Livestock Financial Protection Board Business Plan for the Fiscal Years 2015-2018
Table of Contents
- Program Overview/Mandate
- Board Structure
- Overview of Current and Future Programs and Activities
- Strategic Directions
- Environmental Scan
- Resources Needed to Meet Goals and Objectives
- Financials: Proposed Operating Expenditures, Projected Revenues & Funding Requirements
- Financial Budget
- Risk Identification, Assessment and Management
- Proposed Capital Expenditures
- Implementation Plan
- Performance Measures and Targets
- Communication Plan
- Appendix 1: Board Members and Terms
- Appendix 2: Description of Deliverables of Beef Cattle Financial Protection Inc.
Executive SummaryThe Livestock Financial Protection Board (Board) is pleased to present its Business Plan for the period of 2015/18. As a Board, we continue to focus on administering the Fund for Livestock Producers (Fund); adjudicating claims; granting or refusing the payment of all claims and recovering any money to which the Board is entitled. The following are the main areas of focus for the Board in the upcoming planning horizon:
Protecting the long term viability of the Fund;
Strengthening Board governance and accountability; and
Ensuring that there is an adjudication process in place that is simple, fair, and accessible, with minimal delays.
As Fund administrator, our ultimate goal is to ensure long-term sustainability of the Fund. We are pleased that our investment strategies have helped the Fund weather the last five years with very minimal impact on our investment income. An actuarial study completed in July 2010 determined that the Fund is actuarially sound. Financial markets have improved and this upward trend will likely continue, however we continue to be in a low interest rate environment and it is projected that rates will remain low for the planning horizon. As the global economic situation continues to evolve, the Board will continue to assess the potential impact of different financial market scenarios and make adjustments to its investment strategy as required.
The Board's key achievements for the 2014/15 fiscal year were:
Timely adjudication of claims. The Board continues to fulfill its mandate and contribute directly to its strategic outcome by rendering decisions in a timely manner. In 2014/15 the Board received four claims for compensation from livestock sellers as a result of the failure of one livestock dealer. Three claims were paid in the amount of $164,451.82.
Actuarially sound Fund. The Fund balance at the end of the 2014/15 fiscal year is $7.37M, this was $1.57M above the actuarially sound minimum balance of $5.8M.
Rate of return 3.77%. Despite the continued turmoil in the financial market, the Fund had investment return of 3.77%. Once again, this was due mainly to the strategic investment decisions made by the Board which partially shielded the Fund from the impacts of events in the financial market. The Boards strategy provides the Fund with a lower exposure to investments in risky assets such as equity and much higher investment in fixed income investments. This investment strategy has provided investment returns of just above 3.76% since 2011/12.
Table 1 outlines total revenues and expenditures for the previous year as well as expectations for the planning horizons.
Total Revenues and Expenditures for the Previous Year:
The total revenue for the 2014/15 fiscal year was $364,147. This included $110,083 in fees and $254,063 in interest income. Total expenses were $344,222. Revenue and expenses were in line with projections. In the 2014/15 fiscal year, the Board budgeted $250,000 for claims but actual net expenditures on claims were $164,452(1).
Revenue and Expenditures and Expectations for the Planning Horizon:
Total revenue for this planning horizon (2015/16 to 2017/18) is expected to average 1.0% annual growth. This reflects strengthening economic conditions and recovery of previous money owed to the Board. Total expenses over the same period will increase by 1.18% in the second year of the planning horizon due to the contract with the delivery agent.
For the 2015/16 fiscal year, the Board has estimated revenues of $440,000. This includes approximately $110,000 in fees and $280,000 in interest income. The Board has estimated expenditures of $436,250. This includes payment of $154,500 to determine financial responsibility of livestock dealers; $25,700 for Fund administration and governance support; and $6,000 for secretariat support and $250,000 in claims.
(1) This amount is included for budgeting purposes only and is based on the July 2010 actuarial study. Actual payments on claims may be higher or lower than the budgeted amount.
The Ontario Beef Cattle Financial Protection Program (Program) was established in 1982 to provide compensation to sellers in the event that a buyer (including packing plant operators, abattoir operators, auction market operators, country dealers and cooperatives) defaults on a payment.
The Program has two components: the annual licensing of dealers under the Livestock and Livestock Products Act, R.S.O. 1990, c. L.20 (LLPA) and the administration of the compensation fund established under the Farm Products Payments Act, R.S.O. 1990, c. F.10, as amended (FPPA). The Ministry of Agriculture, Food and Rural Affairs (OMAFRA) is responsible for the licensing of dealers while the Board is primarily responsible for the administration of the Fund.
The Board is a body corporate without share capital constituted under the authority of the FPPA and Ontario Regulation 560/93 - Fund for Livestock Producers, as amended (O. Reg. 560/93), made under the FPPA. It is also classified as a Board-Governed Provincial Agency (Trust) under the Agencies & Appointments Directive (AAD). The Board operates in accordance with the Memorandum of Understanding (MOU) between the Minister of Agriculture, Food and Rural Affairs (Minister) and the Board dated April 11, 2011. Upon a change to one of the parties the MOU must be affirmed by all parties within six months.
As a Trust Agency, the Board's primary function is to administer funds and/or other assets for beneficiaries named under statute. The Board's mandate is, as set out in section 4 of the FPPA:
to administer the Fund;
to investigate all claims made under the FPPA and to determine the extent of their validity;
to grant or refuse the payment of claims or any part thereof and determine the amounts and manner of payment; and
to recover any monies to which it is entitled under the FPPA by suit in a court of competent jurisdiction or otherwise.
Vision and Mission Statement:
The Board's vision is to protect the financial interests of producers and licensed dealers who have sold livestock to licensed dealers, as defined in the Program. The Board's vision supports the following OMAFRA priorities: (1) make Ontario a better place to do business, and (2) support a strong rural Ontario that strengthens the province. The Board contributes to these priorities by ensuring that the Fund is effectively managed and able to meet its financial obligations to livestock sellers. The Fund is an important component of a seller's overall business risk management strategy it helps livestock sellers to manage risks beyond their control i.e. default by a licensed dealer.
The Board's mission is to ensure the long term sustainability of the Fund by promoting sound investment practices and good governance for the benefit of Ontario's livestock sellers who sell to licensed dealers.
The Board's guiding principle is accountability in its management, administration and operation. As an agency of the government, the Board conducts itself according to the management principles of the government. These principles include ethical behavior; prudent, efficient and lawful use of public resources; fairness; high quality service to the public and openness and transparency to the extent allowed under law.
The Board operates at "arm's-length" from the Government but is accountable to the Government in exercising its mandate. The Agency is accountable to the Minister, through the Chair, for its internal governance; setting its goals, objectives and strategic direction within its mandate; and for carrying out the roles and responsibilities assigned to it by the FPPA, all other applicable legislation, this MOU and applicable Treasury Board/Management Board of Cabinet as well as Ministry of Finance directives. Specifically, the Board is held accountable through:
An annual report tabled in the Provincial Legislature.
An annual business plan with performance measures submitted annually to OMAFRA.
Annual audits of the Board's financial statements by the Office of the Auditor General of Ontario.
A Memorandum of Understanding with the Minister.
The FPPA and O. Reg. 560/93 require that the Board be composed of not fewer than five members appointed by the Minister. There are currently seven members on the Board, including the Chair. The Minister appoints a Chair and Vice Chair of the Board from among its members. The Board will be asking the Minister to appoint one of its members as Vice Chair.
O. Reg. 560/93 requires that membership on the Board includes one member representing each of the Beef Farmers of Ontario (BFO), the Canadian Meat Council (CMC), and the operators of community sales under the Livestock Community Sales Act, R.S.O. 1990, c. L.22. By convention, there has also been one member from the Ontario Livestock Dealers Association (OLDA), one member from the Ontario Independent Meat Processors (OIMP), one member from the dairy industry and one member from the veal industry. By convention, there has also been one additional member from the BFO.
See Appendix 1: List of Board Members & Terms
Overview of Current and Future Programs and Activities
The following is an overview of the Board's principal activities (current and future) linked to its mandate and the Government priorities. The Board's mandate is set out in legislation and as such the Board cannot conduct any activity that is inconsistent with its mandate.
The Board is responsible for the overall governance of the Fund. The Fund is used to:
Provide compensation to qualified sellers in the event that certain buyers default on payment.
Offset the cost of determining financial responsibility of dealers as part of the licensing component of the Program.
Pay Board expenses (other than for the remuneration of those of its employees who are public servants employed under Part 111 of the Public Service of Ontario Act, 2006)(2)
Pay for professional, technical or other assistance to or on behalf of the Board
All money to which the Board is entitled is paid into the Fund. Contribution to the Fund is mandatory and is based on a fixed rate per head of livestock in a transaction. Under O. Reg. 321/11 - Fees Payable to Boards, as amended, made under the FPPA, sellers owe the Board a fee of 5 cents per head of livestock on a direct sale of livestock. When the sale is on consignment, both the consignor and consignee owe a 5 cents per head fee. A selling dealer remits the fee on their own behalf, and a buying licensed dealer is required to deduct the fee and forward it to the Board on behalf of a producer seller. A consignee is required to pay their own fee as well as to deduct and remit the consignor's fee. Fees are due on or before the fifteenth day of each month along with a statement of the livestock sold, unless the total yearly sales are less than 1,000 head, in which case the fee is to be submitted semi-annually.
The Board is the administrator of the Fund and is ultimately responsible for the management and administration of the Fund. In 1998, the Board delegated the day to day management of the Fund to Beef Cattle Financial Protection Program Inc. (BCFPPI) ? a not-for-profit corporation governed by its own Board of Directors. In order to be compliant with the Procurement Directive, in December 2012, the Board and OMAFRA jointly conducted an open competitive procurement process to find a delivery agent to assist with the delivery of the Program (licensing and Fund administration). BCFPPI was the successful bidder. Key aspects of this role continue to be receiving and depositing fees; preparing monthly, quarterly and annual financial statements; preparing documentation for annual audits; and investment of the Fund.
The Board's responsibility/activities as Fund administrator includes:
participation in the selection of the delivery agent for day to day administration of the Fund;
establishing or approving and reviewing all policies as required;
reviewing, at least annually, the policies and procedures in place for carrying out its responsibilities as administrator of the Fund;
on a periodic basis, as determined by the Board, obtain reasonable assurances from BCFPPI that the control systems in place are adhered to and that there is not any material non-compliance;
obtain reasonable assurances that the Fund is administered and invested in material compliance with the MOU;
approving payments from the Fund;
reviewing, adopting and monitoring the strategic planning process (this includes meeting with BCFPPI to identify and discuss environmental factors and risks that can impact the Fund, and approving goals and objectives for the Fund);
reviewing and approving the annual audited financial statements of the Fund;
reviewing and approving the Board's operating budget;
on a periodic basis, obtaining and reviewing a report on the Fund investment performance;
ensuring policies and processes are in place for the identification of risks and reviewing and approving risk management strategies; and
ensuring that an actuarial review of the Fund is conducted as required.
Fund Investment Strategy:
The Board's main objective when managing investment capital is to safeguard its ability to remain as a going concern so that it can continue to deliver financial protection to livestock sellers in Ontario. Investment income is one important source of revenue for the Fund. As such, the Board's investment policy focuses on ensuring security, liquidity and maximization of investment income. The investment strategy flows from the investment guidelines set out in the MOU.
The MOU has restrictions in place so that only authorized investments are undertaken (the Fund can only be invested in instruments as set out in the MOU, which includes certain now-repealed provisions of the Trustee Act, R.S.O. 1990, c. T.23). A decision has been made to not amend the MOU and to keep the repealed provision in place under the MOU as a risk mitigation strategy.
It is further guided by Board's policy which requires 60% in long term investments and 40% in short and medium term investments. When short or medium term investments mature, research is done on the variety of rates available from 30 day to 2 year term investments. If it appears that interest rates are generally rising then a shorter maturity date would be chosen to take advantage of potentially higher rates at maturity. If rates appear to be falling then a longer maturity would be selected.
The Fund's asset mix is made up of:
Cash, short and medium term investments:
The Fund's short term investment is one Guaranteed Investment Certificate (GIC) issued by a domestic financial institution that matures on February 15, 2016 and that earns 1.56% per annum. Cash and short term investments holdings at year end were $ 1,770,904. (24.36 % of total investments, up from 16.82 % the previous year). The increase occurred primarily because of a higher amount of cash held at year end.
The Fund's medium term investment is one GIC in the amount of $ 1,500,000 issued by a domestic financial institution with maturity date of February 17, 2017 that earns 1.41% annually.
The Board staggers the maturity date of the GICs to reduce the influence of interest changes and maximize GIC returns.
Long term investment:
The Fund's long term investment consist of real estate in the form of a $4 million first mortgage on development lands in the city of Kitchener bearing interest at 5% payable semiannually. The $4 million is approximately 58% of the Fund's total investment.
Since 2004, when the Board made its initial investment in real estate, the portfolio has generated an average annual return of 4.00%. The year prior the portfolio's yield was 3.22%. This represents an increase of $54,000 per year during a low interest environment. Interest income on these investments totaled $245,792 for 2013/14. In 2012/13 investment income was $244,642 and in 2011/12 it was $269,320. The small increase between 13/14 and 12/13 was due to an increase in total Fund investment.
The Board's strategic investment mix was instrumental in minimizing the impact of the economic downturn on its investment. The Board considers its investment in real estate to be a relatively safe investment that has generated great returns with little to no risk. Diversification among different assets, such as by holding the mortgage as well as short and medium term GICs, is the Board's key strategy to reduce risk.
Over the last seven years, the ability to invest in a high security first mortgage at 5% produced returns in excess of $55,000 more per year than any other options available on the market that the Board can invest in under its guidelines.
Claims Investigation and Adjudication:
The Board adjudicates claims made under the FPPA and determines the payment, if any, to be made from the Fund. A claim for compensation will be considered if it involves: a producer selling to a licensed dealer, a licensed dealer selling to a producer or a licensed dealer selling to another licensed dealer. A claim may be made if a seller hasn't been paid according to the timelines in the regulations. If an application for payment from the Fund is made in respect of a sale of livestock to a dealer, the application must be made to the Board not later than thirty (30) days after the day on which the earliest of the following events occurs:
The dealer's payment becomes due.
All or part of the dealer's assets are placed in the hands of a receiver or of a trustee for distribution under the Bankruptcy and Insolvency Act (Canada) or the Bulk Sales Act.
The dealer ceases to carry on business.
For claims made in respect of a default by a producer, the claim must be made within 30 days of the date of sale.
In 2010, the Board entered into arrangements with a third party for the provision of adjudication support. Prior to 2010, this service was provided by BCFPPI.
The adjudication process begins when the seller files a claim with the Board. Once a claim is received, an application form is sent to the seller. Once the application is returned, it is investigated by the Regulatory Compliance Unit in OMAFRA's Animal Health and Welfare Branch. When the investigation is complete, a report is made to the Board.
The Board conducts an in-depth analysis, which may involve legal services, and either makes a final decision or offers an opportunity for the parties to make submissions or attend a hearing before making its final decision. If the Board offers an opportunity for a hearing, and a hearing is requested by one of the parties, a Notice of Hearing is mailed to the parties stating the time, date and location of the hearing. The Board works to adjudicate cases within 60 days of receiving the report from the investigators. Claims that involve a hearing require more time to resolve because additional meetings are required and, in some cases, the cases tend to be more complex.
The Board determines the payment, if any, to be made from the Fund.
If the Board decides that a claim from a producer made in respect of a dealer is valid, the Board pays 95 percent of the portion of the claim that it recognizes as valid.
Where an approved claim relates to a licensed dealer selling to a producer or feeder cattle finance co-operative who defaults on payment, compensation is 85 per cent of the portion of the claim that the Board recognizes as valid, up to a maximum of $125,000. In these cases, there is no compensation for claims of less than $5,000. Where an approved claim relates to a licensed dealer selling to another licensed dealer, the Board pays 95 percent of the portion of the claim that it recognizes as valid
The Board has discretion to refuse payment from the Fund based on grounds set out in O. Reg. 560/93. Examples of grounds for refusing payment include the claimant extending credit to the buyer; the Director under the LLPA not being notified promptly where payment was not received on time, and the claim not being submitted on time. The rules governing payment from the Fund are also set out in O. Reg. 560/93.
Recovery of Money Owed:
The regulation requires the Board to attempt to recover any money to which it is entitled. The Board, through legal counsel and the Administrator, works to recover money owed to the Board. In 2011, the Board approved and adopted a "Recovery Policy". The policy formalizes and documents current debt recovery practices. A debt recovery policy is a requirement under the MOU between the Minister and the Board. The objective of the policy is to ensure that money owed to the Board is collected as soon as possible using legal, efficient and effective debt recovery procedures. Recovery of debt owed to the Board is an important part of ensuring that the Fund remains viable.
(2) Legal and investigative support are currently provided and paid for by the ministry. The ministry also covers Board members' remuneration (per diem, meal and travel).
The following are the main areas of focus for the Board:
Protecting the long term viability of the Fund;
Strengthening Board governance and accountability; and
Ensuring that there is an adjudication process in place that is simple, fair, and accessible, with minimal delays.
The table below identifies the key strategies that will be used to achieve these goals.
|Protecting the long term viability/sustainability of the Fund||To maintain a solvent Fund that will be able to pay eligible claims as they become due while keeping check-off rates stable over the long term||
|Identify, assess and manage the Fund's financial risks||
|Timely and efficient collection of debt owed||
|Governance and Accountability||Board compliance with government directives such as the Agencies & Appointments Directive AAD||
|Improve Board members' and stakeholders' knowledge of the function of the Board and their roles and responsibilities||
|Maintain an adjudication process that is simple, fair, and accessible, with minimal delays||To conduct adjudicatory Board meetings and hearings and issue decisions in a timely, procedurally fair and legally supportable manner||
|Experienced individuals appointed to the Board||
The environmental scan seeks to provide a complete picture of the full environment in which the Board is operating and the key issues that may need to be addressed through the upcoming planning and budgeting cycles. The challenges and risks faced by the Board have remained similar from year to year over the last couple of years.
The Board is cognizant of its broader responsibilities in ensuring that key risks are identified and that effective processes are in place and implemented to manage these risks. The following are the main issues that emerged from the environmental scan:
Investment Risks: Investment income is one important source of revenue. Investing has inherent risks. Although long term return expectations and trends are generally predictable, there can be considerable volatility in short and medium term results. Currently, the Fund is invested in short and long term fixed interest income type securities. Investment risk is a challenge that could adversely affect the achievements of one of the Board's goals, which is to ensure long term sustainability of the Fund. Appropriate mechanisms are therefore required for controlling investment risk. The Board's key mechanism for identifying and managing the investment risk is a written investment policy. Diversification among asset classes is a key strategy of this policy. Interest rates are at a historic low and are expected to remain low for most of the planning horizon. It is predicted that we may see a slow rise in rates in the last year of the current plan.
Packers Rationalization/Exit: There are a number of factors currently in play that could potentially lead to increased packer rationalization and exit from the market place. The primary factors affecting packers in Ontario is excess plant capacity. The volume of cattle available has dropped and plant capacity has stayed the same. If exit from the marketplace is due to insolvency, claims for payment from the Fund could potentially result. Because the Fund is actuarially sound, this will not likely impact the Board's ability to conduct business.
Policy/Legislative Change by the Ontario Government: The Minister has responsibility for the legislation governing the Program. The Board is subject to the risk of a policy change by the government. In 1997, OMAFRA put forward two options to industry on the future of the Program: (1) a government-run program with full cost recovery paid for by industry and (2) the devolution of the program to industry. The various sectors within the industry agreed that devolution was their choice. A business plan was developed and approved by all sectors and a not-for-profit corporation (BCFPPI) was established with a Board of Directors from all sectors. To date, however, devolution has not occurred. The impact on the Board would be dependent on the changes made to the FPPA and its regulation which govern the operations of the Board. There has been no recent discussion and any amendments would be outside of the Board's control.
Fund Balance and Unpredictability of Claims: The Fund dropping below the actuarially sound level or becoming depleted because of a large claim is another external driver identified by the Board. This risk could negatively impact the Board's ability to deliver financial protection to livestock sellers in Ontario.
An on-going challenge for the Board is the unpredictability of claims, i.e. the number of claims to the Board from year to year is difficult to predict and can fluctuate greatly. Because claims paid are variable, any estimate of future claims can be unreliable.
Higher Livestock Values: Canadian cattle prices have been at record highs due to lower cattle inventories. Cattle inventories continue to shrink in Canada and the U.S. and the market is functioning to encourage expansion which has also contributed to the higher price structure. The market dynamics can change within a short period of time and the financial risk has certainly increased. Higher dollar value for livestock could impact fund solvency, consequently the BFO, along with all other industry partners have requested the Minister to increase the fees paid by sellers from 5 cents per head to 10 cents per head. This request is outstanding at this time.
Institutional continuity and succession planning: Improvements have been brought to succession planning and creating continuity on the Board. Experienced members increase its ability to issue decisions in a timely, fair and legally supportable manner. Too few or inexperienced members could negatively impact the Board's ability to adjudicate claims fairly and efficiently. To minimize the loss of experienced Board members, the Board has asked that appointments be staggered. A Vice Chair is now in place which improves Board's function and continuity.
Governance and Accountability Requirements: There is an increasing focus on strategic planning as it relates to Board governance and accountability. Good governance is an integral component of effective fund management and board performance. Expectations concerning accountability and the fiduciary duty of boards continue to evolve.
Resources Needed to Meet Goals and Objectives
A new three year contract was entered into with BCFPPI beginning January 1, 2013. The new contract required substantial changes from practices under the previous contract. One key change was that the Board became responsible for overhead costs which include office space and equipment associated with all Board activities, which were previously provided by the OMAFRA as an indirect support. The total yearly Board cost for the new contract is $178,150. Of this total, determining financial responsibility costs are $152,700 and $25,450 is for Fund and Board administration.
OMAFRA funds legal and investigative services. Investigative services are provided through the Cooperative Agreement between the MNR and OMAFRA. The Board also receives legal services provided by the Ministry of the Attorney General and, on occasion, uses outside legal assistance as directed by the Ministry of the Attorney General.
The affairs of the Board are subject to an annual audit by the Office of the Auditor General of Ontario.
Financials: Proposed Operating Expenditures, Projected Revenues & Funding Requirements
The following are the three sources of income into the Fund:
Income from investments
Monies recovered after payment of claims
The FPPA provides that the Board is responsible for all its expenses except for those of persons employed under Part III of the Public Service of Ontario Act, 2006, S.O. 2006, c. 35. In addition to claims and its secretarial support, the Board uses the Fund to offset costs associated with determining financial responsibility and administrative support.
Since 1982, investment income has been greater than total costs and claims, resulting in zero use of check-off fees. To date, all net claims and Board expenses have been paid from interest on the Fund.
The Board's operating expenses are based on the number of meetings and will vary from year to year. Because claims paid are variable, budgeted estimates on claims can be unreliable. Meetings are held at least annually or when there is a claim on the Fund. Other Board business can usually be handled by a conference call. As of April 2010, OMAFRA began paying the remuneration of the members of the Board, as required under the FPPA.
The Fund is actuarially sound. An actuarial study was completed by Ernst & Young in July 2010 as a result of industry proposed regulatory changes (the changes were approved by the Ontario government and implemented in July 2011). Several conclusions were indicated in the report:
The Fund has a strong financial position given its claims experience and current Fund balance.
A Fund balance of approximately $4.5M would cover net claims with 99% confidence if the largest livestock sale or exposure by any one player was limited to $5.0M. As of March 31, 2014, the Fund had a balance of $7.3M.
Even if all of the regulation changes are implemented and the Fund faces an adverse trends scenario as described in the report, the Fund balance would still be positive, ending at $5.8M on 31 March 2015. Under this scenario, the current funding and fees would be sufficient.
The contingency plan, if there are claims that would exceed the Board's ability to pay, would be to work with the OMAFRA to determine the best strategy. Some possible options are:
Seek the assistance of the Minister to obtain a loan. The authority for this is found under:
Section 5(3)(b) of the FPPA (allows the Lieutenant Governor in Council to authorize the Minister of Finance to make interest free loans from the Consolidated Revenue Fund to the Board in an amount that does not exceed $250,000.00 in the aggregate); and
Sections 15(2), (3) and (4) of the LLPA (collectively operate to allow the Board to borrow such sums as are necessary to make payments on claims, as well as to authorize the Lieutenant Governor in Council to guarantee the payment of loans, together with interest, to a maximum of $1,000,000).
Fund for Livestock Producers Pro Forma Balance Sheet as at March 31, 2015 / 2016 / 2017
|Cash||$ 520,904||$ 271,298||$ 286,716|
|Accounts Receivable||$ 96,646||$ 100,002||$ 106,095|
|Short-term investments||$ 2,750,000||$ 2,500,000||$ 2,600,000|
|$ 3,367,550||$ 2,871,300||$ 2,992,811|
|Long-term investments||$ 4,000,000||$ 4,500,000||$ 4,500,000|
|Total Assets||$ 7,367,550||$ 7,371,300||$ 7,492,811|
|Equity||$ 7,367,550||$ 7,371,300||$7,492,811|
The tables below shows the budget to actual and the variance for 2012/13 fiscal and the 2013/14 fiscal.
|Fee to BCFPI||178,149||178,150||-1||178,150||178,150||0|
|Excess of Revenue over Expenses||207,351||470,778||-263,427||-39,650||19,925||-19,725|
|Closing Balance of Assets||7,347,625||7,367,550|
|Fee to BCFPI||180,250||185,489||190,489|
|Excess of Revenue over Expenses||-46,250||121,511||132,261|
|Closing Balance of Assets||7,325,050||7,446,561||7,578,822|
Interest Rate 2014,/15 -3.90%
Interest Rate 2015/16-4.00%
Interest Rate 2016/17- 4.15%
Interest Rate 2017/18 - 4.25%
Claims based on a 10 Yr. Average
Fees increased by 5 cents
An on-going challenge for the Board is the unpredictability of claims, i.e. the number of claims to the Board from year to year is difficult to predict and can fluctuate greatly. Because claims paid are variable, any estimate of future claims can be unreliable. Prior to the 2013/14 fiscal the Board did not include a budget for claims paid. This amount is an estimate for budgeting purposes only. Actual payments on claims may be higher or lower than the budgeted amount. The 2015/16 fiscal year includes a budgeted amount of $50,000 to engage an actuary to complete an actuarial review of the Funds.
Risk Identification, Assessment and Management
The Government of Ontario uses a risk-based approach to manage provincial agencies. Consequently, provincial agencies are required to employ a risk framework when making operational decisions. Provincial agencies are responsible for ensuring that funds are spent effectively and efficiently, and are used for the intended purpose. Risk management helps the Board identify risks, assess exposures, and develop appropriate action plans to help ensure provincial agencies meet business objectives. A risk management plan was developed by the Board in 2010 and is updated as part of the Board's strategic planning process.
Agencies are expected to report on the status of the evaluation of their risks on a quarterly basis, except for high risks, which must be reported immediately. This reporting requirement requires the Board to review the risk management plan and identify quarterly whether or not there are changes.
|Risk Category||Risk Name||Risk Level Assessment (low, medium, high)||Risk Action Plan (mitigation strategy)|
|Operational||Investment Risk(s):||Low||The Board uses the following basic procedures to address and manage investment risk: 1) Actuarial review: Reviews periodically performed by an actuary; and 2) Asset allocation and diversification among asset classes to provide the best opportunity for producing sufficient returns to meet the expected liabilities.|
|Medium|| Continue with the current investment policy
which balances return and liquidity.
Actuarial study to ensure that the Fund is adequate for the current conditions in the industry.
Legislative Change by the Ontario Government
|Low||Accept - This is outside of the Board's control. The government is responsible for the legislation that establishes the Board.|
|Operational||Fund Balance and Unpredictability of Claims||Low||Accept/Reduce - An actuarial review was completed in 2010. The review determined that the Fund was actuarially sound. Effective July 1, 2011, the Minister instead of the Lieutenant Governor in Council was given authority to set the check-off fee. This will make it easier to make changes to the check-off if necessary to rebuild the Fund.|
|Operational||High Livestock Value||Medium||Actuarial study once every five years to ensure fund is actuarially sound.|
|Increasing governance and accountability requirements||Low||New member orientation sessions to ensure roles and responsibilities are clearly understood is ongoing. Ensure that Board members fully understand their roles and responsibilities.|
|Institutional continuity and succession planning||Low||The Board works with external partners and OMAFRA to ensure that new candidates for the Board are brought forward for approval well in advance of Board retirements.|
Human Resource/ Staff Numbers
The Board has no staff. However, the Board has entered into third party agreements for the provision of administrative/secretariat, Fund management and adjudication support.
The Ministry of the Attorney General provides legal services to the Board. Legal services staff provides the Board with advice, opinions, and legal assistance in Judicial Reviews and in recovering of monies owed to the Board and contributes to the continuing education of board members.
OMAFRA's Regulatory Compliance Unit provides investigative services.
Initiatives Involving Third Parties
The MOU specifies that the Board is responsible for its own administrative/secretariat and adjudication support. This support was previously paid for by OMAFRA. The MOU also specifies that the person providing the adjudication support cannot be involved in licensing.
In 2012, BCFPPI was the successful bidder in a competitive procurement to assist with the delivery of the Program. One of the deliverables is to provide administrative and Fund management support. The Board of BCFPPI has representatives from the BFO, Ontario Livestock Dealers Association and Ontario Livestock Auction Markets Association. See Appendix 2: Description of Deliverables.
A BCFPPI employee currently acts as the Board's administrator and is responsible for assisting the Board in preparing its annual report, business plan and other documentation required for compliance with the MOU and the Agencies & Appointments Directive. Day to day management of the Fund includes receiving and depositing fees; preparing monthly, quarterly and annual financial statements; preparing documentation for annual audits; and, investment of the Fund. The Fund is invested according to the MOU.
In 2009/10, the Board entered into an arrangement with a third party for the provision of secretariat and adjudication support. This support included but was not limited to:
Overseeing the effective processing and scheduling of claims;
Recording minutes of meetings and distributing same;
Preparing documentation relating to the adjudication of cases; and
Scheduling hearings and drafting decision letters as directed by the Board.
Information Technology (IT)/Electronic Services Delivery (ESD) Plan
The Board has no IT and ESD plan for the coming year.
Proposed Capital Expenditures
The Board has no capital expenditure planned.
Performance measures and targets for each objective are developed below. As part of its continuous improvement process, the Board will develop the oversight responsibility required to ensure that objectives are achieved. The Board will also track progress against these measures and prepare an annual report. Day to day activities of the Board will continue to be implemented by BCFPPI.
Performance Measures and Targets
Goal: Protecting the long term viability/sustainability of the Fund for Livestock Producers
|Performance Measure/Indicator||Baseline 09/10||Actual 14/15||Targets 15/16||Targets 16/17||Targets 17/18||Targets 18/19|
|The Fund remains actuarially sound with a balance of $5.8M as recommended by the 2010 actuarial study||5.8 M||7.3 M||5.8 M||5.8 M||5.8 M||5.8 M|
|As a best management practice, the Board will engage an independent actuary to complete an actuarial study at least once every five years to assess the long term financial sustainability of the Fund in relation to the contribution and payout rates||July 2010||Next study July 2015|
|Unqualified audit opinion from the annual audit||Achieved||Achieved||Ongoing||Ongoing||Ongoing||Ongoing|
|Review investment policy annually to ensure that investment targets are met (e.g. return on investment) and take actions as necessary||ROI of 3.97 %||ROI of 3.9 %||ROI of 4.05 %||ROI of 4.15 %||ROI of 4.15 %||ROI of 4.25%|
|Track debt owed to the Board and attempt to recover based on debt collection/recoveries policy||N/A||Achieved||Debt recovery rate of 30%||Debt recovery rate of 30%||Debt recovery rate of 30%||Debt recovery rate of 30%|
|Budget approved by December 31st as part of the business planning process||
May 2010 (3)
|May 2015||December 2016||December 2017||December 2018||December 2019|
|Quarterly Financial Reports completed and submitted to OMAFRA within 15 days of the end of the quarter||Achieved||Achieved||Quarterly||Quarterly||Quarterly||Quarterly|
|Regular monitoring of payments from the Fund to ensure 100% compliance with section 5(2); 5(5) and 7(2) of the FPPA||Payments compliant with FPPA||Payments compliant with FPPA||Ongoing monitoring of payments to ensure compliance||Ongoing monitoring of payments to ensure compliance||Ongoing monitoring of payments to ensure compliance||Ongoing monitoring of payments to ensure compliance|
Goal: Strengthening Board governance and accountability
|Performance Measure/Indicator||Baseline 09/10||Actual 13/14||Targets 14/15||Targets 16/17||Targets 17/18||Targets 18/19|
|Annual Report submitted within 90 days of the agency's receipt of its audited financial statements from the Auditor General||120 days (July annually)(4)||Not Achieved: Auditor was late (December 2013)||90 days of receipt of audited statements||90 days of receipt of audited statements||90 days of receipt of audited statements||90 days of receipt of audited statements|
|Business Plan submitted by March 31st||March 31/10(5)||Achieved||Mar 31/14||December 31/16||December 31/17||December 31/18|
|Submit Quarterly Risk Assessment Report to OMAFRA within 15 days of the end of the quarter||Achieved||Achieved||Within 15 days of the end of the quarter||Within 15 days of the end of the quarter||Within 15 days of the end of the quarter||Within 15 days of the end of the quarter|
|Stakeholders informed of Boards finances via annual inserts in the BFO's annual report||February||Achieved||February 2015||February 2016||February 2017||February 2018|
Goal: Ensuring that there is an adjudication process in place that is simple, fair, and accessible, with minimal delays
|Performance Measure/Indicator||Baseline 09/10||Actual 14/15||Targets 15/16||Targets 16/17||Target 17/18||Target 18/19|
|Number of days from receipt of report completed by investigators until the Board makes and issues its decision||60 (Actual 300 target not achieved)||achieved||60 days||60 days||60 days||60 days|
|Work with stakeholder groups to ensure that the ministry receives required information to appoint Board members on a timely basis||5 or more members appointed||Achieved||5 or more members appointed||5 or more members appointed||5 or more members appointed||5 or more members appointed|
|New board trained/ oriented on the function of the Board and their roles and responsibilities||n/a||n/a||At the Board meeting following appointment||At the Board meeting following appointment||At the Board meeting following appointment||At the Board meeting following appointment|
(3) Target changed in 2015/16 to meet the new AAD requirements
for business plans
(4) Target changed in 2015/16 to meet the new AAD requirements for annual reports
(5) Target changed in 2015/16 to meet the new AAD requirements for business plans
All external communication of the Board to the public, stakeholders and others shall be approved by the Board.
The Board's target audiences are producers and licensed dealers. The main interface the Board has with their target audience is when they come before the Board regarding a claim. The final outcome of that process will dictate the response by the Board and the stakeholder.
Board communication occurs at two levels:
Communication to parties to a claim against the Fund directed by Board-approved protocol.
Broad-based communication to all stakeholders as an education piece.
Key messages for directed communication
Clearly outlines the regulations that were followed in making a decision
Identifies section or sections of the FPPA and O. Reg. 560/93 relied on in arriving at a decision
States that a decision is normally not made without granting a hearing in the event that the Board sees potential grounds for refusal
Key messages for broad-based communication
Importance of dealing with licensed dealers
Importance of following the rules and regulations when selling livestock
The risk of having a claim denied if rules are not followed
Vehicles to communicate key messages
A brochure titled "Ontario Beef Cattle Financial Protection Program" outlining the program and function of the Board will be distributed yearly as an insert through the Beef Magazine and Dairy Magazine.
Semi-annually, the Beef Magazine carries the list of licensed dealers and the outline of the program. This publication goes to every producer in Ontario.
A list of all licensed dealers on the web site, updated daily or whenever any changes are made. This is a function of the licensing side of the program but also supports the Board's communication strategy.
Direct communication by letter to specific stakeholders.
The Minister will consult with the Chair as appropriate when significant new directions for the Board are contemplated. The Deputy Minister will meet with Chair, as necessary, to discuss matters of mutual importance to the Board and OMAFRA. The Chair will keep the Minister advised, in a timely manner, of all planned events and issues that concern or can be reasonably expected to concern the Minister in the exercise of his/her responsibilities.
Chair, Livestock Financial Protection Board
Appendix 1: Board Members and Terms
|Name||Organization||Date Appointed||Expiry Date|
|Mr. Larry Witzel, Chair||Ontario Livestock Auction Markets Association||April 17, 2015||April 17, 2018|
|Mr. Paul Sharpe||Beef Farmers of Ontario||November 30, 2007||November 30, 2016|
|Mr. Dan Darling||Beef Farmers of Ontario||April 23, 2015||April 23, 2018|
|Vacant.||Canadian Meat Council|
|Mr. Murray Allen||Dairy Industry||September 5, 2008||September 5, 2017|
|Ms. Jennifer Haley||Veal Industry||October 6, 2008||October 6, 2016|
|Mr. Kevin McArthur||Ontario Livestock Dealers Association||July 18, 2011||July 18, 2017|
|Mr. Gerald Houtzager||Independent Meat Packers and Processors||April 13, 2015||April, 13, 2018|
Appendix 2: Description of Deliverables of Beef Cattle Financial Protection Inc.
The supplier shall be responsible for:
- Co-ordinating and oversee the processing of livestock dealer licensing applications (including renewal applications) under the LLPA and Reg. 725, in such a manner as to ensure the effective and timely administration of the licensing program, under the direction of the Director appointed under the LLPA;
- Assessing financial responsibility and security requirements of each livestock dealer licence applicant; and
- Enforcing the LLPA and Reg. 725.
The specific duties includes:
- Hiring, training and managing the staff required to administer the licensing component requirements in accordance with accepted principles of human resource management;
- Ensuring staff comply with all relevant/applicable and any future additions or modification to legislation as they become enacted to Accessibility standards and regulations;
- Proactively communicating with Ontario's francophone applicants;
- Gathering all relevant information regarding the financial and business structure and activities of each applicant, including but not limited to, corporate searches and relevant information pertaining to the owners, principal shareholders, partners, affiliates and major creditors of applicant;
- Ensuring the financial statements and declarations submitted in support of a licence application are complete and accurately reflect the financial position and business activity and inventory positions of the applicant;
- Validating financial data for input and calculation of a financial ratio score for each applicant;
- Assessing qualitative factors relating to financial responsibility of applicants according to criteria approved by the Director (if any);
- Reviewing difficult cases with the Director;
- Formulating and delivering to the Director written recommendations concerning financial responsibility and security requirements, including amount and form of security (if any), of licence applicants;
- Monitoring dealer compliance with requirements under the LLPA and Reg. 725 or any successor legislation, including monitoring of dealers' commercial activities and recording and assessment of all late payment reports or complaints made by the community sale operators, or any industry participants;
- Taking appropriate, timely and effective action in cases where there is reported or suspected non-compliance with dealer requirements, including referring matters to investigation and reporting potentially significant matters and matters that cannot be resolved to the Director on a timely basis;
- Recommending that the Director call a licensing hearing in appropriate cases;
- Attending licensing hearings and presenting evidence and expert opinion on behalf of the Ministry;
- Corresponding with applicants and others on licensing related matters and providing applicants with relevant information concerning licence and program requirements;
- Collecting licence fees and remit those fees the Consolidated Revenue Fund;
- Advising Ministry staff in respect of licensing and security requirements of applicants;
- Preparing information and material for the purpose of responding to inquires from industry stakeholders or to brief ministry officials in respect of media inquiries and issues; and
- Performing such other duties and work relating to the licensing and regulation of dealers under the LLPA, and the administration of the licensing program as is required by the Director.
Livestock Financial Protection Board (LFPB)
The supplier shall be responsible for:
- Attending an initial project meeting with the LFPB at 1 Stone Road West in Guelph to discuss the assignment;
- Facilitating the preparation of the LFPB's business plan, annual report and other documentation as outlined in the Memorandum of Understanding (MOU) between the LFPB and the Ministry;
- Sending monthly notices to all licensed livestock dealers in respect of fees that are owing to the LFPB under the FPPA;
- Collecting fees and any other monies owing to the LFPB and depositing them to the appropriate bank accounts of the LFPB for the credit of the Fund;
- Sending notices to licensed livestock dealers in respect of overdue fees owing to the LFPB under the FPPA;
- Preparing monthly, quarterly and annual financial statements for the Fund, along with all attendant reports;
- Keeping proper records of LFPB income and expenditure;
- Arranging investments of the Fund as the LFPB directs and within the parameters set out in the MOU between the LFPB and the Minister;
- Keeping all securities of the LFPB and Fund in safe custody;
- Preparing documentation for annual audits;
- Tracking, identifying and recommending appointments to the LFPB on behalf of the LFPB;
- Liaising with legal counsel regarding LFPB matters;
- Preparing information and material for the purposes of responding to inquires from industry stakeholders or to brief ministry officials in respect of media inquiries and issues;
- Procure goods and/or services on behalf of the LFPB; and
- Ensuring LFPB is compliant with all relevant legislation and government directives.
For more information:
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