12. Three-Year Financial Plan

As an agency reporting to MAG, the AGCO’s annual spending authority comes from the Ministry’s printed estimates, as approved by the Legislature, and all revenues are remitted to the Consolidated Revenue Fund.  The AGCO Board of Directors reviews the annual budget. The financial tables below reflect current resources and fees.

More than two-thirds of AGCO’s budget comes from recoveries collected from regulated industries.  Due to the COVID-19 pandemic, AGCO is facing pressures in recovering its costs, resulting in a budget deficit.  The AGCO, along with MAG, will manage the fiscal 2020-21 deficit through additional funding and expenditure management.

The proposed expansion of iGaming through the 2020 Budget (November 2020) resulted in increases in the expense budget in the years presented below.

AGCO Revenue – Key Explanations

AGCO Revenue ($ thousands)
Over / (Under)	2020-21	2020-21	Variance $	2021-22	2022-23	2023-24
	Budget	YE Forecast		Budget	Budget	Budget
FEES & LEVIES
Liquor - related	15,714.70	6,527.78	(9,186.92)	8,119.20	13,741.50	14,760.60
Gaming - related	11,346.50	5,580.46	(5,766.04)	4,225.80	10,469.60	11,950.30
Cannabis - related	1,257.00	3,579.96	2,322.96	6,304.90	5,942.30	5,143.60
Total	28,318.20	15,688.20	(12,630.00)	18,649.90	30,153.40	31,854.50

• In 2020-21, Liquor and Gaming negative revenue variances are due to the impacts of COVID-19, which include industry closures, capacity restrictions and licence / registration extensions.  These impacts will partly be offset by increased revenue, driven by demand for new applications for cannabis licences and authorizations.
• Over the next three fiscal years, revenue is expected to increase as industries recover from COVID-19, and as demand for new applications and renewals from cannabis retail licences and authorizations continues.  These revenue levels are still below previously expected levels due to COVID-19 licence extensions at no cost to licensees.

 AGCO Expenditures – Key Explanations

AGCO Expenditures ($ thousands)
Savings / (Pressure)	2020-21	2020-21	Variance $	2021-22	2022-23	2023-24
	Budget*	YE Forecast		Budget	Budget	Budget
OPERATING
Salaries and Wages	69,340.20	62,749.50	6,590.70	69,080.80	69,228.59	69,328.44
Benefits	13,188.30	14,640.29	-1,451.99	13,308.30	13,356.61	13,401.99
OTHER DIRECT OPERATING EXPENSES
Transportation and Communications	3,318.30	1,210.62	2,107.68	3,036.09	3,037.09	3,037.49
Services**	22,748.20	13,108.98	9,639.22	21,636.78	11,496.29	11,509.42
Supplies & Equipment	1841.70	854.03	987.67	1,754.83	1,755.76	1,755.89
Gross Expenditures	110,436.70	92,563.42	17,873.28	108,816.79	98,874.34	99,033.23
Recoveries	-72,241.60	-18,686.92	-53,554.68	-74,024.24	-66,145.35	-66,292.24
Net Funding from Government***	38,195.10	73,876.50	-35,681.40	34,792.56	32,728.98	32,740.99

*The Budget for 2020-21 and outgoing years reflects a $1.39M government-imposed financial constraint from 2019-20.Starting in fiscal year 2020-21, the Salaries and Wages budget is increased by $0.2M. iGaming approved funding of $3.34M is included in the 2020-21 Budget.

**Services in general relate to due diligence costs and related recoveries. These costs are incurred to acquire external service providers to assist in Eligibility Assessments (EA) for Gaming Modernization and private Cannabis retail. The 2020-21 budget includes $8.87M of costs and recoveries related to Gaming Modernization EA, of which $0.25M is expected to be spent. The 2021-22 budget includes the remaining $8.62M of unspent costs in 2020-21 which are expected to be transferred to 2021-22.There is no budgeted amount for this item in 2022-23, resulting in the lower budget for that year.

***Overall variance of ($35.68M) for 2020-21 is due to COVID-19 industry closure lock-down. As a result of the casino closures, the AGCO anticipates not recovering regulatory costs from casinos.

• The AGCO’s budget projects recovery of approximately 65% of costs from its regulated sectors.  The remaining costs require net funding from the government.
• Budgets are based on current approved estimates and include approved iGaming funding for AGCO’s expanded mandate.
• Funding requirements may be impacted by salary awards for negotiated collective agreements.

AGCO Capital Assets – Key Explanations

The AGCO’s Capital Budget consists of the purchase of IT hardware, costs related to the implementation of the multi-year iAGCO IT business application project.  The implementation of iAGCO was completed in October 2020. 

• AGCO IT hardware includes the purchase of personal computing devices, mainframes, data network equipment and storage devices.
• iAGCO capital assets include all build costs including hardware, software, licences and services.