Quarterly Financial Report for the Quarter Ended June 30th, 2015

2015-2016

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. 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).

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.

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 came 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 2014-15 and the 2015-16 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 of Canada through Parliamentary authorities (e.g. Statutory Vote for Employee Benefits Plans (EBP), Budgetary Vote for the Anti-spam legislation activities and for the Voter Contact Registry) 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 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.

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 2015-16 RPP in the supplementary information section entitled “Future-Oriented Statement of Operations”.

Authorities

For 2015-16 to-date, there is a net increase in budgetary authorities of $1.67 million compared to the authorities granted in 2014-15 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, 2015-16 provided full supply for the 2015-16 Main Estimates and was approved through a Warrant of the Governor General dated June 19, 2015 pursuant to Order in Council P.C. 2015-966. Appropriation Act No. 3, 2015-16 provided Supply for Supplementary Estimates (A), 2015-16 and was approved through a Warrant of the Governor General dated June 19, 2015 pursuant to Order in Council P.C. 2015-967.

Expenditures

The CRTC’s spending for the first quarter ended June 30, 2015 is in line with that of the previous fiscal year. Year to date total gross budgetary expenditures for 2015-16 are down slightly (-$0.94 million) over the previous fiscal year. The main reasons for this difference in spending are a combination of increases in expenditures attributable to salary related items ( $0.25 million) and for other non-salary items ($0.14 million) and decreases 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).

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 per year. A public notice of these amounts was made in CRTC Compliance and Enforcement Orders 2013-148 for 2013-14, 2014-307 for 2014-15 and 2015-193 for 2015-16.

Although the CRTC had established its unsolicited telecommunications fees at levels anticipated to fully recover its approved DNCL operating costs, there was 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% and in 2014-15 where unsolicited telecommunications fees collected totalled $3.09 million, or 93.7% 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.

Despite vigorous and effective enforcement actions which has encouraged telemarketers to comply and subscribe to the National DNCL, a review of subscription purchases anticipated for 2015-16 indicated that the $3.3 million revenue target would not be achieved.  Pursuant to subsection 41.21(3) of the Telecommunications Act, and via the Compliance and Enforcement Notice of Consultation 2015-144, the CRTC initiated a public process calling for comments on proposed amendments to the unsolicited telecommunications fees regulations which included an increase in rates for access to the National DNCL.  These amendments would come into force on 1 August 2015.  In addition the CRTC’s monthly monitoring and control mechanism will be maintained to ensure the net dollar amount (expenditures minus revenues) approved by Parliament is not exceeded.

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.

5. Approval by Senior Officials

Approved by:

Jean-Pierre Blais, Chairman and Chief Executive Officer
Gatineau, Canada
Date: August 24, 2015

John Traversy, Chief Financial Officer
Gatineau, Canada
Date: August 24, 2015

Statement of Authorities (unaudited)

Fiscal year 2015-16 (in thousands of dollars)
Total available for use for the year ending March 31, 2016* Used during the quarter ended June 30, 2015 Year to date used at quarter-end
Vote 1 – Program expenditures 53, 005 11,499 11,499
Less: Revenues netted against expenditures (47,625) (45,951) (45,951)
Net Vote 1 – Program expenditures 5,380 (34,452) (34,452)
Statutory authorities – EBP 6,877 1,719 1,719
Total budgetary authorities 12,257 (32,733) (32,733)

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

Fiscal year 2014-15 (in thousands of dollars)
Total available for use for the year ending March 31, 2015* Used during the quarter ended June 30, 2014 Year to date used at quarter-end
Vote 1 – Program expenditures 51,390 12,504 12,504
Less: Revenues netted against expenditures (47,444) (45,990) (45,990)
Net Vote 1 – Program expenditures 3,946 (33,486) (33,486)
Statutory authorities – EBP 6,641 1,660 1,660
Total budgetary authorities 10,587 (31,826) (31,826)

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

Departmental budgetary expenditures by Standard Object (unaudited)

Fiscal year 2015-16 (in thousands of dollars)
Planned expenditures for the year ending March 31, 2016 Used during the quarter ended June 30, 2015 Year to date used at quarter-end
Expenditures:
Personnel (including EBP)
47,812 11,641 11,641
Transportation and communications
1,581 258 258
Information
1,081 297 297
Professional and special services
6,390 685 685
Rentals
765 235 235
Repair and maintenance
348 7 7
Utilities, materials and supplies
326 45 45
Acquisition of machinery and equipment
1,579 45 45
Other subsidies and payments
0 5 5
Total gross budgetary expenditures 59,882 13,218 13,218
Less: revenues netted against expenditures
Revenues (Part I Broadcasting licence fees, Telecommunications fees and Unsolicited telecommunications fees)
(47,625) (45,951) (45,951)
Total revenues netted against expenditures (47,625) (45,951) (45,951)
Total net budgetary expenditures 12,257 (32,733) (32,733)
Fiscal year 2014-15 (in thousands of dollars)
Planned expenditures for the year ending March 31, 2015 Used during the quarter ended June 30, 2014 Year to date used at quarter-end
Expenditures:
Personnel (including EBP)
46,890 11,392 11,392
Transportation and communications
1,671 226 226
Information
780 265 265
Professional and special services
5,342 601 601
Rentals
1,114 162 162
Repair and maintenance
668 44 44
Utilities, materials and supplies
446 44 44
Acquisition of machinery and equipment
1,114 83 83
Other subsidies and payments
6 1,347 1,347
Total gross budgetary expenditures 58,031 14,164 14,164
Less: revenues netted against expenditures
Revenues (Part I Broadcasting licence fees, Telecommunications fees, and Unsolicited telecommunications fees)
(47,444) (45,990) (45,990)
Total revenues netted against expenditures (47,444) (45,990) (45,990)
Total net budgetary expenditures 10,587 (31,826) (31,826)
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