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Transparency

Statement of Management Responsibility

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2009 and all information contained in these statements rests with the CRTC departmental management. These financial statements have been prepared by the CRTC management in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.   

The CRTC management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on the CRTC management's best estimates and judgment and gives due consideration to materiality. To fulfil its accounting and reporting responsibilities, the CRTC management maintains a set of accounts that provides a centralized record of the department's financial transactions. Financial information submitted to the Public Accounts of Canada and included in the department's Departmental Performance Report is consistent with these financial statements.

The CRTC management maintains a system of financial management and internal control designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are in accordance with the Financial Administration Act, are executed in accordance with prescribed regulations, within Parliamentary authorities, and are properly recorded to maintain accountability of Government funds. The CRTC management also seeks to ensure the objectivity and integrity of data in its financial statements by careful selection, training and development of qualified staff, by organizational arrangements that provide appropriate divisions of responsibility, and by communication programs aimed at ensuring that regulations, policies, standards and managerial authorities are understood throughout the department.

The financial statements of the Commission have not been audited.

 

 

Konrad von Finckenstein, Q. C. Robert A. Morin

Chairman                          Secretary General

 

Gatineau, Canada
Date: 8 July, 2009

---

Canadian Radio-television and Telecommunications Commission
Statement of Operations (Unaudited)
For the Year Ended March 31, 2009
(in dollars)

	2008-09			2007-08
	Broadcasting (Note 1)	Telecommunications (Note 1)	Total
Expenses
Salaries and employee benefits	25,565,194	23,290,340	48,855,534	40,936,563
Spectrum management cost (Note 10)	10,000,000	-	10,000,000	10,000,000
Professional and special services	3,009,198	2,983,678	5,992,876	6,366,225
Accommodation	1,618,983	1,618,982	3,237,965	2,915,295
Travel and relocation	1,296,034	1,009,697	2,305,731	2,175,066
Information, advertising and communications services	1,443,716	306,777	1,750,493	1,974,189
Repair and maintenance	596,665	540,195	1,136,860	1,599,897
Amortization	407,937	407,936	815,873	673,762
Furniture and equipment	238,245	229,994	468,239	1,494,952
Materials and supplies	240,369	221,290	461,659	509,426
Rentals	258,311	89,925	348,236	281,225
Other	1,658	1,616	3,274	2,526
Bad debt	1,807	-	1,807	63,957
Total expenses	44,678,117	30,700,430	75,378,547	68,993,083
Revenues
Regulatory fees	27,304,470	28,577,155	55,881,625	54,239,204
Rights and privileges (Note 11)	-	-	-	673,954
Other revenues	31,093	6,971	38,064	71,354
Total revenues	27,335,563	28,584,126	55,919,689	54,984,512
Net cost of operations	17,342,554	2,116,304	19,458,858	14,008,571
The accompanying notes form an integral part of these financial statements

Canadian Radio-television and Telecommunications Commission
Statement of Financial Position (Unaudited)
As at 31 March, 2009
(in dollars)

	2008-09	2007-08
ASSETS
Financial assets
Accounts receivable and advances (Note 4)	146,535	637,208
Total financial assets	146,535	637,208
Non-financial assets
Prepaid expenses	175,255	149,639
Tangible capital assets (Note 5)	3,812,769	2,192,703
Total non-financial assets	3,988,024	2,342,342
Total Assets	4,134,559	2,979,550
LIABILITIES
Accounts payable and accrued liabilities (Note 7)	6,876,654	7,133,185
Deferred revenue (Note 6)	-	1,091,826
Vacation pay and compensatory leave	1,934,315	2,049,943
Accrued employee severance benefits (Note 8(b))	8,712,558	6,834,470
Total Liabilities	17,523,527	17,109,424
Equity of Canada	(13,388,968)	(14,129,874)
Total Liabilities and Equity of Canada	4,134,559	2,979,550
Contingent liabilities (Note 9) The accompanying notes form an integral part of these financial statements

Canadian Radio-television and Telecommunications Commission
Statement of Equity of Canada (Unaudited)
As at 31 March, 2009
(in dollars)

	2008-09	2007-08
Equity of Canada, beginning of year	(14,129,874)	(10,848,902)
Net (cost) of operations	(19,458,858)	(14,008,571)
Current year appropriations used (Note 3)	18,091,838	15,441,427
Revenue not available for spending	(15,519,690)	(14,947,890)
Change in net position in the Consolidated Revenue Fund (Note 3)	753,013	(5,077,315)
Services received without charge from other government departments (Note 10(a))	16,874,603	15,311,377
Equity of Canada, end of year	(13,388,968)	(14,129,874)
The accompanying notes form an integral part of these financial statements

Canadian Radio-television and Telecommunications Commission
Statement of Cash Flow (Unaudited)
For the Year Ended March 31, 2009
(in dollars)

				2008-09	2007-08
Operating activities
Net cost of operations				19,458,858	14,008,571
Non-cash items
Services provided without charge by other government departments included in the Statement of Operations (Note 10(a))				(16,874,603)	(15,311,377)
Amortization of tangible capital assets (Note 5)				(815,873)	(673,762)
Gain on disposal and write-off of tangible capital assets				-	469
Variation in Statement of Financial Position
Increase (decrease) in accounts receivable and advances				(490,673)	(100,844)
Increase in prepaid expenses				25,616	149,639
Increase in liabilities				(414,103)	(4,422,379)
Cash provided by operating activities				889,222	(6,349,683)
Capital investment activities
Acquisition of tangible capital assets (Note 5)				2,435,939	1,771,268
Proceeds from disposal of tangible capital assets				-	(5,363)
Cash used by capital investment activities				2,435,939	1,765,905
Financing activities
Net cash provided to Government of Canada				3,325,161	(4,583,778)
The accompanying notes form an integral part of these financial statements

Notes

1. Authority and Objectives

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.

The following are the program activity descriptions for the CRTC:

Regulation and Supervision of the Canadian Broadcasting Industry (Broadcasting)

Supervise and regulate all aspects of the Canadian broadcasting system in order to implement the broadcasting policy set out in the Broadcasting Act.

Regulation and Monitoring of the Canadian Telecommunications Industry (Telecommunications)

Ensure the implementation of Canadian telecommunications objectives set out in the Telecommunications Act and to ensure that Canadian carriers provide telecommunications services and charge rates on terms that are just and reasonable, and do not unjustly discriminate or provide an unreasonable preference toward any person.

2. Summary of Significant Accounting Policies

The financial statements have been prepared in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

Significant accounting policies are as follows:

(a) Parliamentary appropriations and vote-netting  - The CRTC is financed in part by the Government of Canada through Parliamentary Appropriations  (e.g. Statutory Vote for Employee Benefits Plans (EBP)) and the balance by vote-netted fees it collects from the regulated 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 the Part I licence fees collected from broadcasters and a portion of the annual telecommunications fees collected from telecommunications carriers to finance the costs it incurs in regulating the broadcasting and telecommunications industries (i.e. respendable revenue). The balance of these two fees recovers the costs for items funded through appropriations (e.g. EBP) and costs incurred by other government departments on the CRTC’s behalf and is classified as non-respendable revenue.

The accounting of fees collected and the charges to the appropriations in a given year does not parallel financial reporting according to generally accepted accounting principles since they are primarily based on cash flow requirements. Consequently, items recognized in the statement of operations and the statement of financial position are not necessarily the same as those provided through fee collection and the appropriation from Parliament. Note 3 to these financial statements provides information regarding the source and disposition of these authorities as well as a reconciliation between net cash provided to Government to current year appropriation used.

(b) Net cash provided to Government – The CRTC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada.  All cash received by the CRTC is deposited to the CRF and all cash disbursements made by the CRTC are paid from the CRF.  The net cash provided to Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the federal government.

(c) Change in net position in the Consolidated Revenue Fund is the difference between the net cash provided to Government and appropriations used in a year, excluding the amount of non respendable revenue recorded by the CRTC.  It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.

(d) Revenues – The CRTC collects fees under the authority of the Broadcasting Act and Telecommunications Act and the regulations made pursuant to these Acts, namely the Broadcasting Licence Fee Regulations, 1997 and the Telecommunications Fee Regulations, 1995. These fees are accounted for in the period in which the underlying transaction or event occurs that give rise to the revenues.  Revenues that have been received but not yet earned are disclosed in the Statement of Financial Position as deferred revenue. 

(e) Expenses – Expenses are recorded on the accrual basis:

• Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
• Services provided without charge by other government departments for accommodation, the employer’s contribution to the health and dental insurance plans, spectrum management, and worker’s compensation are recorded as operating expenses at their estimated cost.

(f) Employee future benefits

• Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer plan administered by the Government of Canada.  The CRTC’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan.  Current legislation does not require the CRTC to make contributions for any actuarial deficiencies of the Plan.
• Severance benefits:  Employees are entitled to severance benefits under labour contracts or conditions of employment.  These benefits are accrued as employees render the services necessary to earn them.  The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

(g) Accounts receivables are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain. 

(h) Contingent liabilities – Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. For matters that are within the normal course of operations, to the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.  Matters that are outside of the normal course of operations or for which the potential impact could be significant to the Government are disclosed in the notes to these financial statements, but they are recorded, if required, only at the Government of Canada level.

  
(i) Tangible capital assets – All tangible capital assets having an initial cost of $5,000 or more are recorded at their acquisition cost. The CRTC does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value.

Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

Asset Class	Amortization period
Informatics equipment	3 years
Informatics software	5 years
Vehicles	5 years
Equipment	5 years
Leasehold improvements	25 years

(j) Measurement uncertainty - The preparation of these financial statements in accordance with Treasury Board accounting policies (which are consistent with Canadian generally accepted accounting principles for the public sector) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are contingent liabilities, the liability for employee severance benefits and the useful life of tangible capital assets.  Actual results could significantly differ from those estimated.  Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

3. Parliamentary Appropriations

CRTC receives the major portion of its funding through fees assessed against the regulated industries, i.e. Broadcasting and Telecommunications, as well as a portion from Parliamentary appropriations.  Since Parliamentary appropriations are not calculated on the accrual accounting basis, there is a difference between appropriations used and: (a) net cost of operations; and (b) net cash provided to Government of Canada.  The differences are reconciled in the following tables.

(a) Reconciliation of net cost of operations to current year appropriations used
	2008-09	2007-08
	(in dollars)
Net cost of operations	19,458,858	14,008,571
Adjustments for items affecting net cost of operations but not affecting appropriations:
Add (Less):
Employee severance benefits	(1,878,087)	527,928
Services provided without charge	(16,874,603)	(15,311,377)
Amortization of tangible capital assets	(815,873)	(673,762)
Bad debt expenses	(1,807)	(63,957)
Refund of prior years expenses and adjustment to payables at year end	106,480	20,228
Revenue not available for spending	15,519,690	14,947,890
Gain on disposal and write-down of tangible capital assets	-	469
Vacation pay and compensatory leave	115,625	64,530
Sub-total	(3,828,575)	(488,051)
Adjustments for items not affecting net cost of operations but affecting appropriations:
Add:
Acquisitions of tangible capital assets	2,435,939	1,771,268
Prepaid expenses	25,616	149,639
Sub-total	2,461,555	1,920,907
Current year appropriations used	18,091,838	15,441,427
(b) Appropriations provided and used
Program expenditures and transfer from Treasury Board Votes	13,899,495	10,603,798
Statutory amounts	5,936,884	5,700,587
Total appropriation available	19,836,379	16,304,385
Less:
Appropriations available for future years	(1,744,541)	(862,958)
Total appropriations used	18,091,838	15,441,427

(c) Reconciliation of net cash provided to Government to current year appropriations used
	2008-09	2007-08
	(in dollars)
Net cash provided to Government of Canada	3,325,161	(4,583,778)
Revenue not available for spending	15,519,690	14,947,890
	18,844,851	10,364,112
Change in net position in the Consolidated Revenue Fund
Variation in accounts receivable and advances	490,673	100,844
Disposal of tangible capital assets	-	5,363
Variation in accounts payable and accrued liabilities	(256,533)	3,949,121
Variation in deferred revenue	(1,091,826)	1,065,716
Refund of prior years expenses	106,480	20,228
Variation in bad debt expenses	(1,807)	(63,957)
	(753,013)	5,077,315
Current year appropriation used	18,091,838	15,441,427

 

4. Accounts Receivable and Advances

	2008-09	2007-08
	(in dollars)
Receivables from other Federal Government departments and agencies	104,480	599,931
Receivable from external parties	68,809	65,800
Other	7,604	4,028
	180,893	699,759
Less: Allowance for doubtful accounts on external receivables	(34,358)	(32,551)
Total	146,535	637,208

 

5. Tangible Capital Assets
(in dollars)

	Cost				Accumulated amortization				2009	2008
Capital asset class	Opening balance	Acquisitions	Dispo- sals and write- offs	Closing balance	Opening balance	Amorti-zation	Dispo- sals and write- offs	Closing balance	Net book value	Net book value
Equipment	220,367	11,780	-	232,147	75,919	44,074	-	119,993	112,154	144,448
Vehicles	53,570	-	-	53,570	26,374	6,527	-	32,901	20,669	27,195
Informatics Equipment	1,621,624	347,955	-	1,969,579	592,433	346,243	-	938,676	1,030,903	1,029,191
Informatics Software	3,153,102	1,886,989	-	5,040,091	2,161,234	419,029	-	2,580,263	2,459,828	991,869
Leasehold Improve- ments	-	189,215	-	189,215	-	-	-	-	189,215	-
Total	5,048,663	2,435,939	-	7,484,602	2,855,960	815,873	-	3,671,833	3,812,769	2,192,703

Amortization expense for the year ended March 31, 2009 is $815,873 (2008 - $673,762).

6. Deferred Revenue

Deferred revenue represents the balance at year-end of unearned revenue as a result of an over collection of the estimated telecommunications costs. This over collection was credited to applicable telecommunications carriers as part of the subsequent year’s billing process for CRTC telecommunications fees.

	2008-09	2007-08
	(in dollars)
Opening balance	1,091,826	26,110
Telecommunications fees	-	1,091,826
Revenues recognized	1,091,826	26,110
Closing balance	-	1,091,826

7. Accounts Payable and Accrued Liabilities

	2008-09	2007-08
	(in dollars)
Accounts payable - other Federal Government departments and agencies	1,013,197	516,482
Accounts payable - external parties	2,255,589	4,472,635
Accruals:
Salaries	2,908,941	1,543,866
Operating and Maintenance	698,927	600,202
Total accounts payable and accrued liabilities	6,876,654	7,133,185

8. Employee Benefits 

(a) Pension benefits: The CRTC's employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government of Canada.  Pension benefits accrue up to a maximum period of 35 years at a rate of 2 percent per year of pensionable service, times the average of the best five consecutive years of earnings.  The benefits are integrated with Canada/Québec Pension Plans benefits and they are indexed to inflation.

Both the employees and the CRTC contribute to the cost of the Plan.  The 2008-09 expense amounts to $4.3 million ($4.0 million in 2007-08), which represents approximately 2.0 times (2.1 times in 2007-08) the contributions by employees.

The CRTC's responsibility with regard to the Plan is limited to its contributions.  Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.

(b) Severance benefits:  The CRTC provides severance benefits to its employees based on eligibility, years of service and final salary.  These severance benefits are not pre-funded.  Benefits will be paid from future appropriations.  Information about the severance benefits, measured as at March 31, are as follows:

	2008-09	2007-08
	(in dollars)
Accrued severance liabilities, beginning of year	6,834,470	7,362,397
Expense for the year	3,045,577	69,654
Benefits paid during the year	(1,167,489)	(597,581)
Accrued severance liabilities, end of year	8,712,558	6,834,470

9. Contingent Liabilities

As at 31 March 2009, the Government of Canada (for matters involving the CRTC) had one claim outstanding as a result of litigation which pertains to a challenge of the CRTC’s Part II broadcasting licence fees. In December of 2006, the Federal Court Trial Division ruled that the CRTC’s Part II licence fees collected by the federal government from broadcasters and broadcast distributors were an illegal tax. The Crown appealed that decision to the Federal Court of Appeal. On April 28, 2008 the Federal Court of Appeal overturned the earlier ruling of the Federal Court Trial Division and declared that the Part II licence fees are valid regulatory charges and are not a tax. In June 2008, the plaintiffs filed applications for leave to appeal, of the Federal Court of Appeal decision, to the Supreme Court of Canada. On December 18, 2008 the Supreme Court of Canada announced that the applications for leave to appeal were granted.  The date for hearing this appeal has been tentatively scheduled for October 2009. In accordance with the Treasury Board Accounting Standard applicable to contingent liabilities, the CRTC has not recorded a provision for this contingent liability in these financial statements.

 

10. Related Party Transactions

As a result of common ownership, CRTC is related to all Government of Canada departments, agencies, and Crown corporations.  CRTC enters into transactions with these entities in the normal course of business and on normal trade terms. 

(a) Services provided without charge:

During the year, CRTC received services without charge from other departments for items such as accommodation, the employer's contribution to the health and dental insurance plans.  The services provided without charge that have been recognized in the department's Statement of Operations are as follows:

	2008-09	2007-08
	(in dollars)
Spectrum Management expenses	10,000,000	10,000,000
Accommodation expenses	3,237,965	2,915,295
Health & Dental expenses	3,002,000	2,352,000
Worker's Compensation expenses	634,638	44,082
Total	16,874,603	15,311,377

Industry Canada is responsible for the management of the broadcasting spectrum.  As part of this responsibility, Industry Canada conducts several activities including the issuance of technical certificates that accompany the broadcasting licences issued by the CRTC where the use of broadcasting spectrum is required, as well as monitoring for interference that could affect spectrum use.  Total costs related to Industry Canada's broadcasting spectrum management are reported to the CRTC on an annual basis, as these costs are a component of the Part II broadcasting licence fees collected by the CRTC on behalf of the Government. Other services provided without charge to the CRTC as noted above are a component of the Part I broadcasting licence fee and the annual telecommunications fee collected by the CRTC.

The Government has structured some of its administrative activities for efficiency and cost-effectiveness purposes so that one department performs these on behalf of all without charge.  The costs of these services, which include payroll and cheque issuance services provided by Public Works and Government Services Canada and audit services provided by the Office of the Auditor General of Canada, are not included as an expense in the CRTC's Statement of Operations, nor are they recovered as a component of the CRTC Part I broadcasting licence fee or annual telecommunications fee. 

(b) Receivables and payables outstanding at year-end with related parties:

	2008-09	2007-08
	(in dollars)
Accounts receivable from other government departments and agencies	104,480	599,931
Accounts payable to other government departments and agencies	1,013,197	516,482

11. Revenues – Rights and Privileges

As a result of the on-going litigation (Note 9) which is currently before the Supreme Court of Canada, there was no fee revenue collected or accrued during fiscal year (FY) 2008-09 with respect to CRTC’s Part II broadcasting licence fees for rights and privileges.

Information on comparative data: FY 2007-08 versus FY 2008-09

FY 2007-08 - In December 2006 the Federal Court Trial Division issued a decision declaring that section 11 of the Broadcasting Licence Fee Regulations, 1997 was ultra vires and that the Part II licence fees collected by the federal government, pursuant to these Regulations, were an illegal tax.  The declaration was suspended for nine months in order to allow the government time to react. During this time period, the CRTC collected $673,954 in outstanding Part II licence fees pertaining to the 2005 and 2006 return years. This was the only Part II licence fee revenue collected during FY 2007-08. In November 2007, no Part II licence fees were assessed or collected by the CRTC as a result of the Federal Court decision in effect at that time.

FY 2008-09 - On April 28, 2008 the Federal Court of Appeal (FCA) overturned the earlier ruling of the Federal Court Trial Division and declared that the Part II licence fees are valid regulatory charges and are not a tax. On May 5, 2008 the Canadian Association of Broadcasters publicly announced that it would seek leave to appeal this decision to the Supreme Court of Canada (SCC).  As a result, the CRTC announced on this date that it would not resume any collection action for Part II licence fees until the issue is resolved in a final manner (i.e. Until the earlier of: (i) the matter being settled; or (ii) the application for leave to appeal to the SCC is denied; or (iii) the judgment of the FCA is affirmed by the SCC). On December 18, 2008 the Supreme Court of Canada announced that the applications for leave to appeal were granted.  The date for hearing this appeal has been tentatively scheduled for October 2009. As this matter had not been resolved in a final manner, there were no Part II licence fees assessed or collected by the CRTC in November 2008 for FY 2008-09.

12. Comparative Information

Comparative figures have been reclassified to conform to the current year’s presentation.