Management's Statement of Responsibility for Financial Reporting

The accompanying financial statement of the Alcohol and Gaming Commission of Ontario has been prepared by management in accordance with the accounting policies described in Note 2 to the financial statement. The financial statement has been properly prepared within reasonable limits of materiality and is based on information available up to July 6, 2021.
Management is responsible for the integrity of the financial statement and maintains a system of internal controls designed to provide reasonable assurance that the assets are safeguarded, and reliable financial information is available on a timely basis. The system includes formal policies and procedures and an organizational structure that provides for appropriate delegation of authority and segregation of responsibilities.

The Board of Directors ensure that management fulfills its responsibilities for financial information and internal control through a Financial, Audit and Risk Management (FARM) committee. The FARM committee meets with management and internal audit regularly to review the policies and procedures.

The financial statement has been examined by the Office of the Auditor General of Ontario. The Auditor General’s responsibility is to express an opinion on whether the financial statement is prepared in accordance with the accounting principles described in Note 2 to the financial statement. The Independent Auditor's Report, which appears on the following page, outlines the scope of the Auditor's examination and opinion.

On behalf of Management:

Indepedent Auditor's Report

To the Board of the Alcohol and Gaming Commission of Ontario

Opinion

I have audited the Statement of Revenue and Expenditures of the Alcohol and Gaming Commission of Ontario (the AGCO) for the years ended March 31, 2021 and March 31, 2020, and notes to the financial statement, including a summary of significant accounting policies (together the "financial statement").

In my opinion, the accompanying financial statement is prepared, in all material respects, in accordance with the basis of accounting described in Note 2 to the financial statement.

Basis for Opinion

I conducted my audit in accordance with Canadian generally accepted auditing standards. My responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statement section of my report. I am independent of the AGCO in accordance with the ethical requirements that are relevant to my audit of the financial statement in Canada, and I have fulfilled my other ethical responsibilities in accordance with these requirements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Emphasis of Matter — Basis of Accounting

I draw attention to Note 2 to the financial statement, which describes the basis of accounting. The financial statement is prepared to report on the revenue and expenditures of the AGCO. As a result, the financial statement may not be suitable for another purpose. My opinion is not modified in respect of this matter.

Responsibilities of Management and Those Charged with Governance for the Financial Statement

Management is responsible for the preparation of the financial statement in accordance with the basis of accounting described in Note 2 to the financial statement, and for such internal control as management determines is necessary to enable the preparation of a financial statement that is free from material misstatement, whether due to fraud or error.

In preparing the financial statement, management is responsible for assessing the AGCO·V ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the AGCO either intends to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the AGCO's financial reporting process.

Auditor's Responsbilities for the Audit of the Financial Statement

My objectives are to obtain reasonable assurance about whether the financial statement as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statement.

As part of an audit in accordance with Canadian generally accepted auditing standards, I exercise professional judgment and maintain professional skepticism throughout the audit. I also:

• Identify and assess the risks of material misstatement of the financial statement, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit 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 AGCO's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's us of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the AGCO's ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor's report to the related disclosures in the financial statement or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor's report. However, future events or conditions may cause the AGCO to cease to continue as a going concern.

I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

Bonnie Lysyk, MBA, FCPA, FCA, LPA
Auditor General

Toronto, Ontario
July 6, 2021

Download a PDF version of this document.

Box 105, 15th Floor
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Toronto, Ontario
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www.auditor.on.ca

Statement of Revenue and Expenditures
($'000)

See accompanying notes to the financial statement.

On behalf of the Board:

Notes to the Financial Statement
For the Year Ended March 31, 2021
($'000)

1. Nature of Opeations
   The Alcohol and Gaming Commission of Ontario (AGCO) is an Ontario provincial regulatory agency reporting to the Ministry of the Attorney General (MAG). The agency was established on February 23, 1998 under the Alcohol and Gaming Regulation and Public Protection Act, 1996, which was amended in 2018 and re-named the Alcohol, Cannabis and Gaming Regulation and Public Protection Act, 1996 when the AGCO became responsible for the regulation of retail cannabis sales.
    
   The AGCO is responsible for regulating the alcohol, gaming and horse racing industries and sectors as well as cannabis retail in accordance with the principles of honesty and integrity, and in the public interest. In so doing, the AGCO administers the Liquor Licence Act, Gaming Control Act, 1992, Horse Racing Licence Act, 2015 and the Cannabis Licence Act, 2018. The AGCO also administers sections of the Wine Content and Labelling Act, 2000 and the Liquor Control Act as well as the charity lottery licensing Order-in-Council 208/2024.
    
   As a regulatory agency with a governing board reporting to MAG, the AGCO receives its annual spending authority from the Ministry’s printed estimates, as approved by the Ontario Legislature. The AGCO is funded from a combination of revenue from the Consolidated Revenue Fund and recoveries.
    
   The AGCO is exempt from income taxes. The AGCO's head office is located at 90 Sheppard Avenue East, North York, Ontario, Canada, M2N 0A4.
2. Significant accounting policies
   1. Basis of accounting
      The financial statement is prepared on a cash basis of accounting. Consequently, revenues are recognized when received rather than when earned, and expenditures, except for certain transactions with related parties, are recognized when cash is disbursed rather than when the obligation is incurred. Expenses allocated to the AGCO by Ministries of the Province of Ontario (Note 4a) are expensed when charged, as these transactions are not settled in cash.
   2. Currency
      The financial statement is presented in Canadian dollars (the AGCO’s functional currency).
       
      At the transaction date, revenue or expenditures in currencies other than the AGCO’s functional currency are recognized in Canadian dollars at the exchange rate in effect at that date.
   3. Revenue
      Revenue from fees, licenses and registrations are recorded in the fiscal year that the payment is received.
       
      Revenue from other sources include awarded costs from court received in the fiscal year.
   4. Recoveries
      The AGCO is authorized to recover costs of its regulatory activities in accordance with the Alcohol, Cannabis and Gaming Regulation and Public Protection Act, 1996. The AGCO records recoveries in the Statement of Revenue and Expenditures when the payment is received.

3. Fee and levies
   The AGCO collects fees and levies from the issuance of licences, permits and registrations to the following sectors:

   	2021	2020
   Cannabis	$8,067	$8,907
   Gaming	$2,161	$14,253
   Liquor	$2,485	$14,563
   Other	-	$5
   Total	$12,713	$37,728

4. Related party transactions
   The Province of Ontario is a related party as it is the controlling entity of the AGCO. Organizations that are commonly controlled by the Province of Ontario are also related parties of the AGCO. Transactions with related parties are outlined below.
    
   All related party transactions were measured at the exchange amount, which is the amount of consideration established and agreed upon by the related parties.
   1. Ministries of the Province of Ontario
      During the course of the year, the AGCO entered into the following transactions with various Ministries of the Province of Ontario:
      1. The AGCO has statutory authority to carry out specific types of investigations, inspections and other similar activities in accordance with the Acts and regulations that it administers. The AGCO has dedicated Ontario Provincial Police (OPP) officers within its Investigation and Enforcement Bureau to perform these activities. A Memorandum of Understanding between the AGCO and OPP establishes that the AGCO is responsible for funding the salaries, wages, expenses and administrative support costs for these OPP officers. For the year ended March 31, 2021, the AGCO was charged $14,488 (2020 - $16,390) by the Ministry of the Solicitor General for these costs.
      2. The Ministry of Government and Consumer Services (MGCS) provides the AGCO with network, telecommunication and administrative services. For the year ended March 31, 2021, the AGCO was charged $1,410 (2020 - $1,561) by MGCS for these costs. MGCS also provides the AGCO with other services such as accounting and cash management without charge.
      3. The Ministry of Transportation supplies the AGCO with leased vehicles that are used by employees to perform their duties. For the year ended March 31, 2021, the AGCO was charged $661 (2020 - $893) for this cost.
      4. For the year ended March 31, 2021, MAG charged the AGCO $481 (2020 - $376) for legal services, horse racing regulatory costs, Workplace Safety Insurance Board charges and other administrative services.
      5. MAG provides the AGCO with leased office space at 6 (2020 – 6) locations across the province without charge.
   2. Liquor Control Board of Ontario (LCBO)
      For the year ended March 31, 2021, the AGCO paid LCBO $125 (2020 - $136) for winery audit services and administrative costs.
   3. Ontario Racing Management Inc. (ORM)
      For the year ended March 31, 2021, the AGCO paid ORM $120 (2020 - $138) for the rent of one office location.
5. Pension costs
   Certain employees of the AGCO participate in the Public Service Pension Plan (PSPP) and the Ontario Public Service Employees Union Pension Plan (OPSEUPP), which are defined benefit pension plans for employees of the Province and many provincial agencies. The Province of Ontario is the sole sponsor of PSPP and a joint sponsor of OPSEUPP with the Ontario Public Service Employees Union. The sponsors of these plans determine the AGCO’s annual payments to the respective plans. The AGCO’s responsibilities with regard to PSPP and OPSEUPP are limited to its contributions. Payments made to the plans are recognized as an employee benefits expenditure when contributions are made to the plans. The AGCO’s required annual payments of $4,573 (2020 – $4,428), is included in employee benefits expenditure in the Statement of Revenue and Expenditures.
6. Post-employment benefits
   1. Non-pension post-employment benefits
      The costs of non-pension benefits for eligible pensioners are paid by the Province of Ontario and is not included in this financial statement.
   2. Separation costs
      Separation costs made to employees are recognized as an employee benefits expense when payment is made. For the year ended March 31, 2021, these separation costs amounted to $293 (2020 - $300).
7. AGCO Board of Directors' remuneration
   The AGCO's Board of Directors are part time appointees and are remunerated according to Schedule B of the Management Board of Cabinet’s Agencies and Appointments Directive. Total remuneration paid to the Board of Directors during the year was $105 (2020 - $121).

8. COVID-19 impacts
   On March 11, 2020, COVID 19 was declared a global pandemic by the World Health Organization. The Government of Ontario declared a state of emergency on March 17, 2020. In response, to support its licensees and registrants, the AGCO extended the terms of licences, authorizations and registrations through a series of announcements between March 18, 2020 and January 14, 2021. Effective March 18, 2020, the combined term extensions granted were as follows:

   • Active liquor and gaming licences, authorizations and registrations – 15 months;
   • Active cannabis licences, authorizations and registrations – 9 months;
   • Active horseperson licences – 12 months; and
   • Horseperson licences expired within six months of March 18, 2020 – 12 months.

   Further, in recognition of the impact the pandemic had on businesses that rely on in-person patrons, the AGCO provided recovery waivers to the Ontario gaming sector and refunded any recoveries already collected.
    
   The horse racing sector was allowed to operate for a significant part of the year without patrons in attendance. The AGCO waived fees for all Ontario racetrack operations for the months of April and May 2020. The AGCO also fully waived licensing and regulatory fees for racetrack operators who were required to cancel their scheduled races as a result of the emergency declaration and province wide shut down orders.
    
   These AGCO cost relief measures resulted in a significant decrease in fees, levies and recoveries for the year ended March 31, 2021.