In its financial statements for the year ended March 31, the Ontario Securities Commission reveals that has socked away $12 million to help pay for a possible merger with the Financial Services Commission of Ontario.

The OSC reports that revenue exceeded expenditures in during fiscal 2002 by $30.1 million, down from $37.1 million in 2001. Revenues were $79.9 million, down from $83.4 million the prior year.

Total expenditures increased 7.3% to $49.7 million. The biggest chunk of spending, $34 million, went to salaries and benefits. Salaries and wage costs increased by $4.2 million in 2002, due to the full year cost impact of prior year hiring, an increase in staffing levels and higher benefit costs. Expenditures on administrative costs increased by 18.1% to $4.9 million. The commission spent less on professional services though, as it brings more expertise in house.

The OSC has established a reserve of $20 million, which serves as an operating contingency for revenue shortfalls or unexpected expenditures. The commission notes that in 2002, it also received approval from the Ontario Minister of Finance to retain an extra $12 million from its operating surplus to be used towards the implementation costs of the proposed merger of the OSC and FSCO. If the merger doesn’t go through, the commission has to turn that money over to the province’s Consolidated Revenue Fund. The 2003 OSC budget does not include funding for the work that will be required if legislation is passed enabling a merger.

The commission’s revenue forecast for 2003 is $63.3 million, which is 20.7% lower than 2002. The forecast reflects the impact of the 10% fee cut implemented in August 1999 and June 2001 as well as a further planned 10% fee reduction, which is currently under discussion. The forecast also reflects an expected decline in capital market financings as well as lower mutual fund activity.

The OSC has also budgeted operating expenditures of $53.7 million for 2003. The budget increase relates primarily to salaries and benefits, which are projected to rise by 9.9% to $37.4 million. The OSC had 350 permanent staff at the end of the year compared to 305 at the end of the previous year. Total staffing is projected to reach 367 by March 2003.

The OSC’s 2003 capital budget is $1.7 million, 21.4% higher than the $1.4 million spent in 2002. Approximately 87% of the planned capital expenditures are information technology related.