Quarterly Financial Report for the quarter ended September 30th, 2013

2013-2014

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 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 and Official Languages.

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. This Act received Royal Assent in 2010 but is not yet proclaimed in force.

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 for both the 2012-13 and the 2013-14 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 were established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In 2013-2014, the changes to departmental authorities were reflected in the 2013-2014 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 of Canada through Parliamentary authorities (e.g. Statutory Vote for Employee Benefits Plans (EBP), Budgetary Vote for the Anti-spam legislation activities) and the balance by vote-netted fees it collects from the broadcasting, telecommunications and telemarketing 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. CRTC has the authority to use a portion of: a) the Part I licence fees collected from broadcasters; b) the annual telecommunications fees collected from telecommunications carriers; and c) the unsolicited telecommunications fees from telemarketers (starting in 2013-14) to finance the costs it incurs in discharging its statutory responsibilities under the Broadcasting Act and Telecommunications Act (i.e. respendable revenue). The balance of these three fees recovers the costs for items funded through budgetary authorities (e.g. EBP) and costs incurred by other government departments on the CRTC's behalf and are classified as non-respendable revenue.

Under the authority of the Telecommunications Act, a public consultation process was completed during 2012-13 that resulted in the creation of the Unsolicited Telecommunications Fees Regulations.  These regulations came into effect on April 1, 2013. Starting in 2013-2014, these regulatory fees will be used to recover the cost of the CRTC’s compliance and enforcement activities associated with the National Do Not Call List.

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 2013-14 RPP.

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

For 2013-14 to date, there is a net decrease in budgetary authorities of $2.5 million compared to the authorities granted in 2012-13 Main Estimates and Supplementary Estimates A. Factors contributing to the net decrease include:

Decrease

Increase

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 approved on June 20, 2013. Appropriation Act No. 2, 201314 provides Full Supply for the 2013–14 Main Estimates and was approved through a Warrant of the Governor General dated June 20, 2013 pursuant to Order in Council P.C. 2013-827.

3. Risks and Uncertainties

Prior to 2013-14, the CRTC’s National Do Not Call List (DNCL) investigation and enforcement activities were funded by interim measures on a year-to-year basis. For fiscal year 2012-13, the budgetary authorities for DNCL activities were approved as part of the Supplementary Estimates B process.

Starting in 2013-14, a long term funding solution is being implemented that involves 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 Telecommunications Act.

In accordance with section 41.21(3) of the Telecommunications Act, the CRTC conducted a public consultation (Notice of Consultation 2012-588) regarding the creation of new fees regulations entitled the “Unsolicited Telecommunications Fees Regulations”. The Commission considered all public comments received and subsequently approved the new fees regulations. The Commission’s decision regarding these new regulations was published on January 28, 2013 in Decision 2013-26. The new regulations and fee structure came into effect on April 1, 2013, for the 2013-14 fiscal year.

Although the CRTC has established its unsolicited telecommunications fee levels to fully recover its approved DNCL operating costs for 2013-14, there is a risk that if fewer than expected telemarketers subscribe to the National DNCL and pay fees, there may be funding shortfall.  However, this risk is considered to be low as the level of annual subscription purchases has stabilized over the past years due to  vigorous and effective enforcement actions which has encouraged telemarketers to comply and subscribe to the DNCL.

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 2013-14, was approved as part of the Main Estimates.

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. The SRC is expected to be operational when CASL is proclaimed in force.

5. Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that are being implemented in order to refocus government programs: make it easier for Canadians and business to deal with their government; and, modernize and reduce the back office.

CRTC will achieve Budget 2012 savings of $0.428 million, starting in 2013-14 and on-going, through program reductions for its statutory investigation and enforcement activities under Canada’s anti-spam legislation. The CRTC will enforce the anti-spam legislation when the law is proclaimed in force. 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.

6. Approval by Senior Officials

Approved by:

 

Jean-Pierre Blais, Chairman and CEO
Gatineau, Quebec
Date: November 18, 2013

 

John Traversy, Secretary General
Gatineau, Quebec
Date: November 12, 2013

 

Statement of Authorities (unaudited)

Fiscal year 2013-14 (in thousands of dollars)
Total available for use for the year ending
March 31, 2014*
Used during the quarter ended
September 30, 2013
Year to date used at quarter-end
Vote 50 – Program expenditures 50,892 12,471 24,329
Less: Revenues netted against expenditures (46,488) (825) (46,134)
Net Vote 50 – Program expenditures 4,404 11,646 (21,805)
Statutory authorities – EBP 6,803 1,701 3,402
Total Budgetary Authorities 11,207 13,347 (18,403)

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

 

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.

Departmental budgetary expenditures by Standard Object (unaudited)

Fiscal year 2013-14 (in thousands of dollars)
Planned expenditures for the year ending
March 31, 2014
Used during the quarter ended
September 30, 2013
Year to date used at quarter-end
Expenditures:
Personnel (including EBP) 45,903 12,114 24,112
Transportation and communications 1,651 501 781
Information 1,061                         51                     296
Professional and special services 5,657 1,142 1,941
Rentals 1,297 159 301
Repair and maintenance 707 130 176
Utilities, materials and supplies 472 54 87
Acquisition of machinery and equipment 943 21 37
Other subsidies and payments 4 0 0
Total gross budgetary expenditures 57,695 14,172 27,731
Less: revenues netted against expenditures
Revenues (Part I Broadcasting licence fees, Telecommunications fees and Unsolicited telecommunications fees) (46,488) (825) (46,134)
Total revenues netted against expenditures (46,488) (825) (46,134)
TOTAL NET BUDGETARY EXPENDITURES 11,207 13,347 (18,403)

 

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.

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