2022–23 Agricultural Research Institute of Ontario financial statements

Independent auditor’s report

To the Director of Research 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, 2023 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, 2023 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, as a whole, 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.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the organization’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the organization’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the organization to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Guelph, Ontario
July 13, 2023
Chartered Professional Accountants
Licensed Public Accountants

Statement of financial position as at March 31, 2023

Assets

Asset	2023 (schedule 1) $	2022 $
Cash	9,147,878	7,501,337
Investments	23,153,079	89,928,497
Accounts receivable	1,448,798	1,215,620
Total current assets	33,749,755	98,645,454
TCAs under construction	13,642,914	35,721,913
TCAs (notes 5 and 13)	107,305,596	78,134,301
Total assets	154,698,265	212,501,668

Liabilities

Liability	2023 (schedule 1) $	2022 $
Accounts payable and accruals	8,290,845	15,154,235
Payable to Minister of Finance (note 10)	0	52,346,420
Holdbacks payable	69,850	52,000
Unclaimed expenditures	1,215,617	2,211,018
Deferred revenue	128,532	198,000
Total current liabilities	9,704,844	69,961,673
Asset retirement obligations (notes 13 and 15)	3,207,051	0
Deferred capital funded contributions (notes 6, 9, and 13)	105,276,715	103,003,399
Deferred capital contributions (note 7)	7,867,669	8,917,477
Total liabilities	126,056,279	181,882,549

Net assets

Net assets	2023 (schedule 1) $	2022 $
Fund balances (note 13)	22,277,879	24,595,324
Accumulated remeasurement losses	(67,339)	(407,651)
Contributed assets (note 4)	6,431,446	6,431,446
Total net assets	28,641,986	30,619,119

Total liabilities and net assets

Liabilities and net assets	2023 (schedule 1) $	2022 $
Total liabilities and net assets	154,698,265	212,501,668

Statement of revenues and expenditures and changes in fund balances for year ended March 31, 2023

Research revenues

Revenue	2023 (schedule 2) $	2022 $
Grants — OEGF (Kawartha and IGPC) (note 11)	98,000	382,122
Intellectual property (note 8)	695,900	758,666
Total research revenues	793,900	1,140,788

Property revenues

Revenue	2023 (schedule 2) $	2022 $
Grants — provincial — minor capital (note 9)	4,500,000	4,500,000
Grants — provincial — CAP (note 9)	100,000	0
Rental income — provincial	310,471	380,381
Rental income — private industry	134,026	239,875
Recovery of holding costs — SOLGEN (note 14)	0	64,351
Grants — provincial — payments in lieu of taxes (note 9)	1,250,000	1,250,000
Payments in lieu of taxes	84,665	185,281
Amortization of deferred capital contributions	3,226,144	2,459,459
Total property revenues	9,605,306	9,079,347

Other revenues

Revenue	2023 (schedule 2) $	2022 $
Net gain on sale of TCAs (note 10)	0	667,037
Deferred capital contributions recognized on sale of TCAs (notes 7 and 10)	0	3,719,169
Other income	30,150	13,071
Realized loss on sale of investment	(1,094,176)	(465,747)
Investment income	964,531	755,610
Total other revenues	(99,495)	4,689,140

Total revenues

Revenue	2023 (schedule 2) $	2022 $
Total research revenues	793,900	1,140,788
Total property revenues	9,605,306	9,079,347
Total other revenues	(99,495)	4,689,140
Total revenues	10,299,711	14,909,275

Research expenditures

Expenditure	2023 (schedule 2) $	2022 $
Research projects	920,985	154,026
Intellectual property (note 8)	19,445	46,742
Total research expenditures	940,430	200,768

Property expenditures

Expenditure	2023 (schedule 2) $	2022 $
Payments in lieu of taxes	1,216,237	1,385,660
Minor capital	4,784,825	6,960,764
Management consulting expense	150,064	0
Operations and maintenance	280,794	499,108
Accretion expense	108,554	0
Amortization of TCAs	3,322,870	2,459,459
Total property expenditures	9,863,344	11,304,991

Total expenditures

Expenditure	2023 (schedule 2) $	2022 $
Total research expenditures	940,430	200,768
Total property expenditures	9,863,344	11,304,991
Total expenditures	10,803,774	11,505,759

Excess of revenues over expenditures (expenditures over revenues) for the year

Item	2023 (schedule 2) $	2022 $
Excess of revenues over expenditures (expenditures over revenues) for the year	(504,063)	3,403,516
Net amount transferred from unclaimed expenditures	995,401	173,935
Net excess of revenues over expenditures for the year	491,338	3,577,451

Net assets

Net assets	2023 (schedule 2) $	2022 $
Net assets, beginning of year	30,619,119	32,691,138
Net remeasurement (losses) gains for the year	340,312	(399,225)
Change in contributed land (note 4)	0	(5,250,245)
Opening balance adjustment (note 13)	(2,808,783)	0
Net assets, end of year	28,641,986	30,619,119

Statement of remeasurement losses for year ended March 31, 2023

Remeasurement losses	2023 $	2022 $
Accumulated remeasurement losses, beginning of year	(407,651)	(8,426)
Unrealized gains attributable to investments	1,434,488	66,522
Amounts reclassified to the statement of revenues and expenditures and changes in fund balances: realized loss on sale of investments	(1,094,176)	(465,747)
Net remeasurement (losses) gains for the year	340,312	(399,225)
Accumulated remeasurement losses, end of year	(67,339)	(407,651)

Statement of cash flows for year ended March 31, 2023

Cash provided by (used in) operating activities

Operating activity	2023 $	2022 $
Excess of (expenditures over revenues) revenues over expenditures for the year	(504,063)	3,403,416

Items not requiring an outlay of cash

Operating activity	2023 $	2022 $
Amortization of TCAs	3,322,870	2,459,459
Accretion expense	108,554	0
Deferred capital funded contributions adjustment	0	10,052,480
Deferred capital funded contributions recognized	(2,176,336)	0
Deferred capital funded contributions expensed as minor capital	(757,305)	0
Completed project surplus transferred (to) from unclaimed expenditures	0	(323,439)
Deferred capital contributions	(1,049,808)	(4,131,062)
Direct non-cash increase to deferred capital funded contributions	(1,199,652)	0
Gain on sale of TCAs	0	(67,242,834)
Net remeasurement (losses) gains	340,311	(399,225)
Total items not requiring an outlay of cash	(1,915,429)	(56,181,105)

Changes in non-cash working capital

Operating activity	2023 $	2022 $
Accounts receivable	(233,178)	158,977
Accounts payable and accruals	(6,863,390)	12,739,115
Holdbacks payable	17,850	(190,908)
Payable to Minister of Finance	(52,346,420)	52,346,420
Deferred revenue	(69,468)	(182,000)
Total cash provided by (used in) operating activities	(61,410,035)	8,690,499

Cash provided by (used in) investing activities

Capital activity	2023 $	2022 $
Investments	66,775,418	(72,595,587)
Total cash provided by (used in) investing activities	66,775,418	(72,595,587)

Cash provided by (used in) capital activities

Capital activity	2023 $	2022 $
Proceeds on sale of TCAs	0	71,458,886
TCAs under construction	(8,925,799)	(14,635,912)
Deferred capital funded contributions	5,206,957	6,629,330
Total cash provided by (used in) capital activities	(3,718,842)	63,452,304

Net change in cash for the year

Cash	2023 $	2022 $
Net (decrease) increase in cash for the year	1,646,541	(452,784)
Cash, beginning of the year	7,501,337	7,954,121
Cash end of the year	9,147,878	7,501,337

Notes to the financial statements

Note 1 — Nature of organization

Under the province of Ontario Agencies and Appointments Directive, the Agricultural Research Institute of Ontario (ARIO) is classified as a Board Governed Operational Service Agency reporting to the Minister of Agriculture, Food and Rural Affairs. In addition, 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 for the co‑ordination and direction of agri‑food research programs and research infrastructure in Ontario. These activities relate to a broad range of commodities and disciplines, covering all aspects of the agri‑food system.

Funding for programs supported by ARIO is available from various sources. The Ontario Government, through the Ministry of Agriculture, Food and Rural Affairs (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 as follows:

• ARIO
• Open Competitive Research (includes 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 and all other revenues 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. Investment income is accrued in the period the investment returns are earned.

Financial instruments

Measurement of financial instruments

The organization initially measures its financial assets and liabilities at fair value, except for certain non-arm’s length transactions.

The organization subsequently measures all its financial assets and financial liabilities at amortized cost, except for investments, which are measured at fair value. Changes in fair value are recognized in the statement of remeasurement losses.

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 (TCAs) are recorded at cost and are amortized using the following annual rates and method:

• buildings and components — 25 to 40 years straight line

TCAs under construction (new buildings) are not amortized.

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 expenditure 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.

Asset retirement obligation

ARIO records asset retirement obligations when there is a legal obligation associated with the retirement of the TCA that results from the acquisition, construction, development and/or normal use of a TCA. Such obligation justifies recognition of a liability and can result from existing legislation, regulation, agreement, contract or a promise and an expectation of performance. The estimate of the liability includes costs directly attributable to asset retirement activities, such as post‑retirement operation, maintenance, and monitoring that are an integral part of the retirement of the TCA. Estimated retirement costs are capitalized to the carrying value of the associated assets and amortized on a straight line basis over the asset's estimated useful life. The amortization of the asset retirement costs follows the same method of amortization as the associated TCA.

Note 3 — Financial instruments

Fair value

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 3 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 classified as Level 2 except for cash which is classified as Level 1 as at March 31, 2023 and 2022.

There were no transfers in or out of Level 1 or Level 2 for the years ended March 31, 2023 and 2022.

Associated risks

Market price risk

Market price risk is the risk that the value of an instrument will fluctuate because 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 $231,531 (2022 — $899,285). The price of the investments is affected by changes in market values, foreign exchange rates and interest rates impacting the underlying financial instruments held within the individual investments managed by the investment manager.

Interest rate risk

Interest rate risk refers to the adverse consequences of interest rate changes on the Institute’s cash flows, financial position and income. Interest rate changes have an indirect impact on the investment assets in ARIO. ARIO uses investment diversification to manage this risk.

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

All of ARIO’s fixed income securities are considered to be readily realizable as they can be quickly liquidated at amounts close to their fair value in order to meet liquidity requirements.

Foreign currency risk

Foreign currency risk is the risk that fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. ARIO is not exposed to significant foreign currency risk.

Credit risk

Credit risk is the risk that a customer or counterpart may be unable or unwilling to meet a commitment that it has entered into with ARIO. ARIO is not exposed to significant credit risk.

Note 4 — Contributed assets

Contributed assets of $6,431,446 (2022 — $6,431,446) are recorded in the Infrastructure Fund and represent the cost of the land transferred to ARIO from the Government of Ontario. During the year, there were no reductions. During the prior year, there were 4 land parcel sales that occurred, reducing the value in contributed surplus by $5,250,245. The sales of Guelph, Kemptville, New Liskeard and Woodstock land reduced the contributed land assets by $5,072,100, $18,287, $12,106 and $147,752, respectively.

Note 5 — TCAs

Land assets

Land	Cost $	Accumulated amortization $	Net 2023 (note 13) $	Net 2022 $
Regional campuses	718,698	0	718,698	718,698
Research stations	19,419,546	0	19,419,546	19,419,546
Total land assets	20,138,244	0	20,138,244	20,138,244

Building assets

Building	Cost $	Accumulated amortization $	Net 2023 (note 13) $	Net 2022 $
Regional campuses	28,693,647	10,916,081	17,777,566	12,054,674
Research stations	87,748,824	18,359,038	69,389,786	45,941,383
Total building assets	116,442,471	29,275,119	87,167,352	57,996,057

Total land and building assets

Land and building	Cost $	Accumulated amortization $	Net 2023 (note 13) $	Net 2022 $
Total land assets	20,138,244	0	20,138,244	20,138,244
Total building assets	116,442,471	29,275,119	87,167,352	57,996,057
Total assets	136,580,715	29,275,119	107,305,596	78,134,301

As at March 6, 2007, the titles for TCAs (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 TCAs (and other assets and liabilities) in consolidation with OMAFRA on an annual basis.

Note 6 — Deferred capital funded contributions

Deferred capital funded contributions relating to construction of capital funded projects represents the amount of grants and other restricted funding received by ARIO for construction projects.

Balance	2023 $	2022 $
Balance, beginning of the year	103,003,399	86,321,589
Less amortization for the year	(2,176,336)	(2,047,567)
Less amounts expensed as minor capital	(757,305)	0
Add funds retained for future development	0	14,229,377
Add contributions received for capital purposes	5,206,957	4,500,000
Balance, end of the year	105,276,715	103,003,399

Funding sources

Funding source	2023 $	2022 $
Federal	997,500	1,032,500
Provincial	91,711,222	91,063,446
Industry	12,567,993	10,907,453
Total funding sources	105,276,715	103,003,399

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	2023 $	2022 $
Balance, beginning of the year	8,917,477	13,048,539
Less amounts recognized upon sale of TCAs	0	(3,180,912)
Less amortization for the year	(1,049,808)	(950,150)
Balance, end of the year	7,867,669	8,917,477

Note 8 — ARIO research fund

Revenue

Revenue	Seed royalty $	Technology royalty $	Other $	Total 2023 $	Total 2022 $
Intellectual property	536,220	159,680	0	695,900	758,666
Investment income	(12,149)	(9,051)	0	(21,200)	232,720
Total revenue	524,071	150,629	0	674,700	991,386

Expenses

Expense	Seed royalty $	Technology royalty $	Other $	Total 2023 $	Total 2022 $
Expenses	763	10,382	8,300	19,445	46,742

Fund balances

Fund balances	Seed royalty $	Technology royalty $	Other $	Total 2023 $	Total 2022 $
Net surplus (deficit) for the year	523,308	140,247	(8,300)	655,255	944,644
Fund balance, beginning of year	4,744,080	3,539,774	466,646	8,750,500	8,111,923
Remeasurement gains (losses)	39,549	29,427	3,959	72,935	(306,067)
Fund balance, end of year	5,306,937	3,709,448	462,305	9,478,690	8,750,500

During 2019, the University of Guelph began program administration for the above intellectual property fund.

Note 9 — Grants received from the provincial government

The following grants, recorded at the exchange value, have been received from OMAFRA and successor ministries:

Research programs and other grants

Other grants	2023 $	2022 $
Minor capital	4,500,000	4,500,000
Canadian Agricultural Partnership (CAP)	850,000	1,000,000
Major capital build projects	2,500,000	2,500,000
Payments in lieu of taxes	1,250,000	1,250,000
Total other grants	9,100,000	9,250,000

The following Provincial Government capital transfer payment grants have been partially capitalized as deferred capital funded contributions and partially recognized as revenues as follows:

Minor capital

Minor capital	2023 $	2022 $
Funding received	4,500,000	4,500,000
Capitalized — Deferred capital funding contributions	0	0
Net revenue	4,500,000	4,500,000

Canadian Agricultural Partnership

Minor capital	2023 $	2022 $
Funding received	850,000	1,000,000
Capitalized — Deferred capital funding contributions	(750,000)	(1,000,000)
Net revenue	100,000	0

Major capital build projects

Major capital build projects	2023 $	2022 $
Funding received	2,500,000	2,500,000
Capitalized — Deferred capital funding contributions	(2,500,000)	(2,500,000)
Net revenue	0	0

Note 10 — Gain on disposal of TCA

There were no sales of property in the current fiscal year.

During the prior year, the organization sold property in 4 locations, (Guelph, Kemptville, New Liskeard and Woodstock). All parcels of land, including property, were originally transferred to the organization and capitalized to TCAs and contributed assets.

Proceeds from sale

Proceeds from sale	Guelph $	Kemptville $	New Liskeard $	Woodstock $	Total 2022 $
Proceeds from sale	63,619,843	2,705,793	1,580,050	3,553,200	71,458,886
Proceeds from sale	63,619,843	2,705,793	1,580,050	3,553,200	71,458,886

Net book value

Net book value	Guelph $	Kemptville $	New Liskeard $	Woodstock $	Total 2022 $
Cost of property	5,873,350	4,521,943	2,611,718	147,752	13,154,763
Accumulated amortization	(410,784)	(1,886,088)	(1,391,594)	0	(3,688,466)
Net book value	5,462,566	2,635,855	1,220,124	147,752	9,466,297

Net book value of buildings

Net book value of buildings	Guelph $	Kemptville $	New Liskeard $	Woodstock $	Total 2022 $
Net book value	5,462,566	2,635,855	1,220,124	147,752	9,466,297
Contributed asset	(5,072,100)	(18,287)	(12,106)	(147,752)	(5,250,245)
Net book value of buildings	390,466	2,617,568	1,208,018	0	4,216,052

Gain on sale before undernoted

Net gain on sale before undernoted	Guelph $	Kemptville $	New Liskeard $	Woodstock $	Total 2022 $
Gain on sale before undernoted	63,229,377	88,225	372,032	3,553,200	67,242,834
Funds retained for future development	14,229,377	0	0	0	14,229,377
Payable to the Minister of Finance	49,000,000	0	0	3,346,420	52,346,420
Net gain on sale	0	88,225	372,032	206,780	667,037

Payable to the Minister of Finance is non‑interest bearing with no set repayment terms. The Minister of Finance authorized ARIO to retain the residual proceeds from the sale of the Guelph research station and use it to construct a new research facility, consistent with the ARIO Act, 1990. Accordingly, this has been included in deferred capital funded contributions at the end of fiscal 2022.

Additionally, due to the sale of these TCA, the associated deferred capital contributions have been recognized. At the prior year end, the recognized deferred capital contributions include:

Total recognized	Guelph $	Kemptville $	New Liskeard $	Woodstock $	Total 2022 $
Deferred capital contributions	390,466	1,032,562	1,757,884	0	3,180,912
Deferred capital funded contributions	0	538,257	0	0	538,257
Total recognized	390,466	1,570,819	1,757,884	0	3,719,169

Note 11 — Funding agreements with third parties

ARIO, Her Majesty the Queen 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 $2,800,000.

Her Majesty the Queen in right of Ontario as represented by OMAFRA and Kawartha Ethanol have signed a Capital Grant Agreement effective August 1, 2008 between OMAFRA and Kawartha Ethanol whereby Kawartha Ethanol agreed to contribute to a research and development fund in exchange for the capital grant support provided by OMAFRA through the OEGF. Kawartha Ethanol 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 and received to date are $980,000. Refer to schedule 2.

Note 12 — Canadian Agricultural Partnership (CAP) Funding

During the year, ARIO received funding for research infrastructure projects from the CAP program:

• Electronic Sow Feeders Project: $250,000
  Funding supported the purchase of electronic sow feeders for the new swine research centre currently under construction at the Elora Research Station. The Project will enhance and automate sow feed distribution and monitoring at the new swine research centre while also enabling a number of precision feeding research platforms.
• Electronic Feeders for Finishing Hogs Project: $500,000
  Funding supported the purchase of electronic feeders for finishing hogs within the finishing barn section of the new swine research centre currently under construction at the Elora Research Station. The Project will enhance and automate finishing hog feed distribution and monitoring at the new swine research centre while also enabling a number of precision feeding research platforms.

The development of this asset is ongoing over year end.

Note 13 — Opening balance adjustment

An adjustment was made to opening net assets to account for the asset retirement obligation (ARO) activity from the previous years, back to inception of the TCA. Accordingly, opening net assets were adjusted April 1, 2022 in the following amounts:

Opening balance adjustment	Opening balance 2023 $	Adjustment $	Adjusted balance 2023 $
Tangible capital assets: building	82,432,314	1,805,706	84,238,020
Tangible capital assets: building — accumulated amort	(24,436,257)	(1,515,992)	(25,952,259)
Total tangible capital assets	57,996,057	289,714	58,285,771
Asset retirement obligation	0	(3,098,497)	(3,098,497)
Net assets	24,595,324	(2,808,783)	21,786,541

Note 14 — Recovery of holding costs — SOLGEN

The Ministry of the Solicitor General (SOLGEN) acquired a parcel of land in Kemptville that ARIO had marked for disposition. Up until the time that ARIO and SOLGEN were able to complete the approved transfer of land, ARIO was responsible for incurring all holding costs for any necessary upgrades and costs to maintain the property at its current state. ARIO is now recovering these costs incurred from SOLGEN.

Note 15 — Asset retirement obligation

ARIO records an asset retirement obligation related to the legal obligations where the organization is obligated to incur costs to retire a TCA. A total liability of $3,207,051 has been recorded for activities to fulfill the obligation based on estimations for the extent and cost of activities to fulfill the requirements of the obligation, plus an estimated amount for inflationary costs up to the retirement date.

The change in the year, resulting from a passage of time, was $108,554 and no revision to cash flows were recorded. There were no obligations settled in the fiscal year.

ARIO discounts significant obligations where there is a high degree of confidence on the amount and timing of cash flows. As of March 31, 2023, the obligations have been recorded at their net present value, based on remaining useful lives and discount rates provided by the Province.

Schedule 1 — Research trust funds: financial position as at March 31, 2023

Assets

Assets	ARIO $	Infrastructure $	New directions $	Food safety $	Eliminations $	2023 $
Cash	9,147,878	0	0	0	0	9,147,878
Investments	23,153,079	0	0	0	0	23,153,079
Due from ARIO	0	17,501,768	3,810,666	889,209	(22,201,643)	0
Accounts receivable	10,000	1,438,798	0	0	0	1,448,798
Total current assets	32,310,957	18,940,566	3,810,666	889,209	(22,201,643)	33,749,755
Tangible capital assets under construction	0	13,642,914	0	0	0	13,642,914
Tangible capital assets (notes 5 and 13)	0	107,305,596	0	0	0	107,305,596
Total tangible capital assets	0	120,948,510	0	0	0	120,948,510
Total assets	32,310,957	139,889,076	3,810,666	889,209	(22,201,643)	154,698,265

Liabilities

Liabilities	ARIO $	Infrastructure $	New directions $	Food safety $	Eliminations $	2023 $
Due to other research trust funds	22,201,643	0	0	0	(22,201,643)	0
Accounts payable and accruals	0	7,712,549	528,551	49,745	0	8,290,845
Holdbacks payable	0	0	39,850	30,000	0	69,850
Unclaimed expenditures	630,624	0	382,606	202,387	0	1,215,617
Deferred revenue	0	128,532	0	0	0	128,532
Total current liabilities	22,832,267	7,841,081	951,007	282,132	(22,201,643)	9,704,844
Asset retirement obligation (notes 13 and 15)	0	3,207,051	0	0	0	3,207,051
Deferred capital funded contributions (note 6, 9 and 12)	0	105,276,715	0	0	0	105,276,715
Deferred capital contributions (note 7)	0	7,867,669	0	0	0	7,867,669
Total asset retirement obligation and deferred capital	0	116,351,436	0	0	0	116,351,436
Total liabilities	22,832,267	124,192,516	951,007	282,132	(22,201,643)	126,056,279

Fund balances

Fund balances	ARIO $	Infrastructure $	New directions $	Food safety $	Eliminations $	2023 $
Fund balances (note 13)	9,692,941	9,108,436	2,867,705	608,797	0	22,277,879
Accumulated remeasurement (losses) gains	(214,251)	156,678	(8,046)	(1,720)	0	(67,339)
Contributed assets (note 4)	0	6,431,446	0	0	0	6,431,446
Total fund balances	9,478,690	15,696,560	2,859,659	607,077	0	28,641,986
Total liabilities and net assets	32,310,957	139,889,076	3,810,666	889,209	(22,201,643)	154,698,265

Schedule 2 — Research trust funds: revenues and expenditures and changes in fund balances for the year ended March 31, 2023

Research revenue

Revenue	ARIO (note 8) $	Infrastructure $	New directions $	Food safety $	2023 $
Grants — OEGF (Kawartha and IGPC) (note 11)	0	0	98,000	0	98,000
Intellectual property (note 8)	695,900	0	0	0	695,900
Total research revenues	695,900	0	98,000	0	793,900

Property revenue

Revenue	ARIO (note 8) $	Infrastructure $	New directions $	Food safety $	2023 $
Grants — provincial — minor capital (note 9)	0	4,500,000	0	0	4,500,000
Grants — provincial — CAP (note 9)	0	100,000	0	0	100,000
Rental income — provincial	0	310,471	0	0	310,471
Rental income — private industry	0	134,026	0	0	134,026
Grants — provincial — payments in lieu of taxes (note 9)	0	1,250,000	0	0	1,250,000
Payments in lieu of taxes	0	84,665	0	0	84,665
Amortization of deferred capital contributions	0	3,226,144	0	0	3,226,144
Total property revenues	0	9,605,306	0	0	9,605,306

Other revenue

Revenue	ARIO (note 8) $	Infrastructure $	New directions $	Food safety $	2023 $
Other income	0	30,150	0	0	30,150
Realized loss on sale of investment	(178,915)	(859,805)	(44,885)	(10,571)	(1,094,176)
Investment income	157,715	757,930	39,567	9,319	964,531
Total other revenue	(21,200)	(71,725)	(5,318)	(1,252)	(99,495)

Total revenue

Revenue	ARIO (note 8) $	Infrastructure $	New directions $	Food safety $	2023 $
Total research revenue	695,900	0	98,000	0	793,900
Total property revenue	0	9,605,306	0	0	9,605,306
Other revenue	(21,200)	(71,725)	(5,318)	(1,252)	(99,495)
Total revenues	674,700	9,533,581	92,682	(1,252)	10,299,711

Research expenditures

Research Expenditures	ARIO (note 8) $	Infrastructure $	New directions $	Food safety $	2023 $
Research projects	0	0	815,714	105,271	920,985
Intellectual property (note 8)	19,445	0	0	0	19,445
Total research expenditures	19,445	0	815,714	105,271	940,430

Property expenditures

Property expenditures	ARIO (note 8) $	Infrastructure $	New directions $	Food safety $	2023 $
Payments in lieu of taxes	0	1,216,237	0	0	1,216,237
Minor capital	0	4,784,825	0	0	4,784,825
Management consulting expense	0	150,064	0	0	150,064
Operations and maintenance	0	280,794	0	0	280,794
Accretion expense	0	108,554	0	0	108,554
Amortization of tangible capital assets	0	3,322,870	0	0	3,322,870
Total property expenditures	0	9,863,344	0	0	9,863,344

Total expenditures

Expenditures	ARIO (note 8) $	Infrastructure $	New directions $	Food safety $	2023 $
Total research expenditures	19,445	0	815,714	105,271	940,430
Total property expenditures	0	9,863,344	0	0	9,863,344
Total expenditures	19,445	9,863,344	815,714	105,271	10,803,774

Excess of revenue over expenditures for the year

Net surplus for the year	ARIO (note 8) $	Infrastructure $	New directions $	Food safety $	2023 $
Excess of revenues over expenditures (expenditures over revenues) for the year	655,255	(329,763)	(723,032)	(106,523)	(504,063)
Net amount transferred from unclaimed expenditures	0	0	892,499	102,902	995,401
Total net surplus for the year	655,255	(329,763)	169,467	(3,621)	491,338

Net assets

Net assets	ARIO (note 8) $	Infrastructure $	New directions $	Food safety $	2023 $
Total net surplus for the year	655,255	(329,763)	169,467	(3,621)	491,338
Net assets, beginning of year	8,750,500	18,584,556	2,676,646	607,417	30,619,119
Net remeasurement losses for the year	72,935	250,550	13,546	3,281	340,312
Opening balance adjustment (note 13)	0	(2,808,783)	0	0	(2,808,783)
Net assets, end of year	9,478,690	15,696,560	2,859,659	607,077	28,641,986