Quarterly Financial Report for the Quarter Ended December 31st, 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.

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

This QFR reflects the results of the current fiscal period in relation to the Main Estimates and Supplementary Estimates (A) and Supplementary Estimates B. For 2015-16 to-date, there is a net increase in budgetary authorities of $0.73 million compared to the authorities granted in 2014-15. Factors contributing to the net increase include:

Increase

Decrease

Expenditures

The CRTC’s spending for the third quarter ended December 31, 2015 is in line with that of the previous fiscal year at 67%. Year to date total gross budgetary expenditures for 2015-16 are up slightly ($0.57 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 ($1.25 million) and for other non-salary items ($0.71 million) and decreases in expenditures for “Other subsidies and payments” (i.e. -$1.39 million pertaining to the 2014-15 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 Do Not Call List (DNCL) investigation and enforcement activities were funded by interim measures on a year-to-year basis using Parliamentary appropriations. Following amendments to the Telecommunications Act, starting in 2013-14, under the authority of the Unsolicited Telecommunications Fees Regulations, a long term funding solution was implemented that involves cost recovery of CRTC’s DNCL investigation and enforcement expenses from telemarketers who purchase the National DNCL.

The estimated telemarketing and regulatory costs and revenue target for unsolicited telecommunications fees total $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 investigations and enforcement operating costs, there was a risk that if fewer than expected telemarketers subscribed and paid their fees for access to the National DNCL, there would be a revenue shortfall. This was the case in 2013-14 when unsolicited telecommunications fees collected totalled $3.05 million, or 92.5% and in 2014-15 when unsolicited telecommunications fees collected totalled $3.09 million, or 93.7% of the revenue target. Accordingly, cost containment measures were put in place to ensure that the actual CRTC’s investigation and enforcement costs did not exceed the amount of revenue collected.

Despite vigorous and effective telemarketer outreach and enforcement actions which have encouraged telemarketers to register 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 subscription rates for access to the National DNCL. These amendments came into force on August 1, 2015.

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:

Original signed by

Jean-Pierre Blais,
Chairman and Chief Executive Officer
Gatineau, Canada
Date: February 10, 2016

Original signed by

Danielle May-Cuconato,
Chief Financial Officer
Gatineau, Canada
Date: February 9, 2016

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 December 31, 2015 Year to date used at quarter-end
Vote 1 – Program expenditures 55,413 13,218 36,944
Less: Revenues netted against expenditures (47,627) (840) (47,451)
Net Vote 1 – Program expenditures 7,786 12,378 (10,507)
Statutory authorities – EBP 6,877 1,719 5,158
Total budgetary authorities 14,663 14,097 (5,349)

*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 December 31, 2014 Year to date used at quarter-end
Vote 1 – Program expenditures 54,914 12,303 36,555
Less: Revenues netted against expenditures (47,627) (587) (47,402)
Net Vote 1 – Program expenditures 7,287 11,716 (10,847)
Statutory authorities – EBP 6,641 1,660 4,981
Total budgetary authorities 13,928 13,376 (5,866)

*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 December 31, 2015 Year to date used at quarter-end
Expenditures:
Personnel (including EBP)
47,901 12,328 36,141
Transportation and communications
1,918 357 949
Information
1,311 289 653
Professional and special services
7,499 1,279 3,106
Rentals
928 85 408
Repair and maintenance
422 10 41
Utilities, materials and supplies
396 61 161
Acquisition of machinery and equipment
1,915 528 638
Other subsidies and payments
0 0 5
Total gross budgetary expenditures 62,290 14,937 42,102
Less: revenues netted against expenditures
Revenues (Part I Broadcasting licence fees, Telecommunications fees and Unsolicited telecommunications fees)
(47,627) (840) (47,451)
Total revenues netted against expenditures (47,627) (840) (47,451)
Total net budgetary expenditures 14,663 14,097 (5,349)
Fiscal year 2014-15 (in thousands of dollars)
Planned expenditures for the year ending March 31, 2015 Used during the quarter ended December 31, 2014 Year to date used at quarter-end
Expenditures:
Personnel (including EBP)
47,073 11,794 34,896
Transportation and communications
2,053 343 888
Information
958 275 597
Professional and special services
6,994 1,165 2,843
Rentals
1,368 145 337
Repair and maintenance
916 55 132
Utilities, materials and supplies
548 72 185
Acquisition of machinery and equipment
1,638 80 266
Other subsidies and payments
7 34 1,392
Total gross budgetary expenditures 61,555 13,963 41,536
Less: revenues netted against expenditures
Revenues (Part I Broadcasting licence fees, Telecommunications fees, and Unsolicited telecommunications fees)
(47,627) (587) (47,402)
Total revenues netted against expenditures (47,627) (587) (47,402)
Total net budgetary expenditures 13,928 13,376 (5,866)
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