Quarterly Financial Report for the quarter ended September 30th, 2012

2012-2013

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 A as well as Canada’s Economic Action Plan 2012 (Budget 2012). 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 legislation (CASL).

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 CASL).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 2013‑14.

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 for both the 2011-12 and the 2012-13 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.

As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year. Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on February 28, 2012. As a result the measures announced in the Budget 2012 could not be reflected in the 2012-13 Main Estimates.

In fiscal year 2012-2013, frozen allotments will be established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.

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) and Budgetary Vote for investigation and enforcement activities associated with CASL) 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 2012-13 RPP.

The CRTC’s quarterly and year-to-date spending are in line with that of the previous fiscal year.

For 2012-13, there is a net decrease in budgetary authorities of $1.4 million compared to the authorities granted in 2011-12 Main Estimates and Supplementary Estimates A.  This is due to a decrease in operating and statutory costs.  Factors contributing to the net decrease include:

Decreases

Increases

This QFR reflects the results of the current fiscal period in relation to the Main Estimates and Supplementary Estimates A for which full supply was released on June 28, 2012.

3. Risks and Uncertainties

To date, the CRTC’s National Do Not Call List (DNCL) investigation and enforcement activities have been funded by interim measures on a year-to-year basis.  Funding approved for 2010-11 and 2011-12 totaled $3.0 million ($2.6 million in voted authorities and $0.4 million for EBP).  In addition, for each of these years $0.3 million was approved, and was held centrally in an earmarked reserve, to offset Public Works and Government Services Canada accommodation requirements associated with CRTC’s DNCL investigation and enforcement staff.

In the previous fiscal year (i.e. 2011-12) budgetary authorities for DNCL activities were approved in the first quarter as part of the Supplementary Estimates A process.  For fiscal year 2012-13, no funding authorities had been approved for DNCL activities as of the quarter ended September 30, 2012.  This being said, the CRTC is continuing its investigation and enforcement activities in the current fiscal year and is working with Industry Canada, Canadian Heritage, and central agencies to implement a short term funding solution for 2012-13 and a longer term funding solution starting in 2013-14.

The longer term funding solution will involve cost recovery of CRTC’s DNCL investigation and enforcement activities from telemarketers. On June 29, 2012 Bill C-38 “An Act to Implement Certain Provisions of the Budget Tabled in Parliament on March 29, 2012 and other measures” received Royal Assent.  As part of this Bill, changes to the Telecommunications Act (e.g. section 41.21(1)) were approved that will allow the Commission to make regulations prescribing fees for the purposes of recovering all or a portion of the costs that the Commission determines to be attributable to its responsibilities under section 41.2 of the Act.  In accordance with section 41.21(3) of the Act, the CRTC has issued a Notice of Consultation (NoC # 2012-588) on October 23, 2012.  In this NoC, the CRTC is seeking comments on the new “Unsolicited Telecommunications Fees Regulations” that, when implemented, will be used to fund the CRTC’s DNCL investigation and enforcement activities.  The CRTC is targeting to have these Regulations in place on April 1, 2013, for the 2013-14 fiscal year.

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 CASL and the CRTC accepting responsibility for the development and operation of a SPAM reporting center (SRC).  An administrative agreement between Industry Canada (IC) and the CRTC provides for a vote transfer from IC to the CRTC in the amount of $0.7million on an annual basis starting in 2012-13.  The amount of funding for 2012-13, was approved as part of Supplementary Estimates A.

When CASL comes into effect, it is intended that a SRC will be operational at the same time.  The SRC will receive reports and complaints of spam and related electronic threats, collect voluntarily provided or publicly available information as evidence related to potential violations of CASL, store this information in databases and allow access to such databases by enforcement agencies.

5. Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that will be implemented in order to refocus government programs.

CRTC will achieve Budget 2012 savings of $0.428 million, starting in 2013-14 and on-going, through efficiency measures and program reductions for its statutory investigation and enforcement activities under Canada’s anti-spam legislation. Prior to the start of fiscal year 2013-14 the CRTC will reassess its resource allocation to determine if the reductions identified as part of Budget 2012 can be achieved by O&M reductions (e.g. through process and/or internal services efficiencies) as opposed to salary reductions which would mitigate the potential impact on the number of cases to be investigated and the overall program effectiveness.

The CRTC will enforce the anti-spam legislation when it comes into effect.  The CRTC remains committed to ensuring a safer and more secure online environment for Canadians and will use its remaining resources to effectively target offenders.

There are no financial risks or uncertainties related to these savings.

Other measures referenced in Budget 2012 include the changes to the Telecommunications Act that will allow the CRTC to make fee regulations that would recover its DNCL investigation and enforcement costs from telemarketers.  Further information on this item is explained in the section on “Risks and Uncertainties”.

6. Approval by Senior Officials

Approved by:

 

________________________________
Jean-Pierre Blais, Chairman and CEO
Gatineau, Quebec
Date: November 23, 2012

 

________________________________

John Traversy, Secretary General
Gatineau, Quebec
Date:  November 23, 2012

Statement of Authorities (unaudited)

Fiscal year 2012-13 (in thousands of dollars)
  Total available for use for the year ending March 31, 2013* ** Used during the quarter ended
September 30, 2012
  Year to date used at quarter-end
Vote 50 – Program expenditures 49,956 11,354 22,145
Less:  Revenues netted against expenditures (42,574) (9,298) (42,574)
Net Vote 50 – Program expenditures 7,382 2,056 (20,429)
Statutory authorities – EBP 6,311 1,578 3,156
Total Budgetary Authorities 13,693 3,634 (17,273)

*Includes only Authorities available for use and granted by Parliament at quarter-end.
** Total available for use does not reflect measures announced in Budget 2012.

 

Fiscal year 2011-12 (in thousands of dollars)
  Total available for use for the year ending March 31, 2012* Used during the quarter ended
September 30, 2011
  Year to date used at quarter-end
Vote 45 – Program expenditures 51,189 12,745 23,476
Less:  Revenues netted against expenditures (42,603) (14,798) (42,603)
Net Vote 45 – Program expenditures 8,586 (2,053) (19,127)
Statutory authorities – EBP 6,473 1,618 3,236
Total Budgetary Authorities 15,059 (435) (15,891)

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

Departmental budgetary expenditures by Standard Object (unaudited)

Fiscal year 2012-13 (in thousands of dollars)
  Planned expenditures for the
year ending
March 31, 2013*
  Used during the quarter ended
September 30, 2012
  Year to date used at quarter-end
Expenditures:      
Personnel (including EBP) 42,169 10,726 21,572
Transportation and communications 2,398 478 807
Information 1,266 446 760
Professional and special services 6,713 977 1,637
Rentals 364 135 224
Repair and maintenance 1,468 80 138
Utilities, materials and supplies 377 61 109
Acquisition of machinery and equipment 1,510 23 48
Other subsidies and payments 2 6 6
Total gross budgetary expenditures 56,267 12,932 25,301
Less: revenues netted against expenditures
Revenues (Part I Broadcasting licence fees and Telecommunication fees) (42,574) (9,298) (42,574)
Total revenues netted against expenditures (42,574) (9,298) (42,574)
TOTAL NET BUDGETARY EXPENDITURES 13,693 3,634 (17,273)

*Planned expenditures do not reflect measures announced in Budget 2012.

 

Fiscal year 2011-12 (in thousands of dollars)
  Planned expenditures for the
year ending
March 31, 2012
  Used during the quarter ended
September 30, 2011
  Year to date used at quarter-end
Expenditures:  
Personnel (including EBP) 44,696 12,338 23,121
Transportation and communications 2,271 500 892
Information 1,460 348 607
Professional and special services 6,421 896 1,536
Rentals 392 37 83
Repair and maintenance 1,107 146 301
Utilities, materials and supplies 416 70 142
Acquisition of machinery and equipment 899 28 30
Other subsidies and payments 0 0 0
Total gross budgetary expenditures 57,662 14,363 26,712
Less: revenues netted against expenditures
Revenues (Part I Broadcasting licence fees and Telecommunication fees) (42,603) (14,798) (42,603)
Total revenues netted against expenditures (42,603) (14,798) (42,603)
TOTAL NET BUDGETARY EXPENDITURES 15,059 (435) (15,891)
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