Surplus Investment Framework Backgrounder

Funding model

The Canadian Grain Commission (CGC) is financed through a revolving fund, with over 90% of its operations funded on a cost-recovery basis, through fees. These fees are primarily earned through official grain inspection and weighing services provided to grain exporters. Amounts collected from year to year fluctuate based on inspected grain volumes.

In years with higher-than-average grain volumes, the CGC will accumulate surpluses in its revolving fund, while in years with a lower-than-average volumes, it will draw on those surpluses.

Accumulation of surplus

As of December 31, 2017, the CGC had a revolving fund surplus of approximately $130 M. This surplus was accumulated because of higher than anticipated grain volumes and lower than expected spending.

To reduce the risk of surplus accumulation, the CGC lowered its official inspection and weighing fees before the end of its five-year funding cycle on August 1, 2017. These changes better aligned the fees collected by the CGC with the cost of service provision.

Potential uses of accumulated surplus

The CGC also presented a discussion document on possible uses for the accumulated surplus in 2017. Stakeholders provided feedback that the surplus should be directed towards activities that deliver clear benefits to producers and add value to the sector.

The options put forward in the discussion document were analyzed in further detail, as well as other proposals brought forward by sector stakeholders. In considering approaches for using the surplus, the CGC’s primary objective was to ensure that it would deliver clear benefits to the sector as a whole, including producers.

The CGC looked carefully at the option of returning the money to the sector, and to producers specifically. The Canada Grain Act does not currently allow refunding fees collected from the grain companies to producers. In addition, returning the money directly to the companies that paid the fees may not result in direct benefits to producers. As a result, the CGC concluded that producers would see the greatest benefit if the surplus was used to strengthen and enhance programs offered to the sector.

Surplus Investment Framework

The Surplus Investment Framework will channel approximately $90M in surplus funds into initiatives across three key strategic areas, which touch all aspects of the grain sector:

• strengthening safeguards for producers,

• investing in grain quality assurance, and

• enhancing science and innovation in the grain sector.

In addition to amounts spent through the Surplus Investment Framework, $40 M will be set aside for a contingency operating fund, to cover downward fluctuations in grain volumes. This will ensure consistent service levels and stable fees for the years to come.

The CGC will consult further with the grain sector on individual initiatives under the Surplus Investment Framework going forward.