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Quarterly Financial Report for the quarter ended December 31, 2011

2011-2012

Statement outlining results, risks and significant changes in
operations, personnel and program

1. Introduction

This quarterly financial report (QFR) has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board Accounting Standard 1.3.  This QFR should be read in conjunction with the Main Estimates and Supplementary Estimates.  It has not been subject to an external audit or review.

1.1 Authority, Mandate and Program Activities

The Canadian Radio-television and Telecommunications Commission (CRTC) was created by Parliament in 1968 under the Canadian Radio-television and Telecommunications Commission Act.  The CRTC reports to Parliament through the Minister of Canadian Heritage.

The CRTC is vested with the authority to regulate and supervise all aspects of the Canadian broadcasting system, as well as the telecommunications services providers and common carriers that come under federal jurisdiction.  The CRTC’s powers in the area of broadcasting regulation derive from the Broadcasting Act.  Its powers over telecommunications come from the Telecommunications Act and from various “special acts” of Parliament passed for specific telecommunications companies.  CRTC also has statutory authority to discharge specific responsibilities under Canada’s Anti-spam law (refer to Section 4).

Further details about the CRTC’s authority, mandate and program activities can be found below and in the department’s Report on Plans and Priorities (RPP) and Main Estimates located on the Treasury Board website at www.tbs-sct.gc.ca.

1.2 Basis of Presentation

This QFR has been prepared by management using an expenditure basis of accounting.  The accompanying Statement of Authorities includes the CRTC’s spending authorities granted by Parliament and those used by the department consistent with the Main Estimates and Supplementary Estimates A and B for both the 2010-11 and the 2011-12 fiscal years.  This QFR has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before moneys can be spent by the Government.  Approvals are given in the form of annually approved limits through appropriation acts or through legislation in the form of statutory spending authority for specific purposes.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund.  A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

The CRTC uses the modified accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental performance reporting process.  However, the spending authorities voted by Parliament remain on an expenditure basis.

In this QFR, only those revenues netted against expenditures (i.e. respendable revenue) are being reported. All other revenue that is designated as non-respendable revenue, is not reported in the quarterly financial reports, but will be reported annually in the Public Accounts of Canada and in the CRTC’s Departmental Performance Report.

2. Highlights of fiscal quarter and fiscal year to date results 

The CRTC is financed in part by the Government through Parliamentary Appropriations (e.g. Statutory Vote for Employee Benefits Plans (EBP), Budgetary Vote for investigation and enforcement activities associated with the National Do Not Call List (DNCL) and Anti-spam law activities) and the balance by vote-netted fees it collects from the regulated industries.

Vote-netting is a means of funding selected programs or activities wherein Parliament authorizes a department to apply revenues collected from fee payers towards costs directly incurred for specific activities. The CRTC has the authority to use a portion of the Part I licence fees collected from broadcasters and a portion of the annual telecommunications fees collected from telecommunications carriers to finance the costs it incurs in regulating the broadcasting and telecommunications industries (i.e. respendable revenue). The balance of these two fees recovers the costs for items funded through appropriations (e.g. EBP) and costs incurred by other government departments on the CRTC’s behalf and are classified as non-respendable revenue.

The vote-netted revenue for the entire year is collected primarily within the first two quarters of each fiscal year.  As a result, it is expected that the CRTC quarterly financial reports will always show the net operating expenditures in a credit position.  Further details on CRTC fees and revenues can be found in the 2011-12 RPP.

The CRTC’s quarterly and year-to-date spending are in line with that of the previous fiscal year.  The significant variance in expenditures between years is due primarily to activities related to the new Anti-spam law.

For 2011-12, there is an increase in budgetary authorities of $5.5 million compared to the authorities granted in 2010-11 Main Estimates.  This is due to an increase in operating and statutory costs.  Factors contributing to the net increase include:

• $4.7 million related to the new funding for Anti-spam law; and
• $0.8 million for EBP; of this amount $0.5 million is attributable to new salary funding resulting from the Anti-spam law, and an additional $0.3 million increase resulting from a modification of the EBP rate adjustment.

3. Risks and Uncertainties

The CRTC continues to face funding challenges relating to its National Do Not Call List (DNCL) activities.  In 2006, amendments to the Telecommunications Act came into effect granting the CRTC power and authority to create a National DNCL, investigate complaints and to enforce compliance.  However, no incremental on-going funding was provided to the CRTC to perform these non-discretionary, statutory responsibilities.  To date, the CRTC’s investigation and enforcement activities have been funded by interim measures on a year-to-year basis.  Funding approved for 2010-11 and 2011-12 totalled $3.0 million ($2.6 million in voted authorities and $0.4 million for EBP).  Although funding has been approved to the end of March 31, 2012, no funding has been identified beyond this period.  The lack of long-term funding for the DNCL continues to be a challenge for workforce stability and staff retention.  The CRTC, Industry Canada, and central agencies continue to work together to explore funding solutions and establish an on-going source of funding.  Failure to obtain additional funding beyond 2011‑12 will put the continued operation of this activity at risk.

This QFR reflects the results of the current fiscal period in relation to the Main Estimates and Supplementary Estimates A and B.

Budget 2010 announced that the operating budgets of departments would be frozen at their 2010-11 levels for the fiscal years 2011-12 and 2012-13.  With respect to the CRTC’s voted authorities, the financial impact of this budget freeze may affect appropriated funding related to DNCL and Anti-spam activities.  These two activities are still relatively new and the Anti-spam responsibilities are not yet fully staffed.  The measures to be taken by the CRTC to manage the budget constraints have been considered in consultation with Treasury Board Secretariat officials.

4. Significant changes in relation to operations, personnel and programs

There have been no significant changes in relation to operations, personnel and programs over the past year with the exception of the new Anti-spam law.

In December 2010, Royal Assent was granted for Anti-spam legislation entitled An Act to promote the efficiency and adaptability of the Canadian economy by regulating certain activities that discourage reliance on electronic means of carrying out commercial activities, and to amend the Canadian Radio-television and Telecommunications Commission Act, the Competition Act, the Personal Information Protection and Electronic Documents Act and the Telecommunications Act (herein referred to as Anti-spam law).Under this law, the CRTC has obtained new investigative and enforcement responsibilities and powers to counter spam, malware, botnets, and network re-routing.  The law may come into force during 2012‑13.

In 2010-11, $2.9 million of anti-spam funding was provided by the end of the second quarter ($1.7 million for personnel and $1.2 million for operations and maintenance).  As the funding was received late in the fiscal year, a request to reprofile $2.0 million ($0.9 million in 2011-12, $0.7 million in 2012-13 and $0.4 million in 2013-14) was submitted by the CRTC and was approved by Treasury Board Secretariat.  In 2011-12, $5.2 million of anti-spam funding was provided by the end of the second quarter ($3.0 million for personnel and $2.2 million for operations and maintenance).

5. Approval by Senior Officials

Approved by:

 

________________________________
Len Katz, Acting Chairman
Gatineau, Quebec
Date: February 17, 2012

 

________________________________
John Traversy, Secretary General
Gatineau, Quebec
Date: February 17, 2012

Statement of Authorities (unaudited)

Fiscal year 2011-12 (in thousands of dollars)

	Total available for use for the year ending March 31, 2012*	Used during the quarter ended December 31, 2011	Year to date used at quarter-end
Vote 45 – Program expenditures	53,560	12,205	35,681
Less:  Revenues netted against expenditures	(42,611)	(8)	(42,611)
Net Vote 45 – Program expenditures	10,949	12,197	(6,930)
Statutory authorities – EBP	6,473	1,618	4,854
Total Budgetary Authorities	17,422	13,815	(2,076)

*Includes only Authorities available for use and granted by Parliament at quarter-end.

 

Fiscal year 2010-11 (in thousands of dollars)

	Total available for use for the year ending March 31, 2011*	Used during the quarter ended December 31, 2010	Year to date used at quarter-end
Vote 50 – Program expenditures	49,052	11,608	33,465
Less:  Revenues netted against expenditures	(42,394)	(2)	(42,394)
Net Vote 50 – Program expenditures	6,658	11,606	(8,929)
Statutory authorities – EBP	5,651	1,413	4,239
Total Budgetary Authorities	12,309	13,019	(4,690)

*Includes only Authorities available for use and granted by Parliament at quarter-end.

Statement of Expenditures by Standard Object (unaudited)

Fiscal year 2011-12 (in thousands of dollars)

	Planned expenditures for the year ending March 31, 2012	Used during the quarter ended December 31, 2011	Year to date used at quarter-end
Expenditures:
Personnel (including EBP)*	47,066	11,487	34,608
Transportation and communications	2,271	557	1,449
Information	1,460	94	701
Professional and special services	6,422	1,191	2,727
Rentals	392	89	172
Repair and maintenance	1,107	229	530
Utilities, materials and supplies	416	83	225
Acquisition of machinery and equipment	899	93	123
Other subsidies and payments	0	0	0
Total gross budgetary expenditures	60,033	13,823	40,535
Less: revenues netted against expenditures
Revenues (Part I Broadcasting licence fees and Telecommunication fees)	(42,611)	(8)	(42,611)
Total revenues netted against expenditures	(42,611)	(8)	(42,611)
TOTAL NET BUDGETARY EXPENDITURES	17,422	13,815	(2,076)

*Personnel (including EBP) –Increase mainly due to remuneration to civilian  personnel for the immediate cash-out of all portion of severance pay benefits earned prior to termination of employment as permitted by collective agreements or under terms and conditions of employment.

Fiscal year 2010-11 (in thousands of dollars)

	Planned expenditures for the year ending March 31, 2011	Used during the quarter ended December 31, 2010	Year to date used at quarter-end
Expenditures:
Personnel (including EBP)	42,974	10,331	31,617
Transportation and communications	1,920	698	1,550
Information	1,172	194	774
Professional and special services	6,519	1,108	2,493
Rentals	306	109	201
Repair and maintenance	1,183	235	470
Utilities, materials and supplies	320	76	212
Acquisition of machinery and equipment	274	195	238
Other subsidies and payments*	35	76	149
Total gross budgetary expenditures	54,703	13,022	37,704
Less: revenues netted against expenditures
Revenues (Part I Broadcasting licence fees and Telecommunication fees)	(42,394)	(2)	(42,394)
Total revenues netted against expenditures	(42,394)	(2)	(42,394)
TOTAL NET BUDGETARY EXPENDITURES	12,309	13,020	(4,690)

*Timing difference – actual expenditures used during the quarter include interdepartmental settlements that were coded to the appropriate standard object in subsequent accounting periods.