Alberta Crop Industry Development Fund Limited

Transcription

1 Alberta Crop Industry Development Fund Limited Audited Financial Statements #15 Fiscal 2015/16 March

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3 Financial Statements For the year ended March 31, 2016 Contents Independent Auditor's Report 2 Financial Statements Statement of Financial Position 3 Statement of Operations and Fund Balances 4-5 Statement of Cash Flows 6 Notes to the Financial Statements 7-15

4 Independent Auditor's Report To the Members of Alberta Crop Industry Development Fund Ltd. We have audited the accompanying financial statements of Alberta Crop Industry Development Fund Ltd., which comprise the statement of financial position as at March 31, 2016, and the statements of operations and fund balances, and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Organization's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Organization's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Alberta Crop Industry Development Fund Ltd. as at March 31, 2016, and the results of its operations and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations. Chartered Accountants Lacombe, Alberta May 31,

5 Statement of Financial Position March Assets Current Cash $ 376,040 $ 272,448 Accounts receivable 2,257,261 2,182,671 2,633,301 2,455,119 Long-term investments (Note 3) 12,658,174 22,424,851 Capital assets (Note 4) - - Assets under construction (Note 5) 4,415,064 4,415,064 Liabilities and Fund Balances $ 19,706,539 $ 29,295,034 Current Accounts payable and accrued liabilities (Note 6) $ 573,246 $ 20,835 Funds held in trust (Note 7) 26,870 10, ,116 30,835 Equity in capital assets and assets under construction 4,415,064 4,415,064 Fund balances Fund ,082,703 2,696,619 Fund ,919,229 4,203,655 Biopolymer Fund - 60,619 Royalty Fund 1,018,501 1,096,865 Fund ,386,501 Feeding Initiative Fund - 2,026,429 Fund ,670,926 11,378,447 14,691,359 24,849,135 $ 19,706,539 $ 29,295,034 Approved on behalf of the board:, Chairperson, Secretary-Treasurer The accompanying notes are an integral part of these financial statements. 3

6 2012 Feeding Initiative 2008 Fund Fund Fund Revenue Interest (paid) and dividend income $ 354,069 $ 53,998 $ 29,394 Grant funding received (returned) Realized gain (loss) on sale of investments (106,396) (60,957) (5,200) Unrealized gain (loss) on investments (836,416) (151,348) (82,371) (588,743) (158,307) (58,177) Project grant expenditures (refunds) 1,820,963 1,550,121 3,243,381 General and administrative expenditures Bank charges 1, Consortium support 1, Insurance 1, Meeting expenses 30,383 1,238 12,863 Office expenses 4,427-1,202 Professional fees 24,696-1,420 Project review and technical consulting 3,807 1, Salaries and benefits: - Directors 32,947-7,980 - Management 120,687-32,344 - Staff 62,386 8,752 26,450 Special project - communications 1,702 8,250 1,230 Sponsorships 10, Telecommunications 2, Training and professional dues ,815 19,984 84,943 Excess (deficiency) of revenue over expenditures (2,707,521) (1,728,412) (3,386,501) Fund balance - beginning of year 11,378,447 2,026,429 3,386,501 Repayable to the Province of Alberta - (298,017) - Fund balance - end of year $ 8,670,926 $ - $ - The accompanying notes are an integral part of these financial statements. 4

7 Statement of Operations and Fund Balances For the year ended March 31, 2016 Royalty 2006 Biopolymer 2005 Total Total Fund Fund Fund Fund $ 26,306 $ 2,689 $ 60,619 $ 16,716 $ 543,791 $ 944, , ,542 75,813-1,925 - (381,896) (552,524) 551,303 (2,762) (253,598) - 161,353 (1,165,142) (1,379,294) 149,086 (248,984) 60,619 (203,827) (1,048,333) 192, , , , ,695 8,186,060 6,709, ,344 2, ,000 6,087 10,000-2,268-2,268 5,670 5,433-6, ,317 66,975 78,882-2, ,347 12,258 12,277-2, ,705 21,673-1,007-7,022 13,636 50,772-16, ,567 55,385-20,353 1, , ,816-36,930 15,193 68, , ,768-1, ,196 20,449 21, , , ,863 8,640 8, ,575 17, , , ,003 (78,364) (1,284,426) (60,619) (613,916) (9,859,759) (7,158,259) 1,096,865 4,203,655 60,619 2,696,619 24,849,135 32,007, (298,017) - $ 1,018,501 $ 2,919,229 $ - $ 2,082,703 $ 14,691,359 $ 24,849,135 The accompanying notes are an integral part of these financial statements. 5

8 Statement of Cash Flows For the year ended March Cash flows from operating activities Change in non-cash working capital items Decrease (increase) in accounts receivable $ (74,590) $ 43,976 Increase (decrease) in accounts payable and accrued liabilities 552,411 (25,192) Increase (decrease) in funds held in trust 16,870 (3,345) 494,691 15,439 Cash flows from investing activities Assets under construction - 42,932 (Increase) Decrease in long-term investments 9,766,677 5,806,123 9,766,677 5,849,055 Net change in fund balances Amortization - (42,932) Excess of revenues over (expenditures) (9,859,759) (7,158,259) Fund balances repayable to the Province of Alberta (298,017) - (10,157,776) (7,201,191) Increase (decrease) in cash during the year 103,592 (1,336,697) Cash, beginning of year 272,448 1,609,145 Cash, end of year $ 376,040 $ 272,448 The accompanying notes are an integral part of these financial statements. 6

9 Notes to the Financial Statements March 31, 2016 Nature of operations Alberta Crop Industry Development Fund Ltd. (the "corporation") was incorporated under the Alberta Business Corporations Act as a Part 9 non-profit corporation on April 30, The purpose of the corporation is to promote and enhance the competitiveness of the crop industry in Alberta through leadership in industry, research, innovation and marketing initiatives. The corporation's Board works on behalf of 13 signatory crop industry organizations. The corporation files as a non-profit organization under section 149(1)(l) of the Canadian Income Tax Act with Canada Revenue Agency, and as such, no tax is payable on income earned. 1. Summary of significant accounting policies The financial statements are prepared by management in accordance with Canadian accounting standards for not-for-profit organizations. The significant accounting policies used are as follows: Funding agreements The corporation disburses project grants in accordance with the following funding agreements: (i) Biopolymer Fund The corporation negotiated an agreement with the Province of Alberta for one-time funding relating to a Biopolymer Research Program in the amount of $1,000,000. This fund may be used to purchase capital equipment for the purposes of the Biopolymer Program. This equipment may be used, at the corporation's discretion, by appropriate applicants. On termination, or at a time agreeable to both parties, all capital equipment shall be transferred to the Minister for the benefit of the industry. (ii) Fund 2005 In 2005, the corporation negotiated an agreement with the Province of Alberta to allow the corporation to administer a one-time provincial grant of $23,000,000. The corporation's Board oversees the approval process, through specific criteria, regarding project funding related to goals outlined in the agreement. The term of this agreement expires on March 31, 2018, at which time all unexpended funds are returned to the Province of Alberta. This agreement can be terminated at any time, without reason or cause, by giving six months' written notice, or immediately in the event of default as described in the agreement. Unexpended funds would then be required to be returned to the Province of Alberta. 7

10 Notes to the Financial Statements March 31, Summary of significant accounting policies (continued) (iii) Fund 2006 In 2006, the corporation negotiated an agreement with the Province of Alberta to allow the corporation to administer a provincial grant of $18,000,000. The corporation's Board oversees the approval process, through specific criteria, regarding project funding related to goals outlined in the amending agreement. The term of this agreement expires on March 31, 2018, at which time all unexpended funds are returned to the Province of Alberta. This agreement can be terminated at any time, without reason or cause, by giving six months' written notice, or immediately in the event of default as described in the amending agreement. Unexpended funds would then be required to be returned to the Province of Alberta. (iv) Royalty Fund In 2008, the corporation negotiated an agreement with the Province of Alberta to allow the corporation to administer provincial grants which consist of Barley Development Agreement and Triticale Development Agreement royalties. The corporation's Board oversees the approval process, through specific criteria, regarding project funding related to goals outlines in the agreement. The term of this agreement expires on March 31, 2018, at which time all unexpended funds are returned to the Province of Alberta. This agreement can be terminated at any time, without reason or cause, by giving six months' written notice, or immediately in the event of default as described in the agreement. Unexpended funds would then be required to be returned to the Province of Alberta. During the current year, additional funding was received relating to both barley and triticale royalties. 8

11 Notes to the Financial Statements March 31, Summary of significant accounting policies (continued) (v) Fund 2008 In 2008, the corporation negotiated an agreement with the Province of Alberta to allow the corporation to administer a provincial grant of $5,550,833. The corporation's Board oversees the approval process, through specific criteria regarding project funding related to goals outlined in the agreement. The term of this agreement expired on March 31, There are no unexpended funds to be returned to the Province of Alberta. (vi) Feeding Initiative Fund In 2010, the corporation negotiated an agreement with the Alberta Livestock and Meat Agency Ltd. (ALMA) to allow the corporation to administer a grant of $8,000,000. The corporation's Board oversees the approval process, through specific criteria, regarding project funding related to goals outlined in the agreement. The terms of this agreement expired on March 31, 2016, and all uncommitted funds are to be returned to ALMA. During the 2012 year, additional funding totaling $750,000 was received from ALMA which was earmarked for the sole purpose of co-funding equipment used to analyse quality factors using near infrared reflectance or transmittance spectroscopy (NIRS). The corporation's Board oversaw the approval process. The term of this agreement expired on March 31, 2016, and all unexpended funds are to be returned to ALMA. Total unexpended funds to be returned to ALMA under both agreements totalled $298,017. 9

12 Notes to the Financial Statements March 31, Summary of significant accounting policies (continued) (vii) Fund 2012 In 2012, the corporation negotiated an agreement with the Province of Alberta to allow the corporation to administer a provincial grant of $12,000,000. The corporation's Board oversees the approval process, through specific criteria, regarding project funding related to goals outlined in the agreement. The term of this agreement expires on March 31, 2018, at which time all unexpended funds are returned to the Province of Alberta. This agreement can be terminated at any time, without reason or cause, by giving six months' written notice, or immediately in the event of default as described in the agreement. Unexpended funds would then be required to be returned to the Province of Alberta. The corporation's obligation to repay grant funds received is guaranteed by a security interest, in all present and after acquired property, which is provided to the Minister, or ALMA in the case of the Feeding Initiative Fund. Fund accounting Revenue recognition The corporation follows the restricted fund method of accounting for contributions. Each fund accounts for its program delivery and administrative activities. Restricted contributions are recognized as revenue in the appropriate fund during the year in which they are received. Investment revenue is recognized as it is earned. Gains and losses are categorized into realized and unrealized, where realized gains and losses are those that occurred upon sales during the year, and unrealized gains and losses are those applicable to investments not yet sold on March 31, Cash Project grants Cash is held for the purposes of funding immediate project commitments and operating expenditures. Project grant disbursements are expensed as occurred. Project grant expenditures of approved projects payable in future years will be recognized in that future period. 10

13 Notes to the Financial Statements March 31, Summary of significant accounting policies (continued) Capital assets Capital assets are recorded at cost. The Corporation provides for amortization using the following methods at rates designed to amortize the cost of the capital assets over their estimated useful lives. The annual amortization rates and methods are as follows: Asset Method Rate Equipment Declining balance 20% Leasehold improvements Straight-line 8 years Leasehold improvements are amortized on a straight-line basis over the term of the lease. Financial instruments The Corporation initially measures its financial assets and liabilities at fair value adjusted by, in the case of a financial instrument that will not be measured subsequently at fair value, the amount of transaction costs directly attributable to the instrument. Amounts due to and from related parties are measured at the exchange amount, being the amount agreed to by the related parties. The Corporation subsequently measures its financial assets and financial liabilities at amortized cost, except for derivatives and equity securities quoted in an active market, which are subsequently measured at fair value. Changes in fair value are recognized in net income. Financial assets measured at amortized cost are tested for impairment when there are indicators of possible impairment. When a significant adverse change has occurred during the period in the expected timing or amount of future cash flows from the financial asset or group of assets, a write-down is recognized in net income. Accounting estimates Investments The preparation of financial statements in accordance with Canadian accounting standards for not-for-profit organizations requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenditures during the reported period. These estimates are reviewed periodically and are reported in earnings in the period in which they become known. Actual results could differ from these estimates. Long-term investments are measured at market value. Fair values have been determined through comparison to published market values and rates in effect at March 31,

14 Notes to the Financial Statements March 31, Allocated expenses Administration costs applicable to the operations of the entire corporation are allocated to the fund accounts based on the type of expenditure and the appropriate criteria determined annually by management. 3. Long-term investments 2016 Fair value 2016 Cost 2015 Fair value 2015 Cost Fund 2005 Bonds, strips, and coupons yielding effective annual rate of 2.7% $ 322,517 $ 304,314 $ 1,578,749 $ 1,517,589 Common stock and trust units 129, ,561 2,281,850 2,816,380 Money market funds ,850 23, , ,598 3,884,449 4,357,799 Fund 2006 Bonds, strips, and coupons yielding effective annual rates of 2.61% to 4.00% 714, ,575 1,096,891 1,057,600 Common stock and trust units 1,338,418 1,984,400 1,956,776 2,377,382 Money market funds 25,392 25, , ,992 2,078,642 2,713,142 3,429,061 3,809,974 Fund 2008 Bonds, strips, and coupons yielding effective annual rate of 4.00% 100, , , ,200 Common stock and trust units 183, , , ,876 Money market funds ,490 11, , , , ,556 Barley Royalty Fund Bonds, strips, and coupons yielding effective annual rates of 2.81% to 3.25% 619, , , ,660 Common stock and trust units 312, , , ,042 Money market funds 25,403 25, , , , ,083 1,055,289 1,070,684 Triticale Royalty Fund Money market funds ,725 60,670 Carried forward $ 3,772,836 $ 4,859,933 $ 9,212,963 $ 10,122,683 12

15 Notes to the Financial Statements March 31, Long-term investments (continued) 2016 Fair value 2016 Cost 2015 Fair value 2015 Cost Carried forward $ 3,772,836 $ 4,859,933 $ 9,212,963 $ 10,122,683 Feeding Initiative Fund Bonds, strips, and coupons yielding effective annual rate of 2.15% 347, , , ,970 Common stock and trust units 354, , ,825 1,175,435 Money market funds , , ,123 1,107,790 1,862,412 2,116,729 Fund 2012 Bonds, strips, and coupons yielding effective annual rate of 2.15% 4,791,156 4,656,387 5,271,665 5,061,917 Common stock and trust units 3,329,180 5,006,567 5,494,599 6,411,065 Money market funds 62,879 62, , ,697 8,183,215 9,725,833 11,349,476 12,055,679 $ 12,658,174 $ 15,693,556 $ 22,424,851 $ 24,295, Capital assets Cost Accumulated Accumulated Amortization Cost Amortization Leasehold improvements $ 13,639 $ 13,639 $ 13,639 $ 13,639 Biopolymer equipment 1,533,330 1,533,330 1,533,330 1,533,330 1,546,969 1,546,969 1,546,969 1,546,969 Net book value $ - $ - Biopolymer equipment relates to a specific project funded by the government to supply equipment for a pilot plant located on University of Alberta property. Property and equipment expenditures are included in project grant expenditures of the Biopolymer Fund. A lease agreement is in place, whereby the Governors of the University of Alberta will lease this equipment for an original term of five years for the nominal fee of $1 per year. The lessee is responsible for provision of appropriate housing, maintenance relating to ensuring the equipment is in good working condition, and all inputs required for the operation of the equipment. 13

16 Notes to the Financial Statements March 31, Assets under construction In 2012, the corporation undertook a project to build a pilot plant to process cereal protein and cellulose. Total cost of this project is estimated at $9,254,250, with $4,415,064 being spent prior to March 31, The equipment has been purchased and is currently being stored. The project requires a building to house the pilot plant. 6. Accounts payable and accrued liabilities The government remittances payable at the year end was $Nil ( $NIL). 7. Funds held in trust The funds held in trust relate to monies received from industry by this corporation for a proposed project. They will be issued to the researcher when the project in question begins. 8. Board and staff remuneration Per Diems / Salaries Benefits Expenses and Allowances Board members Clarence Assenheimer $ 26,400 $ - $ 15,113 Dieter Kuhlmann 5,150-1,509 Tom Machacek 11, ,209 Craig Shaw 10, ,398 Graeme Finn 2, ,343 56,450 1,057 23,572 Staff $ 383,983 $ 13,195 $ 18,935 Staff salaries and benefits shown above are the total paid to staff during the fiscal year; a portion of these salaries and benefits have been charged to Consortium Support expense, and are therefore shown in that category on the Statement of Operations and Fund Balances. 9. Economic dependence The Corporation's main source of revenue is from provincial grant funding and the investment income earned on this funding. As the agreements relating to this funding can be terminated at any time, continued operation of the corporation is dependent on continued provincial support. 14

17 Notes to the Financial Statements March 31, Financial instruments Transactions in financial instruments may result in an entity assuming or transferring to another party one or more of the financial risks described below. The required disclosures provide information that assists users of financial statements in assessing the extent of risk related to financial instruments. (a) (b) (c) Market risk Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether the factors are specific to the instrument or all instruments traded in the market. The corporation has significant investments in bonds, preferred shares and common shares that are traded on the open stock exchanges. The values of these investments may be different when investment is sold. Credit risk The corporation is subject to concentrations of credit risk in regards to its accounts receivable as 89% is due from one organization ( %). In addition, all long-term investments are held with one firm. Interest rate risk The Corporation is exposed to interest rate risk. Interest rate risk is the risk that the Corporation has interest rate exposure on its long-term investments. This exposure may have an effect on its earnings in future periods and may increase or decrease the fair market value of the asset. The Corporation does not use derivative instruments to reduce its exposure to interest rate risk. 11. Commitments As at March 31, 2016, the Corporation has entered into various agreements to fund specific research projects, each having schedules for expected payments over the next five years. These payments are conditional upon certain conditions that must be met prior to release. If all conditions are met, the project grant payments committed to are as follows: 2017 $ 8,280, ,759, ,000 $ 10,081,862 15

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19 Copyright 2016 Alberta Crop Industry Development Fund Ltd. June 2016