The AGCO provides services to a wide group of licensees, registrants and authorization holders. The following tables outline AGCO’s currently active licensees, registrants and authorization holders as of March 2022. It also shows the information from the previous fiscal year.

Please note that due to the name changes impacting several licence, registration and authorization types, some of which resulted in re-categorization, there is some variance from the numbers reported in the 2020–2021 Annual Report.

Table 2—AGCO licensees and registrants

Table 3—Total number of liquor licences

Note:

• The implementation of the LLCA in November 2021 resulted in adjustments to certain licence categories.
• Grocery Store Licences, Onsite and Offsite Retail Store Endorsements, and Other Endorsements are now included in this table.
• There is a variance between numbers reported in this table for 2020–21 Liquor Sales Licensed Establishments and Manufacturers (By-the-Glass Included) and what was reported in the 2020–2021 Annual Report as a result of changes to licence categories.

Table 4—Total number of gaming registrations

Note:

• igaming is a new line of business to be launched in April 2022, therefore there are no active registrations for that sector in 2020–21.
• The “AGCO Subsidiary” indicated in the table above is the registration for the Lottery Subsidiary iGaming Ontario.

Table 5—Total number of cannabis licences and authorizations

The Licensing and Registration Branch (L&R) of the AGCO’s Operations Division is responsible for reviewing and processing applications for licences, permits, authorizations and registrations for the sectors regulated by the AGCO. Eligibility Officers, Senior Eligibility Officers and Managers review applications and supporting materials to assess an applicant’s eligibility to hold a particular licence, permit, authorization or registration. When necessary, they enlist the services of additional AGCO departments to facilitate further review or investigation of an application, such as the Regulatory Compliance Branch (RCB), the OPP Investigation and Enforcement Bureau (IEB), and the Audit and Financial Investigations Branch (AFI).

Additionally, L&R reviews and processes applications regarding renewing all licences, permits, authorizations, registrations and amendment applications received to amend or update information pertaining to an establishment or licensee.

As part of the AGCO’s risk-based licensing approach, L&R considers various factors in its review. These factors include an applicant’s type of business, location, compliance history and experience. Some establishments pose a greater risk to public safety, public interest and/or non-compliance with the law. Additionally, when reviewing an application, past conduct, financial responsibility, experience/training and honesty/integrity of an applicant are considered. If the Registrar believes that the issuance of a licence or registration is not in the public interest, the Registrar may issue a Notice of Proposal (NOP) to review or refuse to the applicant or licensee, who may request a hearing on the NOP before the Licence Appeal Tribunal (LAT).

During this assessment, L&R uses AGCO Board–approved criteria to assess the risk(s) posed to public safety and public interest and non-compliance with the law. All potential risks and concerns are reviewed to determine if the licence, permit, authorization or registration should

have a Level I, Level II or Level III risk designation or no designation at all. A risk designation ensures the AGCO focuses the appropriate resources towards the licensee and the establishment to ensure compliance is always maintained. If the Registrar believes that a licensee may require additional assistance or support to remain compliant with the applicable acts and/or the Registrar’s Standards, additional conditions may be attached to their licence, permit, authorization or registration. L&R performs risk-based assessments during the lifetime of all licences, permits, authorizations and registrations to ensure potential risks posed by a licensee or establishment are considered and evaluated.

The following tables outline the number of licences and registrations issued during the fiscal year. It is important to note that the following tables represent applications that have been approved and issued, not all applications submitted. In addition to this, some of the variance is due to the fact that tables now also show renewal and amended licences and registrations.

Table 7—Liquor licences issued, renewed and amended

Table 8—Gaming registrations issued, renewed and amended

Note: The “AGCO Subsidiary” indicated in the table above is the registration for the Lottery Subsidiary iGaming Ontario.

Table 9—Charitable lottery licences issued, renewed and amended

Note:

• Due to this sector transitioning to iAGCO in October 2021, the numbers reported for 2020–21 vary from the 2020–21 annual report.
• The Social Event Gaming Licence was launched in October 2021; there are no numbers to report for the 2020–2021 fiscal year.
• The Special Occasion Gaming Licence was launched in October 2020, resulting in low numbers issued.
• The Social Gaming Licence is not issued under the charitable component of the Criminal Code. All wagers under this licence are paid out to winners and this is not a charitable fundraising opportunity.

The AGCO inspects, monitors and educates to ensure compliance with applicable laws and regulations. The AGCO’s compliance approach is risk-based and outcome-focused.

• Risk-based refers to the regulatory risks underlying the Standards, regulations, laws and requirements. A risk-based compliance approach focuses the greatest resources on mitigating the highest risk areas.
• Outcome-focused means emphasizing the results that regulated sectors are meant to achieve, rather than prescriptive activities that must be carried out.

The compliance activities emphasize monitoring through a series of inspection activities, including unannounced inspections, responding to police reports and evaluating regulatory submissions and public complaints. The AGCO also conducts ongoing regulatory assurance activities, including regular audits, compliance reviews and mystery shopper visits.

In the horse racing sector, the AGCO ensures compliance with the Rules of Racing by reviewing alleged rule infractions and having Race Officials present to officiate races. The AGCO supports the health and welfare of horses and horse racing participants by monitoring and enforcing the Equine Medication and Drug Control Program and ensuring an official veterinarian is in attendance to supervise live racing.

Partnerships

To support a coordinated approach to compliance activities, the AGCO’s compliance approach places significant emphasis on working with local community partners, including police, fire services, municipal by-law and public health units. In the liquor sector, this work also includes administering the Police Report & Last Drink Programs in partnership with the police.

Mystery Shopper Program

The use of mystery shoppers in the grocery sector continues to be an effective tool to aid in evaluating how grocery stores are performing in preventing youth access to alcohol. Throughout 2022–2023, the AGCO will expand its Mystery Shopper Program to cover all liquor licensees operating within the province.

To adequately assess the sector’s ability to prevent youth access to cannabis products, the AGCO continues to use its Mystery Shopper Program to identify retailers who present an increased risk of permitting youth access. During this fiscal year, the AGCO enhanced the Mystery Shopper Program to support enhanced oversight of cannabis retailers operating close to high schools.

Educational activities

The AGCO proactively provides education to all sectors to increase their understanding of regulatory obligations and improve overall compliance. All new licensees or authorization holders in the liquor and cannabis sectors receive this education. In addition, any licensee or authorization holder can take advantage of these opportunities at any time throughout the life cycle of their licence.

Please note that all information in the following tables has been adjusted to align with the new methodology of categorizing inspections that was implemented in fiscal year 2021–2022.The category “miscellaneous compliance activity” includes but is not limited to compliance activity driven by intelligence or investigation activity, Mystery Shopper Program or criminal charges.

Table 13—Compliance Services inspections—Alcohol

Note: There is a variance between numbers reported in this table for 2020–21 violations cited and serious violations escalated for further review and what was reported in the 2020–2021 Annual Report as a result of changes to data categories.

Table 14—Compliance Services inspections—Lottery retailers

Table 15—Compliance Services inspections—Raffles

The AGCO’s Legal Services Division provides legal advice on licensee and registrant compliance within the regulatory framework and represents the Registrar at hearings of appeals before the Licence Appeal Tribunal (LAT), the Horse Racing Appeal Panel (HRAP) and the Divisional Court and the Court of Appeal.

Table 21—Notices of Proposal (NOPs) and Orders of Monetary Penalty (OMPs)—Alcohol

Table 22—Alcohol-related settlements without a hearing

Modernization, transformation and integration

The 2021–2022 year saw the implementation of several important initiatives to drive efficiency. The Investigation and Enforcement Bureau (IEB) implemented the Management Inspection Process to ensure processes are incorporated into everyday operations, providing accountability, consistency and reliability.

Pre-screening applicants during the eligibility process is key to supporting the honesty and integrity of licensees, registrants and authorization holders. To support this process, the IEB implemented the Enhanced Cannabis Application Pre-Screening Interview process for Retail Operator and Retail Manager licences to allow for immediate flagging of any criminal associations. In 2021, enhanced Cannabis Application Pre-Screening Interviews identified 80 applicants as problematic or with areas of risk.

In the igaming sector, the IEB implemented Eligibility and Major Investigations pre-screening igaming CEO interview questions to identify any possible risks associated with the AGCO registration of igaming companies.

Anti–money laundering

Anti–money laundering (AML) continues to be a key focus for the IEB. In 2021–2022, the IEB implemented a new enhanced IEB AML investigative strategy that focused Ontario Provincial Police (OPP) resources to attend the casino floor any time they are called for a suspicious cash transaction when the patron is present at the casino. This allows the IEB members to engage and question the patron regarding the source of funds and determine investigative action.

Partnerships are key to the success of our AML programs. This year, the IEB developed and implemented a video to raise awareness of AML investigative analytic processes among stakeholders, including the OLG, the OPP, the AGCO and FINTRAC. These partnerships were further supported by introducing the IEB AML Coordination Model, where dedicated OPP, OLG and AGCO analysts worked closely to query and analyze their respective agency’s data sets to openly share and discuss information and identify individuals and activities that pose AML risks. The IEB also developed and implemented a new joint AML Investigative Process with the OPP

Provincial Asset Forfeiture Unit for identified High Priority Individuals that warrant an AML investigation that will utilize resources effectively.

A data-driven mindset is key to the IEB’s AML approach. An analytical program/dashboard tool has been developed and implemented to help identify and initiate investigations of individuals who pose risks of engaging in money laundering activities. The IEB has reduced a significant number of manual processes by automating the intake of all suspicious transaction reports (STRs) generated at Ontario gaming sites into the established IEB AML analytical program/dashboard tool. This allows the IEB to allocate resources to focus on high-risk gaming areas, and ground decisions and actions against high-priority individuals to determine if criminal investigations and/or regulatory recommendations are warranted.

To support data collection and drive these analytical insights in 2021–2022, the IEB launched a newly developed OPP Report Management System (RMS) STR investigative report and training video. The new report’s drop-down menus and entry fields walk the investigator through the investigation to ensure that nothing is omitted. This data is also trackable, assisting with future analysis of the information collected in the database and statistic collection. Implementing an enhanced IEB Harm Reduction Strategy and training video ensures consistency and that patrons attending casinos in violation of exclusion orders receive addiction assistance when required.

The IEB Intelligence Unit initiated a collaboration between the Biker Enforcement Unit and the RMS Unit to create a streamlined way to search, identify and compare those listed in the Outlaw Motorcycle Gaming databases to those within the AGCO’s regulatory database. This search resulted in over one thousand outlaw motorcycle gaming members’ names that can be compared to all regulated sectors.

Leadership and stewardship

The IEB Anti–Human Trafficking (AHT) Working Group collaborated with the OPP Anti–Human Trafficking Unit, Criminal Intelligence Service Ontario and municipal partners in order to proactively focus on AHT activities. The working group created a 2021 list of AHT police contacts from police jurisdictions across Ontario that house casinos and/or racetracks. The development of this initiative allowed investigators to quickly mobilize a multi-jurisdictional response to locate a wanted material HT witness from Quebec.

The IEB also provided support and subject matter expertise/follow-up to assist GTA municipal police counterparts on illegal gaming venues.

The Cannabis Intelligence Sharing Working Group involving the IEB/AGCO/ Provincial Joint Forces Cannabis Enforcement Team /OCS was implemented to share critical intelligence information, increase linkages to organized crime groups and enhance relationships. In addition, the Legal Cannabis Intelligence Working Group Due Diligence Investigators Network (DDIN) was implemented. The DDIN engaged cannabis regulators across Canada to share critical intelligence and information strategies from involved stakeholders and share linkages to organized crime connections and affiliations.

Key commitments

• Serve the public interest through effective and innovative approaches to regulation in the alcohol, gaming, cannabis and horse racing sectors.
• Make evidence-based decisions to regulate in the public interest.
• Strengthen our organizational foundation to support the agency’s expanding priorities and business strategies.

Performance measure

The AGCO provides user-based services and information through multiple windows and service channels anytime and anywhere.

• Outcome metric: % of users using digital options to transact with the AGCO meets or exceeds target of 85%.

Table 29—Digital First

Projects

Being a Modern Regulator remains a key commitment and shapes how the AGCO regulates and works with its stakeholders. The AGCO is committed to leveraging evidence and effective stakeholder engagement as part of the development and implementation of its regulatory direction. The following corporate projects are based on the AGCO’s commitment to the Modern Regulator strategic goal.

igaming Framework

The upcoming launch of Ontario’s igaming market on April 4, 2022, is a major milestone.

The AGCO developed a regulatory model for this new, competitive market that protects consumers and provides them with choice, reduces red tape and supports legal market growth and provincial returns.

This model reflects the AGCO’s regulatory objectives for igaming while meeting the unique requirements of the igaming open market. It was informed by a series of engagements with industry stakeholders on the Registrar’s Standards for Internet Gaming (Standards) and the eligibility and compliance approaches for igaming. Following the federal government’s legalization of single-event sports betting, the AGCO also undertook stakeholder engagement on the regulatory standards for sports and event betting, which apply to all sports, esports, novelty and betting exchange.

Through the igaming regulatory model, the AGCO undertook several strategic shifts in its operational compliance and eligibility activities to ensure market participants act in accordance with the law, with honesty and integrity, and in the public interest.

The updated risk-based registration model emphasizes applicant ability to meet the Standards and previous experience of applicants, including history in leading jurisdictions. Compliance activities focus on ensuring regulatory objectives are met through innovative, targeted approaches. This includes setting compliance expectations for entry into the market through game and critical system testing and confirmations of full system compliance with the Standards, as well as setting and monitoring priority compliance areas, with targeted monitoring and interventions where appropriate.

The AGCO provided smooth service delivery to igaming customers, including:

• publishing guides on its website to assist prospective igaming Operators and Gaming- Related Suppliers with the registration process (for example, the Internet Gaming Operator Application Guide) and to help them understand compliance requirements when participating in Ontario’s regulated market (for example, the Internet Gaming Go-Live Compliance Guide)
• collaborating with iGaming Ontario on the development and coordination of a robust onboarding process to ensure igaming Operators have met all requirements to enter the market
• implementing a robust customer service model for handling both regulatory and iGO matters, including responding to complaints and inquiries
• making enhancements to the AGCO internet gaming portal, including the creation of a new player support section to provide players with information about the new igaming model and additional resources.

The AGCO also implemented system changes to support the launch of the new igaming market. This included updates to the iAGCO online portal to include igaming applications, processes for complaints and inquiries and ongoing monitoring and managing of compliance activities through regulatory intelligence data.

Auditor General of Ontario: AGCO Value for Money Audit Report

In December 2020, the Auditor General of Ontario released a Value for Money (VFM) Audit Report of the AGCO. The report contained 26 recommendations and proposed 62 action items, along with management responses from the AGCO and the Ministry of the Attorney General; 56 of the action items were assigned to the AGCO for response.

The implementation of the Auditor General of Ontario’s recommendations is one of the AGCO’s five corporate priorities. The AGCO established a dedicated VFM Audit Action Plan Project Team with project leads overseeing working groups to address each recommendation and related action items.

Throughout 2021, the AGCO provided regular quarterly updates to Ontario Internal Audit. The AGCO provided an update outlining the completed and outstanding undertakings for each recommendation to the Standing Committee on Public Accounts in April 2021.

As a result of the recommendations, the AGCO has improved and strengthened regulatory processes within its operations and introduced new functionality into iAGCO. Recommendations have been implemented through robust government partnerships that support the AGCO’s regulatory mandates.

The AGCO remains committed to its action plan and recognizes the value of the Auditor General of Ontario’s recommendations to enhance its effectiveness as a modern regulator. This remains a corporate priority for fiscal year 2022–2023.

Liquor modernization

The Liquor Licence and Control Act, 2019 (LLCA) came into effect on November 29, 2021, marking a major milestone for liquor regulation in Ontario. The new liquor framework under the LLCA enables the AGCO to modernize the way it regulates the sale, service and delivery of liquor and allows for a more flexible approach.

The new liquor framework is designed to reduce burden, facilitate better monitoring and compliance and reflect the changing liquor landscape for the benefit of Ontarians. It includes the introduction of a new liquor licence and permit structure and the transfer of the regulatory authority for some activities from the Liquor Control Board of Ontario (LCBO) to the AGCO.

The Registrar’s Interim Standards and Requirements for Liquor (Interim Standards) came into effect under the LLCA and primarily maintain and consolidate many of the previous requirements. Over the coming years, the AGCO will build on this work to develop a comprehensive outcomes-based regulatory model, consistent with our overall strategic approach for other regulated sectors.

Enhanced social responsibility measures were also introduced with the creation of a new re- certification requirement for licensees relating to the responsible sale, service and delivery training (such as Smart Serve). The AGCO adopted this industry best practice in recognition of the significant modernization of Ontario’s liquor sector and the need for continued commitment to social responsibility and public protection in the liquor sector.

Under the LLCA, several new permissible activities for licence holders took effect, including:

• all licensed grocery stores may offer beer, wine and cider (as applicable) online for curbside pick-up at the store, as permitted under their licence;
• licensed grocery stores are permitted to display non-liquor products, excluding energy drinks and products that promote immoderate consumption, within the contiguous aisles where liquor products (that is, beer, cider, wine) are displayed;
• Liquor Sales Licence holders are permitted to infuse liquor to create drinks or change the flavour of liquor through practices such as barrel aging, as long as the customer is informed;
• a new temporary extension endorsement allows manufacturers with a retail store at their production site to sell liquor products at industry promotional events, in addition to farmers’ markets;
• the removal of alcohol by volume (ABV) limits that wine and brew pubs were previously subject to (previously, wine pubs could not sell wine with greater than 14% ABV and brew pubs could not sell beer with greater than 6.5% ABV);
• ferment on premise facilities are permitted to combine multiple customers’ ingredients, allowing innovative practices such as barrel aging;
• manufacturers are permitted to deliver the liquor products of other licensed manufacturers that have an on-site retail store (a new delivery endorsement enables this activity).

Key commitments

• Continuously ensure a deep understanding of our stakeholders to anticipate and respond to their evolving needs.
• Provide a positive experience through the delivery of services that are clear, timely and that meet the expectations of those we serve.

Performance measures

Table 30—Service Experience

A service-centred design that optimizes the service experience, engages customers proactively and identifies opportunities for improvements.

• Output metric: Online application turnaround time (in days) meets or is lower than target of 20 days.
• Outcome metric: % of clients satisfied with services meets or exceeds target of 75%.

Note:

• Turnaround time was affected by COVID-19 and the rollout of iAGCO online services to charitable gaming licensees in November 2020.
• The turnaround time includes application turnaround times and auto-renewals completed on the iAGCO portal.
• The “clients satisfied with services” metric is an average based on AGCO website, iAGCO portal and telephone calls.

Table 31—Value for Money

Ensuring value per transaction (internal and external) with a focus on streamlining process and reducing regulatory burden.

• Output metric: % of applications for SOPs auto-issued meets or exceeds target of 90%.

Projects

Service Excellence is a core foundation embedded throughout the AGCO’s work, from both the AGCO’s core service delivery to licensing and registration, compliance, and investigations and enforcement. All corporate projects are viewed through a Service Excellence lens, ensuring that the AGCO builds programs and policies that best serve the needs of our customers.

Clear and timely services that meet expectations

The AGCO is committed to creating a positive experience for our stakeholders through the delivery of clear, timely services and meeting the expectations of those we serve. Through iAGCO, the agency’s digital services portal, 83,678 customer service transactions were initiated. The AGCO Customer Service supported 104,049 customer interactions including calls, webchats, online inquiries, email, and regular mail; 93% of Contact Centre customers received resolution to their inquiry or concern at their initial point of contact.

Due to public health requirements that limited in-person service delivery, the majority of AGCO services were delivered remotely in 2021–2022, with the exception of race day activities in horse racing. In preparation for a return to normal operations, the AGCO modernized its approach to in-person services by introducing a by-appointment model. This change in service approach reflects shifting customer preferences away from in-person services that began prior to the pandemic with an uptake in digital service delivery and was further accelerated to meet public health requirements.

With the AGCO’s contact centre platform set to be decommissioned by its service provider, in 2021–2022 the AGCO started plans to replace and update its enterprise contact centre solution. This work will include the launch of a new multiple-channel solution in 2022–2023 that replaces current functionality and positions the AGCO to meet evolving customer preferences and expectations of a modern contact centre environment.

In response to opportunities identified by the Auditor General of Ontario to improve complaints handling, the AGCO created new procedures and staff training. The AGCO successfully reduced the time to complete complaints-based inspections from 18.9 to 15.4 business days.

Customer-centric design and delivery

To improve the design and delivery of AGCO services, the AGCO is working to better understand our stakeholders. Customer First training was provided to staff starting in 2020– 2021 to encourage greater awareness and skills development in the area of customer-centric design at the AGCO.

Service design tools and methodologies were applied to key corporate projects to improve customer journeys and improve service outcomes. This included:

• the use of customer research, persona development and journey mapping to design and validate the iGaming Service model for Operators, Suppliers and Players;
• process improvements and enhanced communications to support the Cannabis Retail Store Application process;
• updates to the AGCO in-person service model.

The AGCO uses service insights such as Customer Satisfaction Surveys, and complaints, inquiries and service performance measures from iAGCO, to better listen to customers and identify opportunities for service improvement. This has led to improvements to both the website and iAGCO application guidance.

Service metrics

Table 32—Service provision

Table 33—Communication with AGCO stakeholders

Note: Twitter engagement numbers are lower this year due to a decrease in content from the AGCO Twitter account. A significant portion of the Twitter account is related to public notices.

Table 34—Service metrics

Key commitments

• Champion an inclusive workplace by implementing recommendations from the AGCO’s DI&A strategy to further develop employees’ wellbeing and best serve the people of Ontario.
• Develop our talent to empower employees and nurture our internal talent succession pool.

Performance measures

Table 36—Employee experience

The level of engagement and enablement is directly correlated with higher productivity, increased motivation and job satisfaction.

• Outcome metric: The percentage of AGCO staff who would recommend AGCO as a place to work meets or exceeds target of 75%.
• Outcome metric: The percentage of AGCO staff who believe they have opportunities to have their ideas adopted and put into use meets or exceeds target of 70%.

Note: The measures above reflect one point in time and are sourced from a survey conducted in September 2021.

To the Alcohol and Gaming Commission of Ontario

Opinion

I have audited the financial statements of the Alcohol and Gaming Commission of Ontario (the AGCO), which comprise the statements of financial position as at March 31, 2022 and March 31, 2021, and the statements of operations and accumulated deficit, change in net debt and cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In my opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the AGCO as at March 31, 2022 and March 31, 2021, and the results of its operations and accumulated deficit, changes in its net debt and its cash flows for the years then ended in accordance with Canadian public sector accounting standards.

Basis for Opinion

I conducted my audits 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 Statements section of my report. I am independent of the AGCO in accordance with the ethical requirements that are relevant to my audits of the financial statements 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.

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

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian public sector accounting standards, 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.

In preparing the financial statements, management is responsible for assessing the AGCO’s 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.

1. Nature of operations

The Alcohol and Gaming Commission of Ontario (AGCO) is a regulatory board-governed agency incorporated without share capital, that reports 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 (ACGRPPA) when the AGCO became responsible for the regulation of retail cannabis sales. On November 29, 2021, the ACGRPPA was repealed and the Alcohol and Gaming Commission of Ontario Act, 2019 (AGCO Act) was proclaimed into force, continuing the AGCO under a new statute.

The AGCO is responsible for regulating the alcohol, gaming, horse racing and cannabis retail sectors in accordance with the principles of honesty and integrity, and in the public interest. In so doing, the AGCO administers the Liquor Licence and Control Act, 2019, the Gaming Control Act, 1992, the Horse Racing Licence Act, 2015 and the Cannabis Licence Act, 2018. The AGCO also administers the charity lottery licensing Order‑in‑Council 208/2024.

iGaming Ontario was established on July 6, 2021 as a subsidiary corporation of the AGCO. See Note 16 for further disclosure pertaining to the AGCO’s relationship with iGaming Ontario.

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 charges to the regulated sectors (fees and cost recoveries).

Pursuant to the Income Tax Act, the AGCO is exempt from income taxes.

2.  Adoption of Canadian public sector accounting standards

Effective April 1, 2020, the AGCO has adopted Canadian public sector accounting standards (PSAS). Prior to issuing these financial statements, the AGCO prepared a Statement of Revenue and Expenditures on a cash basis of accounting for the first time in the fiscal year 2020-21.

3. Significant accounting policies

1. Basis of accounting
   These financial statements have been prepared in accordance with PSAS established by the Canadian Public Sector Accounting Board. The significant accounting policies used to prepare these statements are summarized below.
    
2. Currency
   The financial statements are presented in Canadian dollars.
        
   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. The AGCO is not impacted by the remeasurement gains and losses caused by foreign currency, because its cash, including foreign exchange rates, is handled by the Ministry of Public and Business Service Delivery (formerly known as the Ministry of Government and Consumer Services) without charge.
    
3. Revenue recognition
   Fee revenue from licences, registrations and permits collected from the liquor, gaming, horse racing and cannabis-retail sectors are recorded in the fiscal year that they are issued. For the term of licences beyond the current fiscal year, the AGCO records deferred licence revenue as a liability and recognizes revenue over the term of licences.
        
   The AGCO is authorized to recover costs of its regulatory activities in accordance with the Alcohol and Gaming Commission of Ontario Act, 2019 (AGCO Act). The AGCO records a deposit liability (included in Security and Customer Deposits) when amounts are received. Recoveries are recognized as revenue (included in Recoveries - Gaming Sector) as the related regulatory costs are incurred, which settles the deposit liability. Currently, costs for regulatory activities are only being recovered from the gaming sector.
        
   Other revenue includes recovery of prior year’s expenditures and awarded costs from court received in the fiscal year.
    
4. Expenditures recognition
   Expenditures are recognized on an accrual basis. Expenditures are recognized in the fiscal year that the events giving rise to the expense occur and resources are consumed.
    
5. Financial instruments
   All financial instruments are included on the Statement of Financial Position and are measured initially at fair value and subsequently at cost.
    

6. Tangible capital assets
   Tangible capital assets are recorded at cost, which includes amounts that are directly related to the acquisition, design, construction, development, improvement or betterment of the assets.
        
   The cost of tangible assets is amortized on a straight-line basis over estimated useful lives as follows:

   	Useful life
   Business application software	10 years
   Information technology hardware	3 - 6 years

   Assets under construction are not amortized until construction is complete and the assets are ready for their intended use.
    

7. Use of estimates
   In preparing the financial statements, management is required to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods.
        
   Items requiring the use of significant estimates include: useful life of capital assets and other employee future benefits.
         
   Estimates are based on the best information available at the time of preparation of the financial statements and are reviewed annually to reflect new information as it becomes available. Measurement uncertainty exists in these financial statements. Actual results could differ from these estimates.
    
8. Future changes in accounting standards
   (a)   PS 3400 - Revenue
   The new standard provides a framework for recognizing revenue by distinguishing between revenue arising from transactions that include performance obligations, referred to as exchange transactions, and those that do not have performance obligations, referred to as non-exchange transactions. While the impact of any changes on the AGCO’s financial statements is not reasonably determinable at this time, the AGCO intends to implement the standard effective April 1, 2023, for the fiscal year 2023-24.

4. Accounts payable and accrued liabilities

Accounts payable relate largely to normal business transactions with third-party vendors and subject to standard provincial government payment terms.

Operational expenses accruals relate to goods or services received but that have not been paid, including regular salaries and wages, employee benefits and normal operating expenses.

Accrued other employee benefits include employee vacation credits accruals and salary continuance arrangements.

5. Deferred licence revenue

Deferred licence revenue represents payments received for licences with terms that extend beyond the current operating cycle. Changes in the deferred licence revenue balances during the current fiscal year are summarized as follows:

6. Employee future benefits

1. 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 the PSPP and a joint sponsor of the OPSEUPP with the Ontario Public Service Employees Union (OPSEU). The sponsors of these plans determine the AGCO’s annual payments to the respective plans. The AGCO’s responsibilities with regard to the PSPP and the OPSEUPP are limited to its contributions. Payments made to the plans are recognized as an expenditure when employees have rendered the service entitling them to the contributions. The AGCO’s required annual contribution of $5,012 (2021 – $4,612), is included in Employee Benefits in the Statement of Operations and Accumulated Deficit.
    

2. Other employee future benefits
   The obligations of separation, long-term income protection (LTIP) pension contributions, and time banking entitlements earned by eligible employees are included in Other Employee Future Benefits in the Statement of Financial Position.

   	2022	2021
   Separation entitlements	$             4,778	$             5,427
   LTIP pension contributions	1,633	1,402
   Time bank entitlements	834	1,316
   	$             7,245	$             8,145

   
   (a)  Separation entitlements
   Employees hired prior to April 1, 2015 and who have completed at least five (5) years of continuous service as a permanent full-time employee with the AGCO as of April 1, 2015, will be eligible for a separation payment equivalent to one week’s base pay for each year of active service up to a maximum of sixteen (16) weeks upon retirement, resignation, or death.
        
   Employees hired prior to April 1, 2015 and who had not completed five (5) years of continuous service as a permanent full-time employee as of April 1, 2015, will only be eligible for a separation payment in the event of retirement, resignation, or death if they have completed at least ten (10) years of continuous service as a permanent full-time employee as of the date of their retirement, resignation, or death. An employee who meets these requirements will be entitled to separation payment equivalent to one week’s base pay for each year of active service up to a maximum of sixteen (16) weeks upon retirement, resignation, or death.
         
   The separation entitlements were calculated using a discount rate of 3.19% (2021 - 2.37%) and expected average remaining service life of 13 years (2021 - 13 years). The cost of living adjustment used in the calculation was 1% (2021 - 1%) according to the latest collective agreement between the AGCO and the OPSEU Local 565.
        
   For the year ended March 31, 2022, these costs amounted to $469 (2021 - $572) and included in employee benefits in the Statement of Operations and Accumulated Deficit.
        
   (b)  LTIP pension contributions
   As required by the PSPP and the OPSEUPP, the AGCO makes the regular employer contributions and the members’ contributions to the pension plans for periods when members are eligible for or receive LTIP benefits.
        
   The cost of living adjustment of pension contributions was determined by the pension boards, 2.4% starting January 2022 (2021 - 1%). Each LTIP arrangement was evaluated individually, based on term and the corresponding discount rate using weighted average rate from Ontario bond yield curve rates.
         
   For the year ended March 31, 2022, these costs amounted to $506 [2021 - $(10)] and included in employee benefits in the Statement of Operations and Accumulated Deficit.
          
   (c)  Time bank entitlements
   Eligible AGCO employees can bank up to 10 vacation days at the end of each calendar year into the “Time Bank”, with a cap of 125 days in total. These time bank days can only be used when employees leave the organization as time off or a lump sum pay.
        
   The time bank entitlements were calculated using a discount rate of 3.10% (2021 - 2.12%) and expected average remaining service life of 10 years (2021 - 9 years). The cost of living adjustment used in the calculation was 1% (2021 - 1%) according to the latest collective agreement between the AGCO and the OPSEU Local 565.
    

3. Non-pension post-employment benefits
   The costs of non-pension benefits for eligible pensioners are paid by the Province of Ontario and are not included in these financial statements.

7. Security and customer deposits

These deposits are established under the AGCO Act, which allows the AGCO to establish fees and other charges in administering the acts in Note 1. The nature of these deposits are as follows:

• Order of monetary penalties (OMP): Under Section 12 (2) of the AGCO Act, monetary penalties serve as an administrative action to promote regulatory compliance for all entities the AGCO regulates in the alcohol, gaming, horse racing and cannabis retail sectors and can be only used for education, training, and awareness purposes.
• Gaming investigation deposits: Under Section 9 of the Gaming Control Act, all applicants/registrants are required to pay the reasonable costs of an inquiry or investigation related to gaming registrations under the Act.

8.  Accounts receivable

Accounts receivable relate to fees, licences and registrations revenue for outstanding payments from horse racing operators, and OMP due to appeal periods.

9. Due from the Province

Due from the Province represents the difference between cash receipts submitted to the Province by the AGCO and the AGCO’s expenses paid. Should the AGCO incur a deficit in any fiscal year, the deficit is covered by the Province and is reflected in Contribution by the Province in the Statement of Operations and Accumulated Deficit.

Cash received by the AGCO is deposited directly into the Consolidated Revenue Fund (CRF). The AGCO’s invoices are paid by the Province’s CRF on behalf of the AGCO and booked against the AGCO’s budget. Goods and Services provided by other ministries in Note 12 are treated as inter-ministry chargebacks and included in Due from the Province.

10. Tangible capital assets

11. Revenue

12. 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, except for transactions with the AGCO’s subsidiary, iGaming Ontario, which are outlined in Note 16.

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 covers the costs for 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, 2022, the AGCO was charged $15,126 (2021 - $14,488) by the Ministry of the Solicitor General for these costs and is included in Salaries and Wages, Employee Benefits and Services in the Statement of Operations and Accumulated Deficit.
   2. The Ministry of Public and Business Service Delivery (MPBSD, formerly known as the Ministry of Government and Consumer Services) provides the AGCO with network, telecommunication and administrative services. For the year ended March 31, 2022, the AGCO was charged $1,382 (2021 - $1,464) by MPBSD for these costs and are included in Transportation and Communication, Services in the Statement of Operations and Accumulated Deficit. MPBSD also provides the AGCO with other services such as accounting, tax remittance 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, 2022, the AGCO was charged $667 (2021 - $661) for this cost and is included in Services in the Statement of Operations and Accumulated Deficit.
   4. For the year ended March 31, 2022, MAG charged the AGCO $351 (2021 - $481) for legal services, horse racing regulatory costs, Workplace Safety Insurance Board charges and other administrative services and is included in Salaries and Wages, Employee Benefits and Services in the Statement of Operations and Accumulated Deficit.
   5. MAG provides the AGCO with leased office space at 6 (2021 – 6) locations across the province. The costs of the leases are paid by MAG out of their voted appropriation. For the year ended March 31, 2022, the costs of rental were $4,354 (2021 - $4,272).
2. Ontario Racing Management Inc. (ORM)
   For the year ended March 31, 2022, the AGCO paid ORM $114 (2021 - $120) for the rental of one office location. The space use licence agreement commenced on August 1, 2016 and shall expire on July 31, 2026, unless sooner terminated in accordance with this agreement. The AGCO acknowledges that ORM is subject to the terms of the Prime Lease with Pearson Corporate Centre GP Inc.
    
3. Ontario Lottery and Gaming Corporation (OLG)
   The AGCO recovers costs from OLG related to the regulation of OLG’s lotteries, internet gaming (iGaming), charitable gaming (cGaming) and OLG land-based casino(s). For the year ended March 31, 2022, the AGCO received $17,635 (2021 - $11,286) of which $12,447 (2021 - $12,590) was recognized to offset regulatory costs incurred during the year. The remaining amounts are recorded as deposits included in Security and Customer Deposits in the Statement of Financial Position until future costs are incurred.

13.  AGCO Board of Directors' remuneration

The AGCO's Board of Directors are part time appointees. Total remuneration paid to the Board of Directors during the year was $136 (2021 - $105).

14.  Financial instruments risks

1. Interest rate risk
   Interest rate risk is the risk the fair value or future cash flows of financial instruments will fluctuate due to changes in market interest rates. The AGCO is subject to interest rate risk on its other employee future benefits liability. The discount rates used in future cash flows for other employee future benefits are based on Ontario bond yield curve depending on employee expected average remaining service life or the term of the future cash flows.
    
2. Credit risk
   Credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge an obligation. The AGCO’s exposure to credit risk is minimal as the majority of the receivables are from the Province of Ontario and iGaming Ontario (a related party under common control by the Province of Ontario).
    
3. Currency risk
   The AGCO’s exposure to currency risk is minimal as few transactions are in currencies other than Canadian dollars.
    
4. Liquidity risk
   The AGCO’s exposure to liquidity risk is minimal as the AGCO may recover its costs through revenue and recoveries from entities that form part of the regulated sectors. As well any deficiency of revenue over expenses is absorbed by the Province and is reflected in the Due from the Province on the Statement of Financial Position.

15. COVID-19 impacts

The COVID-19 pandemic continued to negatively impact the industries and sectors the AGCO regulates in the 2020-2021 and 2021-2022 fiscal year.

Through a series of announcements between March 18, 2020, and January 14, 2021, the AGCO extended the terms of licences, authorizations and registrations.

Beginning March 18, 2020, the combined term extensions granted were as follows:

1. Active liquor and gaming licences, authorizations and registrations – 15 months;
2. Active cannabis licences, authorizations and registrations – 9 months;
3. Active horseperson licences – 12 months; and
4. Horseperson licences expiring within six months of March 18, 2020 – 12 months.

For the 2021-2022 fiscal year, the AGCO waived licensing and regulatory fees for racetrack operators who were required to cancel their scheduled races as a result of the shutdown orders under the Reopening Ontario (A Flexible Response to COVID-19) Act and the Emergency Management and Civil Protection Act.

The AGCO waived collecting regulatory cost recoveries from land based casinos and OLG Charitable Gaming sites for the period of April 1 to September 30, 2021, and the month of January 2022.

These cost relief measures resulted in a significant decrease in revenue for the years ended March 31, 2022 and March 31, 2021.

Table 37—Notices of Appeal

Table 38—Appeals by type of infraction