Quarterly Financial Report for the Quarter Ended September 30th, 2014

2014-2015

Table of Contents

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 began to take effect on July 1, 2014, when most of the Act came into force.  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.

Upon Royal Assent on June 19, 2014, the CRTC was given specific responsibilities under the Fair Elections Act, which amended the Canada Elections Act and the Telecommunications Act. The CRTC’s new responsibilities for the Voter Contact Registry program include: a) the establishment of a secure on-line Voter Contact Registry before the next general federal election; b) maintaining the Registry; and c) conducting compliance and enforcement activities in 2015-16 and on-going. 

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 2013-14 and the 2014-15 fiscal years.  Reductions to departmental authorities relating to Budget 2012 were reflected in the 2013-2014 Main Estimates tabled in Parliament. 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 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, the CRTC created the Unsolicited Telecommunications Fees Regulations, following a public consultation process in 2012-13.  These regulations came into effect on April 1, 2013. Starting in 2013-14, 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 2014-15 RPP in the supplementary information section entitled “Future-Oriented Statement of Operations”.

As of the end of September 2014, the CRTC was working with central agencies to seek approval of incremental budgetary authority for funding related to the establishment, maintenance and implementation of the Voter Contact Registry program.

Authorities

For 2014-15 to-date, there is a net increase in budgetary authorities of $1.92 million compared to the authorities granted in 2013-14 Main Estimates and Supplementary Estimates A.  Factors contributing to the net increase include:

Increase

Decrease

This QFR reflects the results of the current fiscal period in relation to the Main Estimates and Supplementary Estimates (A).  Appropriation Act No. 2, 201415 provided Full Supply for the 2014–15 Main Estimates and was approved through a Warrant of the Governor General dated June 20, 2014 pursuant to Order in Council P.C. 2014-837. Appropriation Act No. 3, 201415 provided Supply for Supplementary Estimates (A), 2014–15 and was approved through a Warrant of the Governor General dated June 20, 2014 pursuant to Order in Council P.C. 2014-838.

Expenditures

The CRTC’s spending for the second quarter ended September 30, 2014 is in line with that of the previous fiscal year.  Year to date total gross budgetary expenditures for 2014-15 are down slightly (-$0.16 million) over the previous fiscal year.  The main reasons for this difference in spending are a combination of an increase in expenditures for “Other subsidies and payments” (i.e. $1.35 million pertaining to a one-time transition payment for implementing salary payment in arrears by the Government of Canada), and decreases in expenditures attributable to salary related items (-$1.01 million), “Transportation and communications” (-$0.24 million) and “professional and special services”  (-$0.26 million).

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 using Parliamentary appropriations. Starting in 2013-14, a long term funding solution was implemented that involves cost recovery of CRTC’s DNCL investigation and enforcement activities from telemarketers under the authority of the Unsolicited Telecommunications Fees Regulations.

The estimated telemarketing and regulatory costs and revenue target for unsolicited telecommunications fees totals $3.3 million for both 2013-14 and 2014-15.  A public notice of these amounts was made in CRTC Compliance and Enforcement Orders 2013-148 for 2013-14, and 2014-307 for 2014-15.

Although the CRTC has established its unsolicited telecommunications fee levels to fully recover its approved DNCL operating costs, there is a risk that if fewer than expected telemarketers subscribe to the National DNCL and pay fees, there may be revenue shortfall.  This was the case in 2013-14 where unsolicited telecommunications fees collected totalled $3.05 million, or 92.5% of the revenue target.  Cost containment measures were put in place such that the actual CRTC costs related to the DNCL did not exceed the amount of revenue collected.

As of the end of September 2014, financial forecasts to the end of the 2014-15 fiscal year have identified a potential revenue shortfall from the $3.3 million revenue target. As a result, the CRTC’s monthly monitoring and control mechanism will be maintained to ensure the net dollar amount (revenues minus expenditures) approved by Parliament is not exceeded. Furthermore, for the balance of the fiscal year the CRTC will be proactively exploring measures to increase the amount of fee revenue collected such that the annual revenue target can be achieved in the future.

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, other than the new statutory responsibilities conferred upon the CRTC in 2014 for the Voter Contact Registry program.

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 achieved Budget 2012 savings of $0.428 million, starting in 2013-14 and will continue to do so on an on-going basis, through program reductions for its statutory investigation and enforcement activities under Canada’s anti-spam legislation which came in force on July 1, 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: November 12, 2014

John Traversy, Secretary General
Gatineau, Quebec
Date: November 7, 2014

Statement of Authorities (unaudited)

Fiscal year 2014-15 (in thousands of dollars)

  Total available for use for the year ending March 31, 2015* Used during the quarter ended
September 30, 2014
Year to date used at quarter-end
Vote 50 – Program expenditures 53,934 11,749 24,252
Less:  Revenues netted against expenditures (47,444) (825) (46,815)
Net Vote 50 – Program expenditures 6,490 10,924 (22,563)
Statutory authorities – EBP 6,641 1,660 3,321
Total Budgetary Authorities 13,131 12,584 (19,242)

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

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.

Departmental budgetary expenditures by Standard Object (unaudited)

Fiscal year 2014-15 (in thousands of dollars)

  Planned expenditures for the
year ending
March 31, 2015
Used during the quarter ended
September 30, 2014
Year to date used at quarter-end
Expenditures:
Personnel (including EBP) 46,890 11,710 23,102
Transportation and communications 2,053 319 545
Information 958 58 322
Professional and special services 6,562 1,078 1,679
Rentals 1,368 30 192
Repair and maintenance 821 33 77
Utilities, materials and supplies 548 68 113
Acquisition of machinery and equipment 1,368 103 186
Other subsidies and payments 7 10 1,357
Total gross budgetary expenditures 60,575 13,409 27,573
Less: revenues netted against expenditures
Revenues (Part I Broadcasting licence fees, Telecommunications fees and Unsolicited telecommunications fees) (47,444) (825) (46,815)
Total revenues netted against expenditures (47,444) (825) (46,815)
TOTAL NET BUDGETARY EXPENDITURES 13,131 12,584 (19,242)

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)
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