Livestock Financial Protection Board Business Plan for the Fiscal Years 2020-2023

Table of Contents

  1. Executive summary
  2. Mandate
  3. Governance
  4. Overview of current and future programs and activities
  5. Strategic direction
  6. Resources, services, and support provided to the Board
  7. Environmental scan
  8. Financial budget
  9. Proposed capital expenditures
  10. Initiatives involving third parties
  11. Performance measures and targets
  12. Risk identification, assessment and management
  13. Communication plan
  14. Appendix 1: Board appointees (as of February 24, 2019)
  15. Appendix 2: History of claims (as of February 24, 2020)
  16. Appendix 3: Ministers mandate letter

Executive summary

The Livestock Financial Protection Board ("Board") is pleased to present its business plan for fiscal years 2020-2023. 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 Board's key commitments for 2020-2023

The following are the main areas of focus for the Board in the 2020 to 2023 planning horizon:

  • Timely adjudication of claims. The Board's goal is to continue to fulfill its mandate and contribute directly to its strategic outcome to investigate and adjudicate claims in a fair and equitable manner and to grant, refuse and recover claim payments under the under the Farm Products Payments Act (FPPA) as appropriate;
  • Actuarially sound Fund balance. The Board will continue to administer the Fund in a sound manner to ensure the long-term sustainability of the Fund. In 2018/19 the Fund balance was $7.8M. This was $1.7M above the actuarially sound minimum balance of $6.1M.
  • Continue to strengthen Board governance and accountability; and
  • Continue to support the ministry's review of the Beef Cattle Financial Protection Program to ensure it is aligned with current agricultural risk management landscape and sector trends.

Our goal is to ensure the long-term sustainability of the Fund. We are pleased that our investment strategies have helped the Fund, considering the unprecedented low interest rates. There is continued uncertainty in the financial markets with risk of a continued low interest rate environment. The Board will continue to assess the potential impact of different financial market scenarios and make adjustments to its investment strategy as required.

Revenue and expenditures for 2020-2023

Revenue

Total revenue for this planning horizon is expected to remain relatively the same as in previous years.

Expenses

Effective January 1, 2020, changes to the FPPA and its regulations have shifted responsibility for most of the administrative costs of the Ontario Beef Cattle Financial Protection Program to the Board.

A new Minister's regulation (O. Reg. 467/19) under the FPPA became effective January 1, 2020 that requires the Board to pay for all licensing and enforcement costs under the Livestock and Livestock Products Act and fund management and claims adjudication under the FPPA from the Fund. Provisions to require the Board to pay investigative and some legal costs under the FPPA will become effective on April 1, 2020. Prior to this, the Ministry paid a greater proportion of the costs. The new regulation will help to ensure the program long-term sustainability and support any potential future enhancements to Ontario's financial protection program. This change will result in an increase in Board expenses as of January 1st (2019/20 fiscal year and onward) in the budget. Prior to the regulation being made effective, the Board paid the costs related to: administering the financial protection Fund; adjudication and payment of claims; recoveries; and a portion of the costs of determining the financial responsibility of dealers (part of licensing).

The Board will continue to review and monitor the soundness of the Fund on an annual basis, and will make recommendations to the Minister regarding the appropriate changes such as the level of check-off fees, as required.

An actuarial review is planned for 2020/21, which involves a third party vendor to conduct a review to determine how potential claim payments and/or expenditures may affect the Fund. This expense is included in the budget for 2020/21 fiscal year.

Table 1 outlines total revenues and expenditures for the previous year as well as expectations for the planning horizon.

Mandate

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

It is the function of a board and it has power,

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

The Board's vision is to protect the financial interests of licensed dealers and producers who have sold livestock to licensed dealers. The Board's vision supports the following OMAFRA priorities:

  • (1) Providing stewardship of Ontario's capacity to produce food; and
  • (2) Fostering economic development of the Agri-Food sector and rural Ontario.

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 as it helps livestock sellers to manage risks beyond their control (i.e. default by a licensed dealer).

The mission of the Board 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.

Governance

The Livestock Financial Protection Board is classified as a Board-Governed Provincial Agency (Trust) under the Agencies & Appointments Directive (AAD).

The Board operates at "arm's-length" from the Government but is accountable to the Minister of Agriculture, Food and Rural Affairs (the Minister), 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. The Board operates under the authority of the FPPA, Ontario Regulations 560/93 – Fund for Livestock Producers and 467/19 – Boards' Payment of Expenses and in accordance with the Memorandum of Understanding (MOU) between the Minister and the Chair.

Memorandum of Understanding (MOU)

A memorandum of understanding (MOU) reflects the relationship between the Board and Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA or Ministry) and establishes the accountability framework between the Minister and the Chair. The MOU outlines the responsibilities between the Minister, the Chair, the Deputy Minister and the Board members as well the administrative, financial, and auditing arrangements with OMAFRA.

Effective July 24, 2019, the Board Chair and Minister affirmed the continued used of the existing MOU (that was effective June 5, 2017). The MOU is effective until it is revoked or the Parties sign a new MOU.

Board structure

The Board is comprised of members as appointed by the Minister for terms of up to three years. Members are eligible for reappointment. The Minister also has the authority to appoint a member of the Board as Chair and another as Vice-Chair.

Amendments to O. Reg. 560/93 - Fund for Livestock Producers became effective January 1, 2020 to improve the LFPB's administration by providing the Board with greater flexibility around quorum by removing quorum requirements from the regulation; and ensuring the Board composition better reflects the needs of the sector by removing the requirement that the Canadian Meat Council (CMC) be represented by a member. 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.

There are currently six members on the Board, including the Chair and Vice Chair. In 2019/20, two existing members were reappointed and one new member was appointed to the Board. Appendix 1 includes a list of Board members and terms.

Mandate letter from Minister

As part of the AAD, the Minister issues an agency mandate letter to the Chair of all board-governed agencies on an annual basis to inform their business plan. The Board Chair received the 2020/21 mandate letter from the Minister which outlines high-level, achievable expectations as follows:

  • Ensure long-term sustainability and effective management of the Fund and report the performance of the Fund to stakeholders
  • Continue to investigate and adjudicate claims in a fair and equitable manner.
  • Support the government's Open for Business objectives of reducing government expenditure and delivering cost saving to Ontario taxpayers
  • Continue to support the ministry's review of the financial protection program to ensure they are aligned with the current agricultural risk management landscape and sector trends.
  • Meet all AAD provisions and requirements (i.e. agency attestation).

These will be measured and addressed in the Board's 2020-2023 business plan as follows:

  • Annually review the performance of the Fund against established targets.
  • Ensure the processing of claims is completed fairly and with minimal delays.
  • Work with OMAFRA to support the governments' Open for Business objective and the financial protection program review and to identify opportunities to ensure that livestock producers and dealers have access to stable risk management tools.
  • Meet all AAD provisions and requirements (i.e. agency attestation).

Overview of current and future programs and activities

The following describes the Ontario Beef Cattle Financial Protection Program (OBCFPP or Program), the Fund and the role of the Board within the Program:

Ontario Beef Cattle Financial Protection Program

The 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:

  1. The annual licensing of dealers under the Livestock and Livestock Products Act (LLPA), and
  2. The administration of the compensation fund established under the Farm Products Payments Act (FPPA).

Ontario Beef Cattle Financial Protection Program Inc. ("Beef Inc.") was under contract with the Ministry to assist in administering the licensing support services component of the program. Beef Inc. was also under contract with the Board to provide governance and secretariat and fund management services for the Board (previously referred to as strategic policy, administration and fund administration for the Board and adjudication support).

In May 2018, Ministry was informed by Beef Inc. that the organization would not extend its services to Ministry and the Board beyond its current service agreement, which expired December 31, 2018.

On December 12, 2018, the Minister approved the transfer of program delivery to AgriCorp effective January 1, 2019.

AgriCorp and Ministry are approaching the transition of the program from the Ministry to AgriCorp in a phased approach. Currently the Ministry (OMAFRA's Director in Animal Health and Welfare Branch) is remaining the Program Director with authority for licensing. AgriCorp is assisting with the licensing components for determining financial responsibility of dealers based on a financial assessment. Both parties are collaborating on processes during this interim phase.

AgriCorp is currently also providing secretariat support to the Board for adjudicating claims, which includes coordination, attendance and preparing draft documents. Other services include assisting the Board in preparing its annual report, business plan and other documentation required for compliance with the MOU and the AAD.

Fund administration

The Board is responsible for the overall governance and administration of the Fund. There is only one Fund that is used to:

  • Provide compensation to qualified sellers in the event that certain buyers default on their payment obligation (pay approved claims, under O. Reg. 467/19);
  • Pay all expenses relating to the administration costs of the licencing of dealers under the LLPA with respect to the delivery of the Program effective January 1, 2020 (except expenses related to appeals to the Agriculture, Food and Rural Affairs Appeal Tribunal; judicial reviews or expenses related to any subsequent appeals under the LLPA; and expenses incurred by the ministry to administer the LLPA);
  • Pay for investigation and legal fees associated with the adjudication of claims;
  • Pay for professional, technical or other assistance to or on behalf of the Board (e.g.: actuarial review).

The Fund is not used for board remuneration as this is provided from the Ministry as board members are employees who are public servants employed under Part 111 of the Public Service of Ontario Act, 2006, S.O. 2006, c. 35.

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. O. Reg. 321/11- Fees Payable to Boards was amended in December 2015. The amendment increased the fee payable to the Board from five to ten cent s per head. The fee increase was effective February 1, 2016, and is payable to the Board as follows:

  • In the case of a direct sale by a producer to a licensed dealer, the fee is payable by the producer.
  • In the case of a private treaty sale, the fee is payable by the licensed dealer who sells the livestock.
  • In the case of a sale by consignment, the consignor and the consignee each pay a separate 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 annually.

The Board is the administrator of the Fund and is ultimately responsible for its management and administration. The Board's main activities are to manage the Fund effectively and prepare for claims when they occur.

Since January 2019, the Board has a service agreement with AgriCorp to provide Governance, Secretariat and Financial Services to the Board. AgriCorp provides the day-to-day administrative functions of the Fund; however, the Board is ultimately responsible for the oversight and management of the Fund. Key aspects of AgriCorp's role is to receive and deposit fees; prepare monthly, quarterly and annual financial statements; prepare documentation for annual audits; prepare annual reports and annual business plans for Board approval, and investment of the Fund as outlined in the Board's Investment policy.

Resources that provide support to the Board have no role in the licensing and inspection components of the program. These functions are separate to avoid any perception of a possible conflict of interest in adjudicating the claims that arise from a dealer's default in payment, while protecting the integrity of the Program.

The Board does not administer any other program and no new programs are being considered for the 2020-2023 time frame.

Fund investment strategy

Investment income is one important source of revenue for the Fund. As such, the Fund is structured and managed to provide a maximum rate of investment return while assuming a low risk tolerance. The Board continues to ensure that the Fund is invested in financial instruments that are consistent with the Trustee Act provisions referenced in the MOU and the Board's investment policy.

The Board's asset mix currently includes investments that guarantee face value at redemption; generally this includes Guaranteed Investment Certificates (GIC) issued by financial institutions or similar financial instruments. When possible, the Board staggers the terms and maturity dates of GICs and uses this laddering strategy to reduce the influence of interest changes and to maximize returns.

The Fund has issued a $4 million first mortgage on development land in the Regional Municipality of Waterloo. The current agreement has $4 million principal at 5% interest paid semi-annually, maturing December 10, 2022.

In the event of the sale or any other conveyance of all or part of the secured lands, the principal and accrued interest on the mortgage shall, at the Board's option, be immediately due and payable. In the unlikely event that a default on the mortgage occurs, as a secured, priority lender, the Board has first right on the property to recover the outstanding principal and interest costs, and any other costs incurred during the process.

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 potential compensation will be considered by the Board if it involves a producer selling to a dealer, a licensed dealer selling to a producer or a licensed dealer selling to another licensed dealer.

A claim application can be made if a seller has not been paid according to the timelines in the regulations.

The claim adjudication process begins when the seller files a claim application with the Board. Once the claim application is received the Board may choose to seek investigation services from OMAFRA's Regulatory Compliance Unit (RCU) to complete an investigation into the claim. When the investigation is complete, a report is made and presented to the Board.

The Board conducts an in-depth analysis, which may involve OMAFRA Legal Services' advice, 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 to dealers and producers based on grounds set out in sections 18 and 19 respectively of O. Reg. 560/93 – Fund for Livestock Producers. 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 the amount of payment from the Fund are set out in sections 20 and 21 of O. Reg. 560/93.

Recovery of money owed

The FPPA enables the Board to attempt to recover any money to which the Board is entitled. The Board, through legal counsel, work to recover money owed to the Board. Recovery of debt owed to the Board is an important part of ensuring that the Fund remains viable.

Strategic direction

The table below identifies the key strategies that the Board will be used to achieve these goals.

Goal/Priorities Objectives Strategies
Long term viability/ sustainability of the Fund To maintain a solvent Fund that will be able to pay eligible claims as they may come due while keeping check-off rates stable over the long term
  • Ensure check-off is collected and deposited into the Fund
  • To conduct an actuarial review.
Long term viability/ sustainability of the Fund Identify, assess and manage the Fund's financial risks
  • Engage a third-party actuary to conduct an actuarial study as required
  • Ensure the Board's accounts and financial transactions are audited annually by the Office of the Auditor General. A report of the audit is available to the Board and to the Minister, as per the FPPA.
  • Review/approve investment policy/strategy annually
  • Ensure payment from the Fund is compliant with the FPPA
Long term viability/ sustainability of the Fund Timely and efficient collection of debt owed
  • Tracking debt owed to the Board
  • Work with legal counsel to ensure that every reasonable attempt is made to collect debt owed to the Board as soon as is reasonably possible using procedures outlined in the debt recovery policy
Governance and Accountability Board compliance with government documents such as the AAD
  • All governance and accountability documents required under the MOU developed and in place
  • Review, discuss and approve compliance documents submitted to the Minister to ensure they are on time and meet the requirements of the directives
Governance and Accountability Improve Board members' and stakeholders' knowledge of the function of the Board and their roles and responsibilities
  • Enhancement of training and orientation program for Board members
  • Keep stakeholders informed of the Board's finances via an insert in the BFO's annual report
Maintain an adjudication process that is simple, fair, and accessible, which minimizes delays To conduct adjudicatory Board meetings and issue decisions in a timely, procedurally fair and legally supportable manner
  • Claims adjudication policy followed
  • Work with the OMAFRA to ensure that claims are investigated in a timely manner while taking human and financial resources into consideration
  • Adjudicate claims in a timely manner while ensuring a fair process for all parties
  • Established timelines for adjudicating claims adhered to
Maintain an adjudication process that is simple, fair, and accessible, which minimizes delays Experienced individuals appointed to the board
  • Members appointed as authorized in the regulation
  • Work with OMAFRA on the appointment process and succession planning to mitigate loss of board member experience
Support the ministry's review of the financial protection programs Ensure that livestock producers have access to stable risk management tools.
  • Attend and participate in any meetings and/or discussions with the ministry on the programs review
  • Identify opportunities as part of the review to ensure that livestock producers have access to stable risk management tools

Resources needed to meet objectives of mandate and strategic directions

The Board does not have staff. All resources are provided through a Service Agreement or as agreed to in the MOU and regulation between the Board and the Minister.

Resources, services, and support provided to the Board

Since January 1, 2019, AgriCorp has been providing the Board with governance, secretariat and financial services in addition to adjudication support including drafting decisions of the Board as directed. The Board currently has a service agreement with AgriCorp that outlines the deliverables and expectations between the two parties. A service agreement for these services was signed in 2019/20 fiscal year for a three-year term (expiring March 31, 2022).

Additional support services to the Board

The Board has additional support available for legal counsel and the investigation of claims. Through the MOU and regulation, these services are provided by the ministry to the Board.

  • Investigative services are provided by the Regulatory Compliance Unit (RCU) within OMAFRA's Food Safety Systems Development Branch; and
  • Legal services are provided by the ministry of the Attorney General through the Ministry of Agriculture, Food & Rural Affairs Legal Services Branch.

Effective April 1, 2020 as part of the new Minister's regulation (O. Reg. 467/19) under the FPPA, most of these costs will be paid for by the Board (previously covered by the Ministry).

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

Environmental scan

The environmental scan seeks to provide a picture of the environment in which the Board is operating and the key factors that could impact the Board and/or health of the Fund through the upcoming planning and cycles. The challenges and risks faced by the Board have remained similar over the past few 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:

External drivers

Investment and interest risks: Investment income is an important source of revenue for the Board to cover projected expenses and claims. 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. 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 to ensure that the Fund is invested in high quality investments that are consistent with the Trustee Act provisions referenced in the MOU and the Board's investment policy.

Packers rationalization/exit: There are a number of factors that could potentially lead to increased meat 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 decreased somewhat with the exit of several small packers from the industry over the last several years. Despite this, excess capacity is still a negative factor. 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 in the upcoming planning horizon.

Policy/legislative change by the Ontario government: The Minister has responsibility for the legislation governing the Program. The Board established under the FPPA is subject to the risk of a legislation change by the government.

As part of the April 2019 provincial budget announcement there was mention of a review of the financial protection programs and changes to the FPPA through Bill 100. The FPPA was amended January 1, 2020 to broaden the types of expenses that may be paid out of the fund (amongst other things).

Fund balance and unpredictability of claims: The Fund dropping below the actuarially sound level or becoming depleted because of an usually large claim(s) 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 making timely claims against the Fund.

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 in the upcoming 2020-2023 planning horizon can be unreliable. An actuarial review that is planned for 2020/21 will consider if the Board should make changes to the target fund level compared to the previous actuarial report.

Livestock values: Canadian cattle prices were at record highs due to lower cattle inventories; however they have dropped significantly and are currently at a more stable level. These lower values have reduced risk to the Fund considerably. However, these reduced values have had a negative impact on the feedlot sector generating significant losses; to the extent that some in this sector who are also licensed dealers could have a negative impact on the Fund.

Internal drivers

Board knowledge management and succession planning: Succession planning and creating continuity on the Board are given consideration when the expiry date of members' term are approaching to help minimize the loss of experience and knowledge during transition periods. To minimize the loss of experienced Board members, the Board has asked that appointments be staggered when the Minister appoints members to the Board.

Governance and accountability requirements: There is an increasing focus and scrutiny of both private and public sector organizations, which has resulted in increasing demands for accountability 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 duties of boards, if any, continue to evolve.

Financial budget

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

Projected Board revenue

The following are the three sources of income into the Fund:

  • Check-off fees;
  • Income from investments; and
  • Monies recovered after payment of claims.

Projected Board expenses

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 paying approved claims, under O. Reg. 467/19 the Board is also authorized to use the Fund to pay for all expenses to administer the FPPA, including governance, secretariat and financial support services; any professional, technical or other assistance to or on behalf of the Board (e.g.: actuarial review); and investigation and legal fees associated with the adjudication of claims. The Board is not required to pay expenses related to judicial reviews If its decision.

Additionally, the Board is required to pay all expenses relating to the administration costs of the licencing of dealers under the LLPA effective January 1, 2020 (except expenses related to appeals to the Agriculture, Food and Rural Affairs Appeal Tribunal; judicial reviews or expenses related to any subsequent appeals under the LLPA; and expenses incurred by the ministry to administer the LLPA) are also paid from the Fund.

Governance/Secretariat and Financial Support ServicesBoth Governance/ Secretariat and Financial Support services are provided to the Board by AgriCorp as agreed to in the Service Agreement between the two parties. The Board has entered into a contract with AgriCorp, which expires on March 31, 2022.

Professional, Technical or Other Assistance to the Agency - An example of this type of cost would be an actuarial review. An actuarial study was last completed in 2015 (2015/16 fiscal). A best practice is a study every five years. The next actuarial review is planned for 2020/21.

Legal Services & Investigation - Under the new Minister's regulation, effective April 1, 2020, the Board will pay for most legal services and investigative costs. Legal counsel also reviews agreements and governance documents and provides any other legal advice as requested. This is a new expense that will be reflected in the Board's financials for 2020/21 onward.

Board member Per Diems, Travel and Meal Expenditures - A financial review determined that Board remuneration (per diem and incidental costs, including travel) should be paid by OMAFRA and not from the Funds. This change came into effect in November of 2010.

Costs of Determining Financial Responsibility – Effective January 1, 2020 the Board is responsible for all licencing costs except those incurred by the ministry to administer the LLPA.

Proposed capital expenditures

The Board does not have any capital expenditures planned for 2020-2023.

Table 1. Financial table - expenditure and revenue

The table below shows the budget, actual revenue and expenditures for 2018-19 and 2019-20 fiscal year as well out-year planning budgets from 2020-2023.

Opening Assets

  Budget 2018-19 Actual 2018-19 Budget 2019-20 Actual5 2019-20 Budget 2020-21 Budget 2021-22 Budget 2022-23
Opening Assets - $7,591,604 $7,675,511 $7,895,451 $7,895,451 $7,703,451 $7,581,451

Revenue

  Budget 2018-19 Actual 2018-19 Budget 2019-20 Actual5 2019-20 Budget 2020-21 Budget 2021-22 Budget 2022-23
Fees 114,000 206,302 228,000 213,891 205,0002 205,0002 205,0002
Interest 145,000 261,664 290,000 278,874 290,0001 290,0001 290,0001
Recoveries 20,000 0 40,000 50,928 40,000 40,000 40,000
Total Revenue $279,000 $467,966 $558,000 $543,693 $535,000 $535,000 $535,000

Expenses

  Budget 2018-19 Actual 2018-19 Budget 2019-20 Actual5 2019-20 Budget 2020-21 Budget 2021-22 Budget 2022-23
Professional Fees (i.e.: actuarial review) - 60,0003 - -
Governance, Secretariat and Financial services (Board) 93,000 35,000 93,000 93,000 93,000
LFPB Legal and Investigative services - 20,0004 20,0004 20,0004
Determining Financial Responsibility/Licensing & Enforcement 120,585 174,119 244,066 77,000 279,000 279,000 279,000
Claims Paid 115,000  0 230,000 $64,695 265,000 265,000 265,000
Total Expenses $235,585 $174,119 $474,066 $141,695 $717,000 $657,000 $657,000

Excess of Revenue over Expenses

  Budget 2018-19 Actual 2018-19 Budget 2019-20 Actual5 2019-20 Budget 2020-21 Budget 2021-22 Budget 2022-23
Excess of Revenue over Expenses - 293,847 83,934 401,998 (182,000) (122,000) (122,000)

Closing Balance of Assets

  Budget 2018-19 Actual 2018-19 Budget 2019-20 Actual5 2019-20 Budget 2020-21 Budget 2021-22 Budget 2022-23
Closing Balance of Assets - $7,895,451 $7,759,485 $8,287,449 $7,703,451 $7,581,451 $7,459,451

Financial Assumptions/ notes:

1 2020 to 2023 forecasted interest rate of 2.0%

2 Amount for fees is based on a 10 year average of fees received.

3 Actuarial review – last actuarial review was last completed in 2015 (completed approx. every 5 years). Next review is planned for 2020-21 fiscal.

4 Effective April 1, 2020 the Board is responsible to pay for most legal services and for investigative services.

5 The 2019-20 actuals represent the actuals from the first three quarters of 2019-20 and a forecast for Q4.

Initiatives involving third parties

Approximately every 5 years, the Board conducts an actuarial review, an initiative that involves a third party vendor, to determine how potential claim payments and other factors may impact the Fund. The last actuarial review was completed in 2015 and the next actuarial review is planned for 2020/21 fiscal. As an agency of the government, the Board adheres to the OPS Procurement Directive when making any purchases for goods or services from a third party vendor.

Information Technology (IT)/ Electronic Services Delivery (ESD) Plan

The Board currently has no IT and ESD plan for the coming year through 2021. All Information Technology support is provided by AgriCorp through the maintenance of ready access and secure storage of documents developed and received on behalf of the Board. The mandate of the Board does not require Electronic Service Delivery.

Performance measures and targets

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

Implementation Plan

Performance measures and targets for each objective are 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.

To maintain a solvent compensation Fund managed in the interest of livestock producers.

Performance Measure/Indicator Baseline 09/10 Actual 18/19 Target 19/20 Target 20/21 Target 21/22 Target 22/23
Unqualified audit opinion from the annual audit Achieved Achieved Ongoing Ongoing Ongoing Ongoing
The Fund remains actuarially sound with a balance of at least $6.1M as recommended by the 2015/16 actuarial study $5.8 M $7.8 M $6.1 M $6.1 M $6.1 M $6.1 M
Receipt and review Fund financial statements from AgriCorp Quarterly Quarterly Achieved Quarterly Quarterly Quarterly
Engage an actuary, at least once every five years, to assess the long-term financial sustainability of the Fund July 2010 Actuarial Study. Completed in 2015 Next study planned for 2020/21 Actuarial study in 2020/21 Next study planned for 2025/26 Next study planned for 2025/26

To conduct adjudicatory hearings and issue decisions in a fair and timely manner.

Performance Measure/Indicator Baseline 09/10 Actual 18/19 Target 19/20 Target 20/21 Target 21/22 Target 22/23
Claims processed with minimal delays Claimants notified within 2 days, dealers within 4 days of receipt of claim Achieved Claimants notified within 2 days, dealers within 4 days of receipt of claim Claimants notified within 2 days, dealers within 4 days of receipt of claim Claimants notified within 2 days, dealers within 4 days of receipt of claim Claimants notified within 2 days, dealers within 4 days of receipt of claim
Number of days from receipt of report completed by investigators until the Board makes and issues its decision (except where a hearing is held) 60 Days Achieved. 60 Days 60 days 60 days 60 days
Claims are adjudicated fairly E.g.: parties are provided an opportunity to provide input and parties are notified of potential grounds for non-payment in advance of a decision being made in most cases. Claims are reviewed individually; Achieved. All claims were reviewed individually Claims are reviewed individually Claims are reviewed individually Claims are reviewed individually Claims are reviewed individually,
Claimants received notification of Board decision Within 10 days of a Board decision Achieved - all claimants notified of Board decision within 10 days of Board decision. Within 10 days of a Board decision Within 10 days of a Board decision Within 10 days of a Board decision Within 10 days of a Board decision

To grant or refuse claims and to seek recovery of amounts paid.

Performance Measure/Indicator Baseline 09/10 Actual 18/19 Target 19/20 Target 20/21 Target 21/22 Target 22/23
Claims are reviewed to determine their validity Board refers to FPPA and uses legal counsel as required to determine validity of claims Achieved. Two claim applications were reviewed in 2018/19. Board refers to FPPA and uses legal counsel as required to determine validity of claims Board refers to FPPA and uses legal counsel as required to determine validity of claims Board refers to FPPA and uses legal counsel as required to determine validity of claims Board refers to FPPA and uses legal counsel as required to determine validity of claims
Recover any money to which the Board is entitled to under the FFPA Legal counsel is consulted when proceeding with any recovery action Achieved. No pay-out of claims from the Fund in 2018/19. Legal counsel is consulted when proceeding with any recovery action Legal counsel is consulted when proceeding with any recovery action Legal counsel is consulted when proceeding with any recovery action Legal counsel is consulted when proceeding with any recovery action

To ensure that the Board is compliant with directives, policies and agreements.

Performance Measure/Indicator Baseline 09/10 Actual 18/19 Target 19/20 Target 20/21 Target 21/22 Target 22/23
Submit Annual Report Within 90 days of the agency's receipt of the audited financial statement. Achieved; met AAD requirement. Report was submitted to Minister through the OMAFRA liaison on Jan 13th within 90-days of completing the financial audit. Within 90 days of the agency's receipt of the audited financial statement meeting AAD require-ments Within 90 days of the agency's receipt of the audited financial statement meeting AAD require-ments Within 90 days of the agency's receipt of the audited financial statement meeting AAD require-ments Within 90 days of the agency's receipt of the audited financial statement meeting AAD requir-ements
Submit Business Plan Annually Achieved. Submitted Dec. 2018. March 2019 March 2020 March 2021 March 2022
Submit Quarterly Risk Assessment Report Quarterly Achieved. Submitted to Ministry liaison. Quarterly Quarterly Quarterly Quarterly
Submit Agency Attestation (New requirement as of 2015/16) Annually Achieved. Submitted to Agency liaison on April 2, 2019. Annually Annually Annually Annually

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 business objectives are met. 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 there are changes needed.

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.
Operational Packers Rationalization/ Exit Medium
  • Continue with the current investment policy which balances return, security and liquidity.
  • Actuarial study to ensure that the Fund is adequate for the current conditions in the industry.
Strategic Policy/ 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 2015. 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. A fee increase have doubled the fee revenue annually and is assisting in increasing the fund balance. This change will also make it easier to implement future changes to the check-off if necessary to rebuild the Fund.
Accountability/ Governance Increasing governance and accountability requirements Low
  • New member orientation sessions to ensure roles and responsibilities are clearly understood are ongoing. Ensure that Board members fully understand their roles and responsibilities.
Accountability/ Governance Institutional continuity and succession planning Medium
  • 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.
Operational Board unable to meet quorum Low
  • Continue to work with Ministry staff to seek re-appointment/new appointments to reduce this risk.

Communication plan

Annually, the Board will inform the stakeholders of the status of the Fund by providing them with a copy of the Board's audited financial statements and annual report, following the Minister's approval of the document.

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

The Board's target audiences are producers and licensed dealers. The main interface the Board has with their target audience occurs when they come before the Board regarding a claim. The outcome of that process will dictate the response by the Board and the stakeholder.

Board communications occur at two levels:

  • Communications to parties to a claim against the Fund directed by Board-approved protocol.
  • Broad-based communications to all stakeholders as an education piece.

Key messages for directed communications

  • 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 or providing an opportunity for further submissions 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

  • In the event of a claim, the Board will advise each claimant via letter on the outcome of their claim.
  • The Minister will consult with the Chair, as appropriate, when significant new directions for the Board are contemplated. The Deputy Minister will meet with the Chair, as necessary, to discuss matters of mutual importance to the Board and OMAFRA.
  • Program information and a list of all licensed cattle dealers are available on the Ministry website which is 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.

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.

Appendix 1: Board appointees (as of February 24, 2019)

Position Member Name Organization Tenure
Chair (Part Time) Larry Witzel Ontario Livestock Auction Markets Association 17-April-2015 – 31-Mar-2022
Vice-Chair (Part-Time) Paul Sharpe Beef Farmers of Ontario 30-Nov-2007 – 28-Feb-2022
Member (Part-Time) Murray Allen Dairy industry representative 5-Sept-2008 – 29-Jan-2021
Member (Part-Time) Laurie Nicol Packer industry representative 20-April-2018 – 31-March-2021
Member (Part-Time) Jennifer Haley Veal industry representative 6-Oct-2008 – 6-Oct-2021
Member (Part-Time) Howard Greig Ontario Livestock Dealer's Association 6-March-2019 – 5-March-2022
Member (Part-Time) Vacant - -

Appendix 2: History of claims (as of February 24, 2020)

(the following numbers are rounded to the nearest dollar and does not include 2019/20)

Fiscal year (April 1 – March 31) Number of claims reviewed/ made decision on Number of claims paid Amount being claimed from Fund ($) Amount Paid  from the Fund ($)
1981-1985 50 21 737,839.60 400,112.40
1985-86 3 0 9,475.30 -
1986-87 142 15 1,813,633.50 1,451,326.50
1987-88 126 77 833,111.20 567,861.20
1988-89 8 5 66,882.60 46,715.50
1989-90 31 23 1,352,067.60 1,183,260.60
1990-91 2 0 9,810.80 -
1991-92 1 0 7,500.00 -
1992-93 1 0 - -
1993-94 28 20 825,975.30 742,852.70
1994-95 2 1 12,110.70 10,899.60
1995-96 34 34 193,869.80 174,482.80
1996-97 2 0 17,852.50 -
1997-98 7 6 165,370.60 138,723.50
1998-99 1 1 11,384.60 7,969.20
1999-20 48 47 2,203,876.00 1,977,548.00
2000-01 142 125 995,275.60 807,618.80
2001-02 0 0 - -
2002-03 17 8 3,782,026.70 210,319.00
2003-04 40 19 337,875.50 296,894.40
2004-05 10 6 211,152.40 70,842.90
2005-06 0 0 - -
2006-07 0 0 - -
2007-08 0 0 - -
2008-09 18 1 703,100.80 18,727.90
2009-10 1 0 654,105.50 -
2010-11 38 22 2,230,621.71 567,980
2011-12 264 172 1,535,925.68 285,911.94
2012-13 61 61 1,225,030.94 1,218,609.00
2013-14 1 1 883.62 883.62
2014-15 3 2 192,596.12 164,451.82
2015-16 13 9 1,232,333.84 409,006.26
2016-17 0 0 - -
2017-18 0 0 0 0
2018-19 2 0 174,955 0
Total 1,096 676 21,818,925 10,817,693
Recovered 3,568,194
Net Paid Out 7,184,803

Appendix 3: Ministers mandate letter

Larry Witzel
Chair, Livestock Financial Protection Board 985920 Oxford Perth Road
Tavistock, ON
N0B 2R0

Dear Mr. Witzel:

I am pleased to write to you in your capacity as Chair of the Livestock Financial Protection Board. Pursuant to the requirements of the Agencies and Appointments Directive (AAD), this letter sets out my expectations for the Livestock Financial Protection Board for the 2020-21 fiscal year.

Ontario's board-governed agencies are vital partners in ensuring the delivery of high quality services to Ontarians. The people of Ontario depend on you to provide leadership to the Livestock Financial Protection Board and stakeholders. Together with your fellow board members, the livestock industry relies on you to establish the goals, objectives, and strategic direction for the Livestock Financial Protection Board consistent with its mandate, government policies, and my directions where appropriate. I thank you for your willingness to serve.

As you are aware, on January 1, 2019, the Livestock Financial Protection Program underwent a change in delivery agent from Beef Cattle Financial Protection Program Inc. to Agricorp. I would like to thank the Board for its efforts during this period of change, and trust that you will continue to work with the Ministry and Agricorp to ensure a smooth and successful transition.

As you plan for the 2020-21 fiscal year, I expect the Livestock Financial Protection Board to focus on the items below and look forward to seeing these addressed in the agency's annual business plan:

  • Annually measure and communicate to stakeholders the performance of the Fund for Livestock Producers against established targets and have an established investment policy that is reviewed annually to ensure the long-term sustainability of the Fund.
  • Continue to investigate and adjudicate all claims in a fair, equitable and timely I expect the Board to make decisions on claims based on prudent and consistent adherence to established operational procedures, as well as effective customer service in supporting Ontario farmers with the processing of claims and ensuring that the adjudication process is fair and has minimal delays.
  • Working with the ministry to implement the changes brought about by Bill 100 that will help ensure the long-term sustainability of Ontario's financial protection programs and allow the boards to play a greater role in helping their sectors manage risks of non-payment.
  • Continue to support the ministry's review of the financial protection programs to ensure they are aligned with the current agricultural risk management landscape and sector trends.
  • Continue the good work in meeting all AAD provisions and requirements.

I look forward to the continued partnership between the Livestock Financial Protection Board and OMAFRA, and to hearing about your progress on these commitments in your agency's annual report.

Ernie Hardeman
Minister of Agriculture, Food and Rural Affairs


For more information:
Toll Free: 1-877-424-1300
E-mail: ag.info.omafra@ontario.ca