Deputy Head's transition documents for 2024: Key files

Purpose:

To inform you about the Canadian Grain Commission’s (CGC) evolving financial situation.

Summary:

• For the past three fiscal years, beginning in fiscal year 2021-22, the CGC has drawn on its accumulated surplus to address revenue shortfalls. This is primarily due to lower-than-expected grain volumes, growing operational cost pressures and modernization imperatives.
• The CGC is currently reviewing its fees and grain volume forecast to develop a cost recovery approach.
• CGC officials will bring options to the Commission to address revenue shortfalls, including a service fee proposal and pre-regulatory consultation approach.

Context:

The CGC operates as a revolving fund, charging service fees to fund most of its operations. The CGC funds approximately 90 percent of its operating budget through service and licence fees, with the balance coming from parliamentary appropriation. The majority of CGC fee revenues come from official inspection and weighing of grain exports. CGC fees are automatically adjusted for inflation under regulation annually; however, these adjustments are not currently sufficient to account for lower-than-expected grain volumes, cost pressures and the need for program modernization.

The CGC establishes its main fees based on the volume of grain exports expected to require official inspection and weighing. The costs of delivering service include direct and supporting work. The large majority of these costs are fixed and must be recovered, regardless of volumes inspected. As a result, forecasting export volumes is a key element of fee setting. Fees set on underestimated volumes result in surplus accumulation. Conversely, fees based on overestimated volumes result in revenue shortfalls.

The CGC implemented the current cost-recovery structure in 2013 and committed to reviewing and updating its fees every 5 years. In 2018, following several years of large surpluses due to larger than anticipated grain export volumes, the CGC reduced fees and consulted on use of its $130M accumulated surplus. Based on this feedback, the CGC announced an Investment Framework to guide investment of the surplus. The CGC proposed to maintain $40M for a contingency operating reserve and earmarked $90M for investments. However, large-scale investment of the surplus was later paused following Budget 2019’s announcement of the CGA Review to ensure alignment between the two processes.

At its highest point, the CGC’s accumulated surplus was $156M as of March 31, 2021, including a $40M contingency operating reserve. On August 1, 2021, following additional years of surpluses due to continuing larger-than-anticipated grain export volumes, the CGC adjusted its grain volume estimate upwards, resulting in targeted reductions to its major fees. Since that time, surplus accumulation has ceased, and the CGC has been drawing on the revolving fund. At the end of the 2023-24 fiscal year, the CGC estimates the accumulated surplus is below the 2018 Investment Framework level for the first time.

The current public commitment set out in the CGC’s published priorities is to review the fees and make any required adjustments by April 1, 2025. The CGC is currently reviewing its fees and grain volume forecasts to develop a cost recovery approach.

Considerations:

The CGC continues to retain a large accumulated surplus balance given the pause in major investment following announcement of the Canada Grain Act (CGA) Review. At the same time, as a result of the fee reductions made in 2021, growing operational cost pressures and modernization imperatives, the CGC is beginning to draw on the surplus significantly.

Most of the CGC’s costs are fixed and it would be difficult to make substantive reduction efforts without broader program changes and potential workforce adjustment.

The CGC also needs to modernize its regulatory framework, programs and services to capitalize on innovation and meet the needs of the grain sector. This includes developing a suite of integrated program delivery systems to provide seamless, digital service to clients and implementing the CGC’s Science Strategy, including addressing laboratory deficiencies.

A Laboratory HQ Project and potential CGA Review outcomes could have further implications for accumulated surplus funds.

There will be a need to communicate with the sector on the CGC’s fee review and financial situation. In addition, stakeholders will expect a say in any consideration of fee changes going forward.

Next steps:

• CGC officials will come back to the Commission with options to address revenue shortfalls, including a service fee proposal and pre-regulatory consultation approach. Any proposed regulatory fee amendments would require Ministerial and Treasury Board approval, including Canada Gazette Part I consultation.

Purpose:

To inform you about the Canadian Grain Commission’s (CGC) Laboratory HQ Project.

Summary:

• The existing CGC HQ building in Winnipeg no longer supports the requirements of the CGC’s Grain Research Laboratory.
• The CGC is working with Public Services and Procurement Canada (PSPC) to explore options for obtaining a new facility.
• There are three potential funding sources (standalone or used in combination): an increase to CGC fees, a request for one-time appropriation, or a draw on the CGC’s revolving fund surplus. Each of these require Ministerial approval.
• Many stakeholder groups have expressed strong positions regarding funding infrastructure projects with CGC surplus, and any proposed action would necessitate a communications and engagement strategy.

Context:

The Crown-owned CGC Building no longer supports the requirements of the CGC’s Grain Research Laboratory and cannot be upgraded due to space limitations and aging infrastructure. PSPC, as the custodian of the building, has determined a full renovation is required and is requesting tenants vacate at the end of their leases.

Considerations:

The laboratory HQ project is closely linked to other high-profile initiatives, including the AAFC-led CGA Review, the CGC surplus investment framework, and the CGC Science Strategy. These initiatives have received significant stakeholder attention and the next steps on each will need to be aligned.

The project supports the Government of Canada’s Office Portfolio Reduction Plan to reduce office space by 50% over the next ten years, Accessibility Standards for barrier-free government buildings by 2040 and the Greening Government Strategy to reduce greenhouse gas emission and have a carbon-neutral real property portfolio by 2050. PSPC will obtain approval and deliver the project under its authorities to acquire and hold real property and to manage large projects. The CGC will be responsible for funding the interior fit-up and equipment.

Given that laboratory facilities account for a significant portion of the space requirement, the overall investment in a new facility aligns with the goals of the CGC Science Strategy, which was widely consulted on and has broad support within the sector.

At the same time that the CGC is seeking new facilities, its current co-tenants Cereals Canada and the Canadian Malt Barley Technical Centre will also need to relocate. They have joined with other sector organizations and Economic Development Winnipeg to propose the Global Agriculture Technology Exchange, which contemplates a campus style approach and could include the CGC. While they have asked that CGC surplus funds be used for this project, a fully costed proposal has not been shared to date.

Labs Canada (PSPC) is also developing plans to reinforce regional science by optimizing and sharing laboratory facilities or co-locating science-based departments that conduct similar activities. The CGC Laboratory HQ project is separate from the Labs Canada initiative, but discussions are ongoing.

The CGC’s work with PSPC does not preclude the CGC from participating in the Global Agricultural Technology Exchange or Labs Canada initiative, should they move forward in the near future. PSPC is aware of these possibilities and the potential need to adapt the project.

Next steps:

• Any progress on this project will require Ministerial and Treasury Board approval

Purpose:

To inform you of the Canadian Grain Commission’s (CGC) approach to theCanada Grain Act (CGA) Review.

Summary:

• The CGA Review is ongoing and stakeholders continue to push for progress.
• AAFC led CGA Review consultations and continues to lead any legislative work.
• The CGC is taking a multi-pronged approach to address CGA Review feedback including:
  • supporting Agriculture Agri-Food Canada (AAFC) with analysis,
  • developing amendments to the Canada Grain Regulations (CGR),
  • making operational improvements, and
  • being prepared to submit proposals to an Annual Regulatory Modernization Bill call out.

Context:

Federal Budgets 2019 and 2021 confirmed the Government of Canada’s commitment to review the CGA and the operations of the CGC in response to stakeholder input received through the Targeted Regulatory Review for Agri-Food and Aquaculture. AAFC is leading the review and the CGC is in a supporting role.

In 2021, AAFC held a consultation on the CGA review, and published a discussion document to support stakeholders’ written submissions. The consultation closed April 30, 2021. AAFC received 66 written submissions during the consultation process, and heard further from stakeholders at a public Town Hall on April 23, 2021 and three roundtables with key stakeholders.

The What We Heard Report is publically available on AAFC’s website and has been included as part of this briefing package. Overall, respondents indicated that the CGC should continue to have a strong role in establishing and maintaining a world-class grain quality assurance system, through regulation and oversight of the grain sector. However, opinions on the specific roles that the CGC should adopt going forward, particularly in relation to delivery of official inspection services were mixed.

Considerations:

Minister MacAulay and AAFC are leading the CGA Review and the development of any legislative amendments.

Several objectives in the 2022 mandate letter for the Chief Commissioner of the CGC are related to the CGA:

• support the Agriculture and Agri-Food Canada (AAFC) led review of the CGA;
• identify and take action on regulatory changes and operational reforms, within the CGC’s existing authority, that deliver benefits to producers and the value chain;
• consider updates to the Surplus Investment Framework to ensure that accumulated surplus funds are used effectively and deliver tangible benefits to the Canadian grain value chain, in alignment with the emerging path forward on the CGA review;

The CGC is taking a multi-pronged approach in response to the CGA review and to support modernization. First, the CGC continues to support AAFC with analysis, focused on priority areas of interest, such as official inspection and weighing service delivery, elevator and grain dealer licensing and farmer payment protection.

Second, the CGC continues to investigate opportunities to further modernize within the current regulatory framework. This includes, but is not limited to, putting forward regulatory amendment packages to deliver on established grain grading and producer protection modernization goals, and a comprehensive review of the CGC’s service fees and standards to ensure alignment with costs of service provision.

The CGC is also improving operations within the current regulatory framework. Examples of this include digital modernization projects, the science strategy and improvements to the Grain Standards Committees Terms of Reference.

Finally, the CGC is prepared to submit non-contentious proposals to amend the CGA as part of the fourth Annual Regulatory Modernization Bill (ARMB IV). The ARMB process is designed to help modernize the federal regulatory framework. In 2023, the Government of Canada began a review of the ARMB process and solicited input to help inform the development of a future ARMB. TBS continues to review the ARMB process and has yet to call for proposals to be considered for ARMB IV.

While improvements to the CGR and CGC operations have been viewed positively, stakeholders continue to request progress on the CGA Review at the legislative level. Outcomes of the CGA review are also tied to the progress of other key files including the CGC Laboratory Headquarters project and the CGC’s Fees and Surplus Strategy.

Next steps:

• Continue to support AAFC in the CGA review with analysis
• Continue to pursue regulatory changes and operational improvements within the CGC’s existing authorities
• Stand ready to submit proposals to an ARMB callout

Purpose:

To inform you about the Canadian Grain Commission’s (CGC) 2024 to 2026 Forward Regulatory Plan (FRP) and 2024 to 2029 Regulatory Stock Review Plan.

Summary:

• The Treasury Board Secretariat (TBS) requires that all departments post Minister-approved updates to their Forward Regulatory Plan (FRP) and Regulatory Stock Review Plan annually by April 1 on their websites.

Context:

The FRP is a publicly available list, with descriptions, of planned or anticipated regulatory amendments that the Government of Canada intends to propose or finalize within a 2-year period. It may include regulatory initiatives that are planned to come forward over a longer time frame and that are indicated as long-term.

The Regulatory Stock Review Plan is a longer-term document that publicly provides information on proposed regulatory review initiatives that are planned within a five-year period. It is intended to give Canadians, including businesses and Indigenous peoples, and trading partners, greater opportunity to inform the reviews of regulations and to plan for the future.

Considerations:

The CGC reviews its’ the CGR annually as part of its Stock Review Plan in order to improve efficiency and responsiveness and reduce inconsistencies in Canada’s grain quality assurance and producer protection systems.

The CGC currently has three items on its 2024 to 2026 Forward Regulatory Plan:

• Amendments to the Canada Grain Regulations – Repeal Schedule 3 and incorporate by reference updated grading determinant tables. The proposal would make regulatory amendments to the Canada Grain Regulations as part of the Canadian Grain Commission’s commitment to modernizing the Canadian grain grading system. Currently grades are determined with reference to numerous grading factors found in the Canadian Grain Commission’s Official Grain Grading Guide (OGGG), many of which are not included in Schedule 3 (Grades of Grain) to the Canada Grain Regulations. Schedule 3 currently lacks the specificity and flexibility of the OGGG to be a useful reference for grading grain in a modern context, both for the grain industry and the Canadian Grain Commission. The proposed amendments would repeal Schedule 3 and incorporate by reference updated grading tables and factors. These amendments would improve consistency and transparency for stakeholders.
• Amendments to the Canada Grain Regulations – ‘Final Quality Determination’ provisions. Final Quality Determination is an important producer protection tool for arbitrating disputes between producers and licensed primary elevator operators who cannot otherwise agree on a grade or dockage for a delivery of grain. The proposed regulatory amendment would extend the ‘Final Quality Determination’ service to include certain other grain quality characteristics that are not official grading determinants. Final Quality Determination can be used by producers to dispute the assessment of any regulated grain’s official grade or any individual grading determinant, such as moisture, protein, or dockage. However, this service cannot currently be used to dispute grain delivery contract specifications that are not listed in Schedule 3 of the Canada Grain Regulations as grading determinants for that grain, such as Falling Number, deoxynivalenol (DON) and chlorophyll.
• Amendments to the Canada Grain Regulations – Update fees in Schedule 1. The Canadian Grain Commission has committed to a full review of service fees on a five-year cycle, or as required, to ensure that fees remain aligned with the costs of service provision. Fees in Schedule 1 to the Canada Grain Regulations are targeted for review and potential amendment on April 1, 2025.

Next steps:

• To review and update the CGC’s Forward Regulatory plans and Regulatory Stock Review plans in fall 2024, after strategic planning.

Purpose:

To inform you about the Canadian Grain Commission’s (CGC) Science Strategy and implementation options.

Summary:

• As part ofCanada Grain Act (CGA) Review consultations, sector stakeholders indicated widespread support for the CGC’s Grain Research Laboratory (GRL) and for a continued role in grain quality research and science.
• The CGC, in consultation with stakeholders, developed a Science Strategy to support innovative research and science-based activities and provide a vision for the future.
• The CGC’s Science Strategy was published on the CGC website in January 2023. Options for implementing the Science Strategy are being explored.

Context:

Positioning the CGC as a global leader in grain science is one of four Focus Areas of the CGC’s 2024-25 Strategic Plan. Implementing the CGC Science Strategy to achieve the future vison and support innovative programs and services is one of the main initiatives of this area of focus.

The CGC Science Strategy identifies research and science based activities to ensure that the CGC continues to position itself as a national leader in grain research and that our activities are aligned with the needs of industry and stakeholders.

The Science Strategy guides mid- and long-term decision making related to investments in research, projects, and other science-based activities. It focuses research and science-based activities, ensures that science continues to underpin Canada’s grain quality assurance system, and positions the CGC as a global leader in grain research.

Considerations:

The Science Strategy is linked to other ongoing CGC files and initiatives including the CGA review, Head Quarters (HQ) building project, the Surplus Investment Framework, and the fees review.

The outcomes of the Science Strategy will contribute directly to the priority in the Commission mandate letter of supporting Canadian export growth and mitigating international market access risk and technical trade issues through innovative science.

The GRL is currently investing $5 million in upgrades to laboratories and workspaces to address deficiencies in infrastructure and improvements to enhance space utilization and safety including upgrades to HVAC and dust handling systems and providing backup electrical power to equipment.

The Science Strategy is intended to be aspirational but also achievable. The actions proposed in the strategy build on our current strengths and also enhance and/or expand program activities in some key areas. The proposed programmatic enhancements align with the “Enhancing grain quality and science innovation” pillar of the CGC Investment Framework.

The degree to which the strategy’s objectives can be fully achieved will depend on the ability to add additional resources in some GRL program areas.

The GRL developed an implementation plan to be a companion document to the Science Strategy which will guide the activities and projects. The plan includes three implementation scenarios based on different levels of funding to support the strategy goals and provide significant outcomes. They represent different levels of ambition for program enhancement.

Next steps:

• To select an implementation approach and operationalize the strategy. Planned actions for any expansion or enhancements to activities will be conditional on approval of necessary funding and revisited and revised in light of any changes to the CGA, fee reviews, funding or other internal or external factors.
• Develop and report on performance measures.

Purpose:

To inform you of the CGC’s In-Country Presence Strategy.

Summary:

• Some individual producers and producer groups have expressed concerns with variability in sampling, grading, and other quality assessments at in-country licensed elevators, which can impact the price they receive for their grain deliveries. These concerns emerged as a major theme in the feedback obtained duringCanada Grain Act Review consultations in 2021.
• In response, the CGC’s approved 2022/23 and Beyond Strategic Plan included the specific initiative of Supporting producers at the point of sale (in-country) to ensure fair compensation for their deliveries.
• In April 2022 the Commission approved an in-country presence strategy which included five phases:
  • Phase I: Understand – conduct planning and research (complete)
  • Phase II: Define – setting the standard(s) – (complete)
  • Phase III: Initiate – cooperative implementation – (in progress)
  • Phase IV: Transition – compliance strategy – (not started)
  • Phase V: Monitor – compliance and enforcement – (not started)
• On April 30, 2024, the CGC published standards for moisture and protein assessment, along with associated CGC Standard Operating Procedures. These standards have been developed in consultation with stakeholders and are voluntary in nature.

Context:

The internal team advancing this initiative is led by Chief Grain Inspector Derek Bunkowsky with support from staff in Industry Services, Grain Research Laboratory, and the Innovation and Strategy divisions.

This topic has featured prominently in CGC engagements with producers and producer groups, including the annual stakeholder engagement sessions throughout January-March, 2024. Producer groups are generally supportive of CGC efforts, although some have expressed interest in seeing a more assertive and hands-on approach.

The CGC has engaged with licensees on this initiative through a questionnaire, webinars, and solicitation of feedback on draft standards. While the questionnaire did not indicate systemic issues, it pointed to a patchwork of controls and an opportunity for greater consistency across the system.

Many larger licensees, particularly those who are members of the Western Grain Elevator Association, point to their sophisticated internal quality management systems and have questioned CGC action in this area.

Considerations:

This initiative is possible within current authority and does not require amendments to the Canada Grain Act.

This initiative has also prompted a review and changes to CGC processes for Final Quality Determination. Specifically, the CGC has commenced follow-ups with individual producers, and is also collecting comparative results before/after the process. If, as a result of this new FQD follow-up process the CGC feels there is a need to take additional steps to address identified concerns with the licensee, that is happening.

There are currently no approved plans for the CGC to commence any type of regularly scheduled in-person proactive physical presence at licensed facilities. However, the CGC remains prepared to arrange onsite visits by CGC service centre staff if and when a need is identified.

Next steps:

• The project team is preparing options to continue with Phase III (Initiate) which could include delivering education to licensees along with other efforts to support voluntary compliance.

Purpose:

To provide a status update of the Canadian Grain Commission (CGC) Grain Grading Modernization Initiative.

Summary:

• In 2017 the CGC began a comprehensive science-based review of the Canadian grain grading system as part of its commitment to grain sector stakeholders for continuous improvement.
• The elements identified as part of the review include:
  • Commercial cleanliness - completed
  • Decimal precision of grading factors – completed
  • Fusarium damage and end-use functionality - completed
  • Guidance documents and work procedures - completed
  • Standard and guide samples - in progress
  • Grading factors of concern - in progress
  • Modernize the Official Grain Grading Guide (OGGG) - in progress
• Refer to Grain Grading Modernization for further information on the completed initiative elements.
• Completion targets for in progress initiative elements are dependant on CGC research resources and the ability to source the required types of affected crop material to perform the necessary research.

Context:

Updates on the ongoing review elements:

Considerations:

Both grades and specifications remain important components of the Canada’s grain grading system. With this review, the CGC’s objective is to ensure that the grain grading system is evaluated using science-based, effective, precise and user-friendly tools.

Any changes coming out of the review are made after careful consideration and scientific research and will be based on recommendations from the Eastern and Western Standards Committees.

Any changes to the grain grading system are meant to balance costs to the grain grading system with the benefits of improvements.

As part of its Science Strategy, the CGC is developing a technology modernization framework to outline its approach in the development, evaluation, and/or validation of new and innovative technologies (including artificial intelligence) for use in Canada’s grain grading system.

Next steps:

• The CGC will continue to work with grain sector stakeholders in an open and transparent manner as the review of Canada’s grain grading system proceeds.
• As new grading issues emerge (such as the recent soybean seedcoat discolouration situation) these items will be included in the modernization initiative. It is important to note the modernization is not limited to the initial items that were identified.

Purpose:

To provide current state of the Digital Services modernization projects; Licensing and Export Documents modernization.

Summary:

• The Government of Canada’s Digital Services Strategy provides a vision for Canadians to obtain government services that are client centric, efficient and convenient.
• To support this vision, the Canadian Grain Commission (CGC) is developing a suite of digital services to provide seamless online service delivery to our clients through the MyCGC Portal.

Context:

The MyCGC Portal is envisioned to be a digitized and centralized system to provide the following:

• Enhanced client experience where transactions with the CGC are easily accessible through a single point of entry
• Statistical reporting tools that are accessible and easy to use to enable users to report accurate and complete data to meet CGC’s requirement to publish statistical information that supports grain marketing transparency
• Reduced reliance on manual processes and legacy systems with highly customized content
• A system that is maintained by Information Management Technology Services (IMTS) professionals with the necessary support and system maintenance
• Increased internal efficiency and accuracy through automation of manual processes and the reduction redundant duplication of data entry
• Increased transparency with real-time tracking of results of services

Licensing Modernization

This project aims to modernize the Safeguards for Grain Farmers (“Safeguards”) digital systems and improve their clients’ interaction processes by expanding on digital service capabilities. The main objectives are:

1. Reduce duplication of data maintenance in standalone spreadsheets and applications
2. Sunset in-house custom-built applications Licensing, Bonding & Financial system (LBFIN), Licensed Elevators in Canada (LEIC) and Renew and Update License (RAUL)
3. Increase the number of services that clients can access through the portal

Investing in this project would accrue the following business value for the CGC:

• Enhanced efficiency by streamlining workflows and manual processes between internal and external CGC stakeholders. Licensee requirements tracking, risk assessment, and trend analysis could be automated as opposed to the workarounds that are being used today.
• Improved information management controls since the data will be more centralized and it will be easier to access the latest information when investigating issues.
• Clients would be able to satisfy more licensing requirements online and retrieve information in a secure platform.
• Aligning with the Government of Canada’s digital strategic objectives enhances the organization’s compliance and helps fulfill the Chief Information Officer’s obligations.
• Information centralization can enable data analytics and will enhance opportunities for strategic insights through data analytics pertaining to the service.

Export Documentation Modernization

Under the Canada Grain Act (CGA) and Canada Grain Regulations (CGR), the CGC has a mandate to ensure a dependable commodity for domestic and export markets. To achieve this, the CGC provides export documents which provide information on the grade, quantity, and quality of Canadian grain and provide assurances that cargos are compliant for importing countries to enable market access.

The term export documentation refers to official documents including Certificates Final which are described in the CGA and unofficial documents such as Statements of Assurance (SOA) and Letters of Analysis (LOA) that are not defined in the CGA but may be requested.

During the 2022/23 crop year the CGC issued:

• 6,830 LOAs (37% of all documents)
• 9,495 SOAs (51% of all documents)

Multiple documents are issued for each vessel:

• at the request of the exporter
• on a fee for service basis ($82.46/document)

Investing in this project would accrue the following business value for the CGC:

• Stakeholder satisfaction with the service will be increased through improved modern tools, accessibility, and flexibility by having suitable digital solutions to help facilitate business operations and commercial transactions.
• Circumvent future risks to the continuity of business operations and the CGC’s mission with a system that is easy to use and maintain, stable and reliable, secure, and adaptable.
• Enhanced efficiency by streamlining workflows and manual processes between internal and external CGC stakeholders.
• Improved information management controls as digital documents allow for better version control through a reduced risk of errors and ensuring stakeholders have access to the latest information.
• Aligning with the Government of Canada’s Digital Operations Strategic Plan 2021-2024 and the Directive on Service and Digital enhances the organization’s compliance and helps fulfill the Chief Information Officer’s obligations.
• Enhanced opportunities for strategic insights through data analytics pertaining to the service.