Quarterly Financial Report for the quarter ended December 31st, 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. The Act will begin to take effect on July 1, 2014, when most of the Act comes into force. Once the law is in force, it will help to protect Canadians while ensuring that businesses can continue to compete in the global marketplace. On January 15, 2015, sections of the Act related to the unsolicited installation of computer programs or software come into force, and the Private Right of Action provisions will come into force on July 1, 2017.

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.

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 are used to recover the cost of the CRTC’s compliance and enforcement activities associated with the National Do Not Call List (DNCL).

The majority of the CRTC’s vote-netted revenue for the year is collected 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.

Authorities

For 2013-14 to-date, there is a net decrease in budgetary authorities of $3.3 million compared to the authorities granted in 2012-13 Main Estimates and Supplementary Estimates A and B. 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, Supplementary Estimates (A) and Supplementary Estimates (B). Appropriation Act No. 2, 201314 provided Full Supply for the 2013–14 Main Estimates was approved through a Warrant of the Governor General dated June 20, 2013 pursuant to Order in Council P.C. 2013-827.

Expenditures

The CRTC’s spending for the third quarter ended December 31, 2013 is in line with that of the previous fiscal year. Year to date total gross budgetary expenditures for 2013-14 are up slightly ($2.1 million or 5.4%) over the previous fiscal year. This net increase in expenditures is primarily attributable to salary related items, including an increase in one time severance payments and salary adjustments as a result of collective agreements ratified during the fiscal year.

3. Risks and Uncertainties

Prior to 2013-14, the CRTC’s National 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. The risk of a material shortfall in revenue 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. Based on the actual fee revenue received to date, as well as the forecasted revenue to the end of the year, the CRTC is projecting that approximately 95% of the revenue target of $3.3 million will be met in 2013-14.

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 will become operational when CASL comes in force in July 2014.

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 comes in force in July 2014. 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: February 4, 2014

 

John Traversy, Secretary General
Gatineau, Quebec
Date: February 4, 2014

 

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
December 31, 2013
Year to date used at quarter-end
Vote 50 – Program expenditures 54,034 11,409 35,737
Less: Revenues netted against expenditures (47,270) (1,136) (47,270)
Net Vote 50 – Program expenditures 6,764 10,273 (11,533)
Statutory authorities – EBP 6,959 1,701 5,103
Total Budgetary Authorities 13,723 11,974 (6,430)

*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
December 31, 2012
Year to date used at quarter-end
Vote 50 – Program expenditures 53,934 11,854 33,998
Less: Revenues netted against expenditures (43,271) (697) (43,271)
Net Vote 50 – Program expenditures 10,663 11,157 (9,273)
Statutory authorities – EBP 6,311 1,578 4,734
Total Budgetary Authorities 16,974 12,735 (4,539)

*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
December 31, 2013
Year to date used at quarter-end
Expenditures:
Personnel (including EBP) 46,856 11,433 35,544
Transportation and communications 1,979 364 1,145
Information 1,272 123 419
Professional and special services 6,782 963 2,904
Rentals 1,555 47 348
Repair and maintenance 848 63 239
Utilities, materials and supplies 566 56 143
Acquisition of machinery and equipment 1,131 61 98
Other subsidies and payments 4 0 0
Total gross budgetary expenditures 60,993 13,110 40,840
Less: revenues netted against expenditures
Revenues (Part I Broadcasting licence fees, Telecommunications fees and Unsolicited telecommunications fees) (47,270) (1,136) (47,270)
Total revenues netted against expenditures (47,270) (1,136) (47,270)
TOTAL NET BUDGETARY EXPENDITURES 13,723 11,974 (6,430)

 

Fiscal year 2012-13 (in thousands of dollars)
Planned expenditures for the year ending
March 31, 2013*
Used during the quarter ended
December 31, 2012
Year to date used at quarter-end
Expenditures:
Personnel (including EBP) 45,854 10,789 32,362
Transportation and communications 2,406 416 1,223
Information 1,261 36 796
Professional and special services 6,874 1,346 2,983
Rentals 363 216 440
Repair and maintenance 1,582 372 509
Utilities, materials and supplies 395 136 245
Acquisition of machinery and equipment 1,504 120 168
Other subsidies and payments 6 0 6
Total gross budgetary expenditures 60,245 13,432 38,732
Less: revenues netted against expenditures
Revenues (Part I Broadcasting licence fees and Telecommunication fees) (43,271) (697) (43,271)
Total revenues netted against expenditures (43,271) (697) (43,271)
TOTAL NET BUDGETARY EXPENDITURES 16,974 12,735 (4,539)

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

Date modified: