expenses only), however claims are the unknown factor relevant to the board's operating expenses. A projected amount of $347,000 is included annually for budgeting purposes to be paid out of the funds. Revenue is also very dependent on the interest rates and check-off fees.

Key achievements from 2023–2024

• Review and management of fund performance completed;
• Business planning and risk assessment completed;
• Improvements to the board claim application form and a new claim information sheet were implemented and made available on agricorp.com;
• Met with key industry stakeholders to discuss results and recommendations from the actuarial review;
• Minister appointed board chair and the re-appointment of board members was achieved;
• Orientation held for appointed chair and any appointed members; and
• Annual review of policies and guidelines was undertaken with minor (non-material) or no updates made.

The board will continue to work collaboratively with the ministry to make recommendations for vacant member positions. The board continues to focus on the effective management of the funds. All policies and guidelines are reviewed annually to both ensure that the material continues to be relevant, and that the members remain informed.

Mandate

The GFPB was established in 1985 and is classified as a trust agency under the Agencies and Appointments Directive (AAD). The board's mandate of administrating the four funds (grain corn, soybean, wheat, and canola), investigating, granting and refusing claims, and recovering money is directly linked to one of the ministry's goals of ensuring the sustainability of agriculture in Ontario.

The board's mandate is set out in subsection 4 (1) of the FPPA:

4 (1) It is the function of a board and it has power,

1. To administer its fund;
2. To investigate all claims made to it under this act and to determine the extent of their validity;
3. To grant or refuse the payment of claims or any part thereof and determine the amounts and manner of payment;
4. To recover any money to which it is entitled under this act by suit in a court of competent jurisdiction or otherwise; and
5. to carry out the functions, and exercise the powers, prescribed by regulation.

The board's mandate, strategies and activities have always been focused on prudent management of the funds to ensure financial compensation is available to grain corn, soybean, wheat, and canola producers/owners when required.

The vision of the board is to protect the financial interests of Ontario producers who have sold grain corn, soybeans, wheat and canola, as well as owners who stored grain with elevator operators. The board's vision supports the Ontario Ministry of Agriculture, Food and Rural Affairs' (OMAFRA) priorities of a thriving agri-food sector and rural communities seizing economic opportunities.

Governance

The board is accountable to the minister, through the chair, for setting goals, objectives and the strategic direction for the board. The board operates under the authority set out in the FPPA and in accordance with the Memorandum of Understanding (MOU) between the minister and the chair, and under the regulations made thereunder:

• O. Reg. 70/12 (Payments From Funds For Grain Producers)
• O. Reg. 321/11 (Fees Payable to Boards)
• O. Reg. 467/19 (Boards Payment of Expenses)

The board must comply with provincial government directives that guide agencies in the delivery of services to the public. The AAD is a Management Board of Cabinet directive and sets out the requirements for the board as a provincial agency.

Memorandum of Understanding (MOU)

The MOU defines the relationship between OMAFRA and the board, including the roles and responsibilities of the minister, the deputy minister, the board chair and the board members. The MOU sets out the operational and reporting relationship between the board and the minister, and also outlines the administrative, financial and auditing arrangements with OMAFRA. With the appointment of a board chair effective November 3, 2023, both parties must renew the MOU by signing a letter of affirmation to the current MOU, or revise and sign the updated MOU within six months of the appointment. The chair and MOU are planning to affirm the existing MOU (that was effective June 5, 2017) and renew this before May 2024. The MOU is effective until it is revoked or the parties sign a new MOU.

Updates may be required to the MOU as a result of the legislative and proposed regulatory changes. Once changes are finalized and approved, the ministry will begin the work to update the MOU. The ministry is targeting a late fall 2024 effective date for the new regulation coming into effect and the proclamation of the new legislation (“Protecting Farmers from Non-Payment Act”).

Board structure

Per O. Reg. 70/12, the board shall be comprised of no fewer than five members as appointed by the minister for terms of up to three years. Members are eligible for reappointment. The minister also has the authority to appoint a chair and a vice chair. Currently, if either the chair or the vice chair position are vacant, the ministry will publicly post a job advertisement on the Public Appointment Secretariat (PAS) website where current board members and the general public can apply.

To ensure stakeholder confidence in its decisions, when there is a vacancy, the board requests stakeholders to identify candidates for recommendation to the minister for potential appointment. Currently membership of the board includes nominees from the Grain Farmers of Ontario (GFO), the Ontario Agri Business Association (OABA), the Ontario Canola Growers (OCG) and direct minister appointment. These industry groups are asked to select candidates based on the board's key competency needs of: industry experience as a primary agricultural producer or grain dealer; financial experience in accounting or investments; board governance and risk management. These key competencies enable the board to continue to meet its mandate and enhance performance as a board.

There are currently 8 board members including the chair. The chair role was vacant as of September 18, 2023 and the ministry posted a job advertisement publicly on the PAS for this vacancy for existing members and public to apply to. As a result of the job ad, the minister appointed a current board member to the position of chair effective November 3, 2023. The vice chair role is vacant as of February 26, 2024 as the existing member resigned from the board due to other time commitments associated within the industry. The ministry will post a job advertisement publicly on the PAS for this vacancy in the near future. Appendix 1 includes a list of the board members.

Minister's letter of direction

As part of the AAD process the minister issues an agency a minister's letter of direction to the chairs of all board-governed agencies on an annual basis to inform their business plan. The board chair received the letter of direction from the minister in December 2023 which outlines high-level, achievable expectations for the 2024–25 fiscal year (see Appendix 3 for a copy of the letter). The board has aligned its strategic approach and priorities to support these as follows:

• Providing effective oversight of Agricorp's delivery of program licensing; and Agricorp's investment and management of the funds that the board is accountable for.
• Maintaining open communication, providing superior client service, and stakeholder relations with key stakeholder groups, including: measuring and reporting on the performance of the funds against quantifiable targets; having an established investment policy that is reviewed annually and is shared with stakeholders; ensuring stakeholders have clarity on administrative and operational expenses paid from the funds; and ensuring key stakeholders groups understand the rationale for changes to the producer check-off fee.
• Continue to investigate and adjudicate claims in a fair, equitable and timely manner.
• Continue to engage with the ministry during upcoming consultations to support the operationalization of the Protecting Farmers from Non-Payment Act.
• Supporting government priorities to modernize program delivery and drive agri-food sector on innovation and resilience by using these lenses to inform the board's operational decisions and supporting ministry policy-development, as required, by leveraging the industry knowledge/expertise of its members.

These will be measured and addressed in the board's 2024–2027 business plan as follows:

• Effective oversight, risk management and expenditure management of the funds (e.g. use tactics such as engaging an actuary in 2024/25; approve the program budget; quarterly review and approve the financial reports of actual expenses (costs) relative to the board's budget and the fiscal year-end forecast.
• The board has committed to engaging an actuary in 2024–25 fiscal year and will keep open lines of communications with stakeholders on the process including the scope and assumptions being used in the review to ensure openness and transparency.
• Share the board's audited financials and the annual report with stakeholders following minister's approval of the annual report which provides the details of results for the fiscal year on the performance of the funds and reports performance against measures.
• Review, monitor the funds investment revenue through the quarterly investment summary report and annually review the board's established Statement of Investment policy (approve updates if needed) and share the policy with stakeholders. Annually review the performance of each of the funds against the established minimum target fund balance to ensure the balances are maintained as per the actuarial review.
• Annually review claims adjudication guidelines as well as ensure the processing of claims is completed fairly and with minimal delays.
• Continue to work with OMAFRA to support the financial protection programs review and to identify opportunities to ensure that grain producers and owners have access to stable risk management tools.
• Work with OMAFRA and stakeholders to identify and ensure any potential candidates for board appointment have the appropriate skills, knowledge and experience as needed.

Overview of current and future programs and activities

The following describes the Grain Financial Protection Program (GFPP), the four funds and the role of the board in the GFPP:

Grain Financial Protection Program

The GFPP was introduced in the mid-1980s, following a series of grain elevator bankruptcies. The GFPP program is comprised of the licensing component under the Grains Act. The program helps protect producers who sell grain and oilseeds to licensed dealers and/or elevator operators that default on payment.

Annually, all dealers and elevator operators must be licensed and make payments to producers within specified timelines.

Under the Grains Act, Agricorp (a provincial crown corporation), through the designation of a chief inspector who has statutory authority on licensing, is responsible for delivering all aspects of grain dealer and elevator operator licensing and inspection components of the GFPP. The following are the licensing components of the GFPP:

• Annually, determining the financial responsibility of grain dealers and elevator operators (to be licensed dealers/ operators must prove they are financially viable or provide/post security);
• Inspection of storage sites; and
• Licensing of grain dealers and elevator operators.

As part of the GFPP, producers are required to pay a check-off fee on each unit of grain and oilseed sold. The check-off fee is remitted by the stakeholders (GFO and OCG) to the GFPB and deposited into the appropriate fund.

The funds

There are four separate funds: grain corn, soybean, canola and wheat. The purpose of the four funds is to provide producers/owners with financial compensation in the event that a dealer or elevator operator defaults on their obligation or if there is a storage shortfall.

All revenue income held in the funds comes from the mandatory producer check-off fees and investment income generated from those fees.

Investment income is an important source of revenue for the funds. As such, currently investments of the monies in the funds are structured and managed to provide a maximum rate of investment return while assuming a low risk tolerance. The GFPB has a Statement of Investment policy, reviewed annually, that guides investments prior to any board decision. The board's asset mix currently includes investments that guarantee face value at redemption; generally this includes Guaranteed Investment Certificates (GIC) issued by financial institutions or similar financial instruments.

The FPPA authorizes the board to withdraw amounts from the funds for specific purposes, such as to compensate producers for valid claims when a dealer has defaulted on a payment or to compensate owners when an elevator has defaulted on a storage responsibility.

Per Ontario Regulation 467/19, the GFPB is responsible to pay all expenses relating to the administration of the following:

The Farm Products Payments Act (FPPA):

• The administration of the Fund for Canola Producer, the Fund for Grain Corn Producers, the Fund for Soybean Producers and the Fund for Wheat Producers, including actuarial studies of those funds;
• the adjudication of claims for payments from the funds;
• the recovery of money the board may be entitled to receive;
• communications and educational activities;
• the investigation of claims for payment from the funds; and
• legal fees associated with the FPPA.

The Grains Act:

• The determination of whether a person is financially responsible for the purposes of the act;
• the determination of the amount of security a person is required to pay to the chief inspector under the act;
• licensing under the act (issue, refusal, renew, suspend, revocation, impose terms and conditions);
• the issuance or refusal to issue a shortfall permit;
• requests for a hearing by the chief inspector in connection with licensing under the act;
• Inspections under the act;
• the exercise of the chief inspector's powers;
• communications and education activities in relation to the act; and
• actions taken to determine whether a person should be referred to the ministry for potential prosecution for an offense.

The funds are not used for:

• Board remuneration (i.e. board member per diems, travel and meal expenditures);
• Expenses related to appeals to the Agriculture, Food and Rural Affairs Appeal Tribunal; judicial reviews; prosecutions of offences; and legal fees associated with respect to the Grains Act.

Grain Financial Protection Board

The board is a trust agency that operates under the legal authority as set out in FPPA and Ontario Regulation 70/12. The board members are industry representatives appointed by the minister to manage the four producer funds (i.e. fund and investment management) and adjudicate claims (review and determine claim validity and how much a producer is eligible to receive in the event of a default).

The board administers the funds and, as such, in addition to adjudicating claims, its focus is on the growth of the funds and on prudent management of expenditures. The GFPB ensures there is adequate money in each of the four funds to pay for all expenses and to pay any valid claims.

Producers may submit a claim to the GFPB to cover a portion of their losses if a licensed dealer and/or elevator operator defaults and does not meet their payment or storage obligations.

• The GFPB will review and determine the validity of applications for potential payment from the funds (i.e. investigation may occur).
• They decide to pay or refuse to pay on a claim based on the evidence and provisions of the FPPA and regulations.
• Payment to producers and owners is made after the board has determined that the claim is valid and the board has approved the claim for payment.
• The board's main activities are to manage the funds effectively and prepare for claims when they occur.

The board typically meets quarterly, or as required by business demands (e.g. to review and adjudicate claims).

The board does not administer any other program and no new programs are being considered for the 2024–2027 timeframe.

Resources needed to meet objectives of mandate and strategic directions

Human resources and staff numbers

The board does not have staff. All resources are provided through a service agreement or as agreed to in the MOU between the board and the minister.

The board currently has a multi-year service agreement with Agricorp to provide governance, secretariat and financial services to the board (i.e. administration services to the GFPB for fund management, claim adjudication, governance and secretariat administration services). Staff that provide support to the board have no role in the licensing and inspection components of the GFPP. These functions are separate to avoid any perception of a possible conflict of interest in adjudicating the claims that arise from a licensed dealer's/elevator operator's default in payment, while protecting the integrity of the GFPP.

Resources, services, and support provided to the board

Board service agreement with Agricorp

Both governance/secretariat and financial support services are provided to the board by Agricorp as agreed to in the service agreement between the two parties. The current governance, secretariat and financial services agreement between the GFPB and Agricorp was extended for an additional one-year term, to March 31, 2025, allowing for the work on the new regulations to be completed and work towards a new delivery agreement. Updates to the current agreement may be required as a result of the legislative and proposed regulatory changes. Once changes are finalized and approved, the ministry will discuss any changes that may impact the board and next steps to explore options to update the agreement. The ministry is targeting a late fall 2024 effective date for new regulation coming into effect and the proclamation of the new legislation.

Additional support services to the board

The board has additional support available for legal counsel and the investigation of claims. These services are provided by the ministry to the board and effective April 1, 2020, these costs are paid for by the board.

• Investigative services are provided by the Agriculture Investigations Unit within OMAFRA's Food Safety and Environment Division; and
• Legal counsel/services are provided by OMAFRA through the ministry of the Attorney General, Legal Services Branch.

At this time the board is not considering other service providers for these services. If other service providers are considered, the board will engage the ministry as part of these discussions if needed so that consideration can be given to the broader implications for the program and the ministry from a risk management perspective.

Strategic direction

The board's strategic direction is focused on the following broad priorities which are essential in keeping with the board's mandate and responsibilities: 

• To ensure long-term sustainability of the funds administered by the board;
• To continue to investigate and adjudicate claims in a fair and equitable manner;
• To grant, refuse and recover claim payments under the FPPA, as appropriate; and
• To ensure appropriate agreements are reviewed, understood and in place to fulfill the mandate.

To support the priorities outlined above, the board has established five goals with corresponding objectives and activities that are used to assist with fulfilling their mandate.

The goals which the board focuses on are:

Environmental scan

The board is responsible through its mandate to manage the funds and to adjudicate claims presented by producers and owners of canola, grain corn, soybeans, or wheat. Producers or owners may submit a claim to the board to potentially cover a portion of their losses.

The factors that could impact the board and/or the health of the funds are outlined below.

External drivers

Interest rates

Interest rates play a significant role in the overall health of the funds. From 2020 until March 2022 the board's investments were providing a lower rate of return than expected (projected to be approximately 1.5%) due to low interest rates.

Since March 2022, interest rates have increased providing a higher rate of return for the board on their investments. While interest rates are rising in the short term, there is an inverted investment curve at indicating lower rates for longer terms (i.e. 3 to 5 years). The board's investment projections so anticipate a slight decrease to be expected in investment income returns for fiscal 2026 and into fiscal 2027. The board's current strategy with investments considers a laddering approach when possible to reduce the influence of interest changes and to maximize returns and will continue to review investments on a quarterly basis and make adjustments if needed.

The board will continue to review investments quarterly to ensure that the funds are invested in high quality investments that are consistent with the Trustee Act provisions referenced in the MOU and the board's investment policy, while also considering the current unprecedented low interest rates. The 2021–22 actuarial review also recognized this that shorter duration investments are being favoured over long-term investments in recent years.

Commodity prices

Commodity prices have experienced great volatility that may increase cash flow challenges and increase the amount of risk to dealers and elevator operators and, in turn, to the funds. This volatility has made it harder to predict the future of commodity prices. The commodity prices volatility increases risk to the funds.

Elevator operators and dealers

In recent years there has been an increase in the number of smaller businesses offering grain elevator and/or dealer services. Many of these are producers increasing their own on-farm storage capacity and using their surplus storage capacity to store grain for other producers. An awareness campaign by stakeholders has resulted in an increased knowledge of the requirement to deal with a licensed facility. Agricorp addresses unlicensed facilities and dealers as soon as they are apparent with actions under the Grains Act.

If a dealer or elevator is not licensed, a review of that organization's financial responsibility is completed. This may determine the risk that the organization will default on their obligations to a producer or owner. Agricorp occasionally receives complaints about unlicensed operators, but the number has decreased from a few years ago when many producers increased on farm storage capacity and provided custom storage to neighbours while unlicensed. In the majority of the cases, the complaint has resulted in the operator completing an application and the issuance of a license for the grain elevator.

Out of province dealers

In the past few years, there have been a few dealers based in Quebec or the United States that require a license. Producers are free to sell and transport crops to other jurisdictions but if operations are purchasing from Ontario producers, a license is required. There are out of province dealers that are currently licensed.

Increased demand for government accountability and transparency

Increased scrutiny of both private and public sector organizations has resulted in increasing demands for accountability. Government, including agencies, need to perform their functions effectively and efficiently in a transparent and responsible manner. They must show that government directives are complied with and outcomes are achieved through clear and regular reporting. The Management Board of Cabinet requires greater board accountability, transparency, reporting and standardized risk identification and management. In response to the need for greater transparency, the board completes and submits to the ministry a quarterly risk assessment report and an annual agency attestation and meets required Ontario Public Sector (OPS) directives.

Legislative, strategic and policy changes

The board was established under the FPPA, which is administered by OMAFRA. Any change to the FPPA could have a direct and profound impact upon the board and its activities. Since 2019, the ministry is leading a review of Ontario's legislation governing the financial protection programs (Grain Financial Protection Program and the Ontario Beef Cattle Financial Protection Program). New legislation “Protecting Farmers from Non-Payment Act” was passed in Spring 2023 as a result of the consultation with industry stakeholders is not yet operational. It will be proclaimed and operationalized following further consultation with industry and the drafting of new regulation. The ministry is seeking industry input and targeting a late fall 2024 effective date for the new regulation coming into effect and the proclamation of the new legislation. Once changes are finalized and approved, the ministry will discuss with the board any changes that may impact the board which will be incorporated into the board's 2024–25 annual report and 2025–28 business plan. The board is currently operating under the FPPA until the new act is proclaimed and the regulations are approved and operationalized per the minister.

Financial Responsibility Review Committee (FRRC)

The FRRC was established in the 1980's to provide third party expert advice related to the determination of the financial strength of GFPP applicants. The FRRC includes two third-party chartered accountants that are procured by Agricorp as per directives to review all licensee files and provide licensing recommendations to the chief inspector for the GFPP. The FRRC services and role are documented in a terms of reference document.

In 2021 the ministry led a review of the FRRC's mandate to assess its continued role in supporting the program and identify any potential changes in its mandate. Based on feedback from industry stakeholders and Agricorp, it was determined that FRRC continues to play an important role in supporting the program.

Internal drivers

Funds

An actuarial review was conducted in 2021–22 fiscal year and the results were presented to the board in February 2022. The results indicated that the funds are highly dependent upon revenue (check-off fees and investment income). The risk of not achieving the target surplus position for the grain corn and canola funds is increasing over time which indicates that the funding are not sufficient and recommends the grain corn and canola check-off fees be increased in the near future to ensure these funds remain solvent. The board discussed the actuarial review recommendations with stakeholders in December 2022 and respectfully recommended to the minister a change in the check-off fees for grain corn and canola.

The board has committed to engaging an actuary in 2024–25 fiscal year and will keep open lines of communications with stakeholders on the process including the scope and assumptions being used in the review to ensure openness and transparency. In the meantime, the board will continue to monitor all the funds against the target levels to ensure they are growing or maintained at an appropriate level. Once consultations on the proposed regulatory amendments is complete, the board will finalize next steps and timing to engage an actuary.

Board expertise and development

The funds have a low frequency of claims. This makes it difficult for board members to acquire “hands-on” claims adjudication experience. The board annually reviews the Claim Adjudication Guidelines and claims training is held to assist board members to adjudicate claims. Board members bring a variety of skills and experience and an annual review of these guidelines promotes a consistent approach to adjudicating claims.

Board knowledge management and succession planning

Planning and consideration are given to the expiry date of members' terms to minimize the loss of experience and knowledge during member transition periods. A review of current board members' terms is conducted at every board meeting. When providing potential appointments to the minister for consideration, it is recommended that tenures are staggered in part to promote continuity on the board.

Performance measures and targets 

The following indicators define the outcomes the board is committed to achieving. These indicators are the basis for measuring and evaluating impact.

Implementation plan: Performance measures and targets for each objective are identified below.  As part of its continuous improvement process, the board has set goals to ensure that objectives are achieved. The board also tracks progress against these measures and prepares an annual report.

Minimum target fund balances are maintained as per actuarial review. (2022/23 to 2025/26 target is per 2021–22 actuarial review).

Financial budget

The estimated revenues and expenses for the next three years are provided in Table 1 (below). The board is subject to an annual audit by the Office of the Auditor General of Ontario.

The financial audit of the 2022–23 fiscal year was completed in January 2024 with an unqualified opinion. The funds (grain corn, soybean, wheat and canola) meet the minimum target balances as outlined in the 2022 actuarial report. Total revenue for 2022–23 was $1,030,251 and total expenses were $547,893.

Projected board revenues for 2024–2027

The board receives revenue for the four separate funds from two sources. Revenue is received from producer check-off fees and interest earned on the balance of the funds held. 

Check-off fees

Producers contribute to the funds by paying check-off fees that are received when a producer sells one of the four commodities: grain corn, soybean, canola or wheat. Each commodity has its own check-off fee which is expressed in $/tonne. They are based on the volume of crop sold and current fees are outlined for the four commodities below: 

• Corn: 1/10 of 1 cent/tonne
• Wheat: 5 cents/tonne
• Soybeans: 10 cents/tonne
• Canola: 20 cents/tonne

Assuming that the projected sales of the four commodities would be similar to previous years, the projected check-off fees revenue for 2024–27 will be approximately $498,000 per annum based on an average from the last three-years plus current year activities.

The 2021–22 actuarial review results recommended that the grain corn and canola check-off fee be increased in the near future. The risk of not achieving the target surplus position for the grain corn and canola funds is increasing over time which indicates that the funding are not sufficient and recommends the grain corn and canola check-off fees be increased in the near future to ensure these funds remain solvent. The board discussed these recommendations with stakeholders on December 16, 2022. The board sent a letter to respectfully recommend to the minister consider a change in the check-off fees for grain corn (from $0.001 to $0.019 per tonne sold) and canola (from $0.20 to $0.417 per tonne sold) based on the results. Check-off fees are outlined in minister's regulation therefore any changes to the check-off fee would require minister approval as the minister has the authority to set these check-off fees under the FPPA. The recommendation to increase the check-off fees is being addressed as part of the development of the regulations through the financial protection program review.

The actuarial review is a point in time report in 2021–22 and the board acknowledges that the environment has changed since it was completed (i.e. interest rates; commodity prices). The board has committed to engaging an actuary in 2024–25 fiscal year. To ensure openness and transparency the board will engage with stakeholders on the scope of the review and assumptions being used and keep open lines of communication throughout the process. In the meantime, the board will continue to monitor all the funds and once consultations on the proposed regulatory amendments is complete, the board will finalize next steps and timing to engage an actuary.

The last adjustment to the fees was approved by the minister effective July 1, 2013 (which was an increase in soybean check-off fee and a decrease in the wheat check-off fee. No change made to grain corn or canola check-off fee).

Investment interest

The second source of revenue is from investment interest earned on the balance of the funds held which is a key source of revenue on the balance of the funds. The board invests in instruments authorized under the MOU and as per their investment policy that is reviewed annually.

In fiscal 2024, the Bank of Canada increased its policy rate from 4.5% to the present rate of 5% effective January 24, 2024. This has resulted in an increase in interest rates throughout the fiscal year, increasing interest income on cash balances, as well as increased returns on investments made during fiscal 2024. Overall, interest returns for fiscal 2023–24 are forecasted to be 4.4%. Returns are anticipated to increase in the next fiscal year and then have a slight decreases the following two fiscal years with projected investment returns of 4.8% in fiscal year 2024–25, 4.7% in fiscal year 2025–26 and 4.4% in fiscal 2026–27. While interest rates are rising in the short term, there is an inverted investment curve at present indicating lower rates for longer terms (i.e. 3 to 5 years). This anticipated decline results in a slight decrease to expected returns for fiscal 2026 and into fiscal 2027.

Overall return on investment for the next two fiscal years is expected to be consistent with current year levels, and then projecting a slight decrease for future fiscal years. The board's strategy with investments considers a laddering approach when possible to reduce the influence of interest changes and to maximize returns.

Projected board expenditures for 2024–2027

The board has been able to effectively manage expenses over the past several years. For 2024–25, the budgeted expenses are estimated to remain similar compared to the previous year.

Effective January 1, 2020, as part of the new minister's regulation (O. Reg. 467/19: Boards' Payment of Expenses), the FPPA was amended to enable regulations requiring the board to pay for all expenses relating to the administration of both the Grains Act (expenses related to annually determining financial responsibility of dealers, licensing, inspections and enforcement) and the FPPA (expenses related to fund management and claim adjudication).

As well under that regulation, effective April 1, 2020, the board began to pay investigative and some legal costs under the FPPA. The board is not required to pay expenses related to judicial reviews of its decisions or expenses related to any subsequent appeals under the FPPA. The board is also not required to pay expenses related to appeals, judicial reviews, prosecutions and legal fees with respect to the Grains Act.

Appointees receive remuneration (i.e. per diem, travel and meal expenditures) based on their role and as outlined in the AAD for board meetings, training and orientation. This is paid by OMAFRA and not from the funds.

Expenses related to the Grains Act

Financial responsibility review, licensing & enforcement — As indicated in the MOU, the board is obliged to pay the person or persons who are responsible for determining whether grain dealer license applicants and grain dealer licensees are financially responsible (annually determining financial responsibility of dealers, licensing, inspections and enforcement). Agricorp is that person.

The expenses from 2024-2027 reflects the board paying for all administrative program delivery expenses (costs) of the Grains Act. Although the board is required to pay all administrative program expenses from the funds, they have no authority for licencing and enforcement of individual dealers and/or elevator operators under the Grains Act.

Financial Responsibility Review Committee (FRRC) — The FRRC is an external third-party vendor that is procured by Agricorp to provide advice and recommendations to the chief inspector regarding the financial risk assessment of grain license applications. The FRRC members review approximately 300 files annually. In 2023, Agricorp signed a contract agreement with the two existing FRRC members with the agreement term expiring October 2027). The FRRC services and role are documented in a terms of reference document.

The board is responsible to pay for all administration of the Grains Act (GFPP program delivery administrative expenses) effective January 1, 2020 which includes FRRC expenses. The board has no authority in the licensing process as the licensing authority remains Agricorp's.

Expenses related to the FPPA

Claim payments — All claim payments and associated administrative expenses for claim payments are paid from the four funds. The total expense depends on the number and complexity of the claims received by the board and the amount of approved claims. The board's budget for claims is set with the assumption to allow for the potential contingency that claim payments may occur and be paid from the fund annually. While claims have been infrequent, the board still sets this assumption for budget purposes based on their mandate to ensure there are funds to pay claims. 

The previous actuarial report used $263,000 as the budgeted claim payment amount. The 2021–22 actuarial review used a claim severity of $347,000 (that includes for potential catastrophic losses) which is higher as a result of the increased commodity prices since the last actuarial review and the assumption that the potential claim payments to be paid out would be larger.

In 2023-24, there were no claims submitted from producers or owners seeking payment from the funds and no payout from the funds.

Governance, secretariat and financial support services — The FPPA requires the board to meet all its expenses from the funds except for the remuneration of those of its employees who are public servants employed under Part III of the Public Service of Ontario Act, 2006. The board has entered into a contract with Agricorp for these administrative services to the board (fund management, claim adjudication, governance and secretariat administration services to the GFPB) which currently expires March 31, 2024. The parties are proposing to extend the expiry for an additional 1-year term to March 31, 2025 to allow for the work on the new regulations to be completed and work towards a new delivery agreement.

Professional, technical or other assistance to the agency — An example of this type of expense would be the actuarial review conducted approximately every five years. An actuarial review was last conducted in 2021–22 fiscal as included in the budget and the expenses came in under budget. The board has committed to engage an actuary in 2024–25 fiscal year and this is reflected in financial table.

Board legal services and investigation — Since April 1, 2020 the board pays the costs for most legal services associated with the administration of the FPPA and investigative costs. Legal services also reviews any board agreements, governance documents and provides other legal advice as requested. This is a new expense reflected in the board's financials for 2020–21 onward. The board budgets for legal and investigative services with the assumption that there are claims to adjudicate that would require legal and investigative services. The budget is set to allow for this potential contingency that may occur.

For any general legal and investigative expenses that are invoiced to the board (i.e. review of agreement), these will be allocated among each of the four funds based on the board's expense allocation policy. For any legal and investigative services relating to claim adjudication that are invoiced to the board, these will be allocated to the fund based on the commodity being claimed. In the case of multiple commodities being claimed, the allocation will be prorated based on the percentage of total tonnes claimed by commodity. This is outlined in the board's expense allocation policy which is reviewed by the board annually.

Proposed capital expenditures

The board does not have any capital expenditures planned for 2024–2027.

Table 1. Financial table — expenditure and revenue (as of February 29, 2024)

See Appendix 3 for a summary of actual revenue and expenditure by fund for 2021–22 and 2022–23.

Initiatives involving third parties

Approximately every 5 years the board conducts an actuarial review, an initiative that involves an independent third-party vendor, to determine how potential claim payments may impact the funds. As an agency of the government, the board adheres to the Ontario Public Sector (OPS) Procurement Directive when making any purchases for goods or services from a third-party vendor.

The board conducted the procurement process and the successful independent third-party vendor conducted an actuarial review in the 2021–22 fiscal based on the change in the funding model that occurred in 2020. The last actuarial review was completed in 2016–17. This expense of this is paid from the four funds. The actuarial review is a report that was completed at a point in time based on financial information available at that time.

The board acknowledges that the environment has changed since the actuarial review was completed (i.e. interest rates; commodity prices) and have committed to engaging an actuary in 2024–25 fiscal year. The review may also consider any of the proposed regulatory changes that could have an impact on both expenses and revenues for the funds. Once consultations on the proposed regulatory amendments is complete, the board will finalize next steps and timing to engage an actuary.

No other initiatives involving third parties is planned for 2024 to 2027.

Information technology

All information technology support is provided by Agricorp through the maintenance of ready access and secure storage of documents developed and received on behalf of the board. The mandate of the board does not require electronic service delivery.

Risk assessment and management

The AAD requires a risk-based approach to be used to focus ministry and central agency resources on higher risk agencies and to ensure compliance with directive requirements. The table below provides a description of the risks identified and the plans to mitigate these risks. Aside from the actions detailed below, risk management is also supported by a strong commitment by the board and its service provider to meet or exceed the performance measures outlined in this plan.

Communication plan

Schedule C of the MOU between the board and the ministry outlines the communication plan that the board will follow.  

Key messages for communication

• Clearly outlines the process and regulations that are followed in making a decision.
• Identifies section(s) of the applicable act(s) and regulations used to arrive at a decision. 

Key messages for broad based communications

• All funds are maintained on an actuarially sound basis.
• The board adjudicates claims made under the FPPA and determines the payment, if any, to be made from the fund.
• The FPPA protects the financial interests of producers who sell grain corn, soybeans, wheat and canola to licensed dealers. It also protects the financial interests of owners who store grain corn, soybeans, canola or wheat with licensed elevator operators.
• Agricorp is responsible under contract with OMAFRA to administer the licensing, inspection and enforcement components of the GFPP including the determination of financial responsibility of licence applicants.                 

Tools used to communicate key messages

• Annually, inform stakeholders of the status and performance of the funds by providing them with a copy of the board's audited financial statements and annual report when available.
• In the event of a claim, the board will advise each claimant and the dealer and/or elevator operator via letter on the outcome of their claim.
• Share the board's established investment policy with stakeholders following the board's annual review.
• Meet and participate in minimum of one stakeholder meeting every two to three years or more frequently, as needed. Provide updates to stakeholders when available on board member appointments (i.e. new appointees and re-appointments.
• The minister will consult with the chair, as appropriate, when significant new directions for the board are contemplated. The deputy minister will meet with the chair, as necessary, to discuss matters of mutual importance to the board and OMAFRA.

Actuarial review report

• The board informed the industry stakeholders of the results from the 2021–22 actuarial review by sharing the final report by email on September 26, 2022. Also, a meeting was held with stakeholders on December 16, 2022 where analysis from the actuarial review including the revenue received through the check off fees and recommendation for changes was presented and discussed.
• The board will keep open lines of communications with stakeholders on the engagement of an actuary in 2024/25 to ensure openness and transparency.

New legislation and new regulation (target late fall 2024)

• The ministry is targeting a late fall 2024 effective date for the new regulation coming into effect and the proclamation of the new legislation. Once changes are finalized and approved, the ministry, Agricorp and the board will determine how best to communicate changes to producers and licensed dealers.

Appendix 1: Current board Appointees (as of February 29, 2024)

Appendix 2:  History of claims (as of February 29, 2024)

Appendix 3: Revenue and expenditure by fund for 2021–22 and 2022–23 fiscal

Summary of the 2021–22 and 2022–23 revenue and expenses by fund (based on the audited financial statements):

• Overall the total fund balance of the four funds is $18.3M as of March 31, 2023, which is an increase from the previous year primarily due to the investment income received.
• There were no claim applications received and none to adjudicate. Claims paid was $0 over the last two fiscal years.
• The fund revenue from check-off fees decreased slightly in 2022–23, from the previous year.
• While the overall fund increased as of March 31, 2023, the financial position of the four fund balances fluctuated year over year.

Appendix 4: Ministers letter of direction for 2024–25

Ron Campbell
Chair, Grain Financial Protection Board 
1 Stone Road West 
Guelph, ON N1H 8M4

Dear Ron:

I am pleased to share our government's 2024–25 priorities for the Grain Financial Protection Board (GFPB).

As chair, you play a vital role in helping the GFPB achieve its mandate. It is important that your agency's goals, objectives, and strategic direction continue to align with our government's priorities and direction. As part of the government of Ontario, agencies are expected to act in the best interests of the people of Ontario and ensure that they provide value for money to taxpayers. Agencies are also required to adhere to government policies and directives.

Per the requirements of the Agencies and Appointments Directive, this letter sets out my expectations for the GFPB for 2024-25. These priorities include:

1. Competitiveness, sustainability and expenditure management

• Operating within the agency's financial allocations.
• Identifying and pursuing opportunities for efficiencies and savings through innovative practices, and/or improved program sustainability.
• Complying with applicable direction related to accounting practices.

2. Transparency and accountability

• Abiding by applicable government directives and policies and ensuring transparency and accountability in reporting.
• Adhering to accounting standards and practices, and responding to audit findings, where applicable.
• Identifying appropriate skills, knowledge and experience needed to effectively support the board's role in agency governance and accountability, and providing the minister with annual skills matrices to ensure boards have qualified appointees.
• Reviewing and updating agency key performance Indicators annually to ensure efficiency, effectiveness and sustainability.

3. Risk management

• Developing and implementing an effective process for the identification, assessment and mitigation of agency risks, including cyber security, and any future emergency risks.

4. Diversity and inclusion

• Developing and encouraging diversity and inclusion initiatives by promoting an equitable, inclusive, accessible, anti-racist and diverse workplace.
• Adopting an inclusion engagement process to ensure all voices are heard to inform policies and decision-making.

5. Data collection, sharing and use

• Improving how the agency uses data in decision-making, information sharing and reporting, to inform outcome-based reporting and improve service delivery.

6. Digital delivery and customer service

• Exploring and implementing digitization for online service delivery to ensure customer service standards are met.
• Using a variety of approaches or tools to ensure service delivery in all situations.

These are the government-wide commitments for board-governed provincial agencies. Please see the attached guide for further details of each priority.

I am also sharing several priorities specific to the GFPB:

1. Providing effective oversight of: (1) Agricorp's delivery of program licensing; and (2) Agricorp's investment and management of the funds (i.e. monies generated via the check-off fee) that the board is accountable for. This includes effective oversight of program expenses to ensure efficiency, transparency, financial accountability, and future sustainability.
2. Maintaining open communication, providing superior client service, and stakeholder relations with key stakeholder groups, including: (1) measuring and reporting on the performance of the funds against quantifiable targets; (2) having an established investment policy that is reviewed annually and is shared with stakeholders; (3) ensuring stakeholders have clarity on administrative and operational expenses paid from the funds; and (4) ensuring key stakeholder groups understand the rationale for changes to the producer check-off fee.
3. Continuing to investigate and adjudicate all claims in a fair, equitable and timely manner with a focus on reducing burden and improving the customer service experience. The board is expected to make decisions on claims based on prudent and consistent adherence to established operational procedures, as well as effective customer service.
4. Continuing to engage with the ministry, as needed, during upcoming consultations to support the operationalization of the Protecting Farmers from Non-Payment Act.
5. Supporting government priorities to modernize program delivery and drive agri-food sector innovation and resilience by using these lenses to inform the board's operational decisions and supporting ministry policy-development, as required, by leveraging the industry knowledge/expertise of its members.

To achieve the above, there is an expectation that the GFPB continues to act in the best interests of the board and the beneficiaries. I look forward to hearing how these priorities will be reflected in the agency's upcoming business plan and in ongoing agency operations.

Thank you and your fellow board members for your continued commitment to the GFPB. Your work and ongoing support is invaluable to me and the people of Ontario. Should you have any questions, please feel free to contact my office or David Hagarty, Assistant Deputy Minister, Policy Division.

Sincerely,

Hon. Lisa M. Thompson
Minister of Agriculture, Food and Rural Affairs

cc: David Hagarty, Assistant Deputy Minister, Policy Division