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Statement of Management Responsibility

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2011 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 based on 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 in the preparation of the Public Accounts of Canada, and included in the department's Departmental Performance Report, is consistent with these financial statements.

The CRTC management is also responsible for maintaining an effective system of internal control over financial reporting 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 and other applicable legislation, regulations, authorities and policies.

The CRTC management also seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training and development of qualified staff, through organizational arrangements that provide appropriate divisions of responsibility; through 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.

 

(the original version was signed by)		(the original version was signed by)
Konrad von Finckenstein, Q. C.		Robert A. Morin
Chairman		Secretary General
		Chief Financial Officer
Gatineau, Canada		Gatineau, Canada
Date: July 22, 2011		Date: July 22, 2011

 

Canadian Radio-television and Telecommunications Commission
Statement of Financial Position (Unaudited)
As at March 31, 2011
(in dollars)
	2010-11	2009-10
ASSETS		Restated
Financial assets		(Note 11)
Due from Consolidated Revenue Fund	3,705,610	3,085,978
Accounts receivable and advances (Note 4)	187,684	78,844
Total financial assets	3,893,294	3,164,822
Non-financial assets
Prepaid expenses	168,846	141,827
Tangible capital assets (Note 5)	4,155,499	3,890,757
Total non-financial assets	4,324,345	4,032,584
Total Assets	8,217,639	7,197,406
LIABILITIES
Accounts payable and accrued liabilities (Note 6)	3,708,976	3,091,065
Vacation pay and compensatory leave	1,757,717	1,924,355
Accrued employee severance benefits (Note 7(b))	7,628,666	7,460,850
Total Liabilities	13,095,359	12,476,270
Equity of Canada	(4,877,720)	(5,278,864)
Total Liabilities and Equity of Canada	8,217,639	7,197,406
The accompanying notes form an integral part of these financial statements.
(the original version was signed by)   (the original version was signed by) Konrad von Finckenstein, Q. C.   Robert A. Morin Chairman   Chief Financial Officer Gatineau, Canada   Gatineau, Canada Date: July 22, 2011   Date: July 22, 2011

 

Canadian Radio-television and Telecommunications Commission
Statement of Operations (Unaudited)
As of March 31, 2011
(in dollars)
		2010-11			2009-10
	Canadian	Canadian	Internal
	Broadcasting	Telecommunications	services
	(Note 1)	(Note 1)	(Note 1)	Total
Revenues
Rights and privileges (Note   2(d) and Note 9)	100,000,000	-	-	100,000,000	415,279,112
Regulatory fees (Note 2(d))	28,368,511	20,042,595	14,585,893	62,996,999	64,535,271
Other revenues (Note 10)	12,582	1,945,663	-	1,958,245	18,698,361
Total revenues	128,381,094	21,988,258	14,585,893	164,955,244	498,512,744
Expenses
Salaries and employee   benefits	16,616,907	16,060,418	13,270,385	45,947,710	45,208,248
Professional and special   services	1,270,246	1,324,277	1,103,713	3,698,236	4,551,490
Accommodation	1,158,333	974,729	974,120	3,107,182	2,822,190
Travel and relocation	1,093,896	1,000,370	95,257	2,189,523	1,894,048
Amortization	590,234	590,234	-	1,180,468	934,391
Information, advertising and   communications service	628,289	207,858	295,442	1,131,589	999,348
Repair and maintenance	555,229	552,974	277	1,108,480	1,088,632
Furniture and equipment	372,124	372,074	23,460	767,658	166,601
Materials and supplies	90,890	95,922	164,692	351,504	361,171
Rentals	199,242	118,010	430	317,682	236,753
Bad debt	138,242	133,738	-	271,980	433,876,668
Other	50,192	50,730	1,493	102,415	2,056
Spectrum management cost   (Note 8(a))	-	-	-	-	10,000,000
Total expenses	22,763,824	21,481,334	15,929,269	60,174,427	502,141,596
Net revenue from   operations	(105,617,270)	(506,924)	1,343,376	(104,780,817)	3,628,852
The accompanying notes form an integral part of these financial statements.

 

Canadian Radio-television and Telecommunications Commission
Statement of Equity of Canada (Unaudited)
For the Year Ended March 31, 2011
(in dollars)
	2010-11	2009-10
		Restated
		(Note 11)
Equity of Canada, beginning of year	(5,278,864)	(6,523,379)
Net revenue from operations	104,780,817	(3,628,852)
Net cash provided to Government	(111,144,028)	(7,489,463)
Change in Due from the Consolidated Revenue Fund	619,632	(3,779,611)
Services received without charge from other government departments (Note 8(a))	6,144,723	16,142,441
Equity of Canada, end of year	(4,877,720)	(5,278,864)
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, 2011
(in dollars)
	2010-11	2009-10
Operating activities
Net revenue from operations	(104,780,817)	3,628,852
Non-cash items:
Services provided without charge by other   government departments included in the   Statement of Operations (Note 8(a))	(6,144,723)	(16,142,441)
Amortization of tangible capital assets (Note 5)	(1,180,468)	(934,391)
Variation in Statement of Financial Position:
Increase (decrease) in accounts receivable and   advances	108,840	(67,691)
Increase (decrease) in prepaid expenses	27,019	(33,428)
Decrease (increase) in liabilities	(619,089)	5,047,257
Cash provided by operating activities	(112,589,238)	(8,501,842)
Capital investing activities
Acquisition of tangible capital assets (Note 5)	1,445,210	1,012,379
Cash used in capital investing activities	1,445,210	1,012,379
Net cash provided to Government of Canada	(111,144,028)	(7,489,463)
The accompanying notes form an integral part of these financial statements.

 

1. Authority and Objectives

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.

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 (hereinafter referred to as Anti-spam legislation).Under this legislation, the CRTC has obtained new investigative and enforcement responsibilities and powers to counter spam and malware.  The legislation will come into force in 2011.

The following are the program activity descriptions for the CRTC:

Canadian Broadcasting

The Broadcasting Act requires that the CRTC regulate and monitor broadcasters and broadcasting services, including radio, television, cable distribution and direct-to-home satellite systems, through the issuance of licenses. This program is important in order to ensure the predominance of Canadian content and by providing Canadians with full access to the broadcasting system, as participants in the industry and as audiences.

Canadian Telecommunications

The Telecommunications Act requires that the CRTC regulate and supervise the telecommunications industry by approving tariffs and fostering competition. The CRTC’s regulation of the telecommunications industry is based on an increased reliance on market forces and, where required, effective and efficient regulation.  As a result of the CRTC’s regulation of the telecommunications industry, Canadians have access to reliable telephone and other high-quality telecommunications services at affordable prices.  The CRTC’s activities related to the Anti-spam legislation will seek to reduce the volume of unwanted commercial electronic messages and harmful computer programs that Canadians receive, thereby ensuring access to more reliable telecommunications services and increasing confidence in electronic commerce.

Internal Services

Internal Services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; Acquisition Services; and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not those provided specifically to a program.

 

2. Summary of Significant Accounting Policies

These financial statements have been prepared in accordance with Treasury Board accounting policies stated below, which are based on Canadian generally accepted accounting principles for the public sector.  The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles.

Significant accounting policies are as follows:

(a)  Parliamentary authorities and vote-netting – 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 revenues 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 authorities (e.g. EBP) and costs incurred by other government departments on the CRTC’s behalf and are classified as non-respendable revenue. Part II broadcasting licence fees are entirely classified as non-respendable revenue.

The accounting of fees collected and the charges to the authorities 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 authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting.

(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 Government.

(c)  Amounts due from/to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF.  Amounts due from the CRF represent the net amount of cash that the Department is entitled to draw from the CRF without further appropriations to discharge its liabilities.

(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, 2010. These fees are accounted for in the period in which the underlying transaction or event occurs that give rise to the revenues. The CRTC’s regulatory fees (Part I broadcasting licence fees and annual telecommunications fees) recover the CRTC’s costs associated with its broadcasting, telecommunications, and internal services activities.  The Part II licence fees are regulatory charges imposed in relation to a broadcaster’s privilege (i.e. rights and privileges).  These fees recover part of the Government of Canada’s substantial annual investment in the Canadian broadcasting system.

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

• Vacation pay and compensatory leave are accrued as the benefits are earned by 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, 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.  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 and loans receivables are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain.

(h)  Tangible capital assets – All tangible capital assets and leasehold improvements 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, assets located on Indian Reserves and museum collections.

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

(i)  Measurement uncertainty – The preparation of these financial statements 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 the allowance for doubtful accounts, 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 Authorities

The 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 authorities.  Since Parliamentary authorities are not calculated on the accrual accounting basis, the CRTC has different net results of operations for the year on a government funding basis than on an accrual accounting basis.  The differences are reconciled in the following tables:

(a) Reconciliation of net cost of operations to current year authorities used
	2010-11	2009-10
	(in dollars)
Net revenue from operations	(104,780,817)	3,628,852
Adjustments for items affecting net cost of operations but not affecting authorities:
Decrease (increase) in employee future benefits	(167,816)	1,251,708
Services provided without charge by other government departments	(6,144,723)	(16,142,441)
Amortization of tangible capital assets	(1,180,468)	(934,391)
Decrease (increase) in bad debt expenses	(271,980)	(433,876,668)
Refund of prior years’ expenditures and adjustments to payables at year end	37,085	319,543
Revenue not available for spending	122,391,295	457,198,673
Decrease (increase) in vacation pay and compensatory leave	166,638	9,960
Sub-total	114,830,031	7,826,384
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets	1,445,210	1,012,379
Decrease (increase) in prepaid expenses	27,019	(33,428)
Sub-total	1,472,229	978,951
Current year authorities used	11,521,443	12,434,187
(b) Authorities provided and used
Vote 50 - Operating expenditures	7,562,128	7,933,889
Statutory amounts	6,165,842	6,372,581
Total authorities available	13,727,970	14,306,470
Authorities available for future years	(2,206,527)	(1,872,283)
Current year authorities used	11,521,443	12,434,187

 

4. Accounts Receivable and Advances

The following table presents details of the CRTC’s accounts receivable and advances balances:

	2010-11	2009-10
	(in dollars)
Receivables from other government departments and agencies	118,657	43,722
Receivables from external parties	165,969	58,893
Other	4,055	5,640
	288,681	108,255
Allowance for doubtful accounts on receivables from external parties	(100,997)	(29,411)
Total	187,684	78,844

5. Tangible Capital Assets (in dollars)

	Cost				Accumulated amortization				Net book value
Capital asset class	Opening balance	Acquisi-tions	Disposals and write-offs	Closing balance	Opening balance	Amorti-zation	Disposals and write-offs	Closing balance	2011	2010
Equipment	232,147	-	-	232,147	158,414	30,412	-	188,826	43,321	73,733
Vehicles	53,570	21,816	-	75,386	39,428	6,527	-	45,955	29,431	14,142
Informatics Equipment	1,969,579	521,972	-	2,491,551	1,286,153	347,477	-	1,633,630	857,921	683,426
Informatics Software	6,022,925	901,422	242,989	6,681,358	3,113,976	787,301	242,989	3,658,288	3,023,070	2,908,949
Leasehold Improvements	218,760	-	-	218,760	8,253	8,751	-	17,004	201,756	210,507
Total	8,496,981	1,445,210	242,989	9,699,202	4,606,224	1,180,468	242,989	5,543,703	4,155,499	3,890,757

6. Accounts Payable and Accrued Liabilities

The following table presents details of the CRTC’s accounts payable and accrued liabilities:

	2010-11	2009-10
	(in dollars)
Accounts payable to other government departments and agencies	591,838	1,120,976
Accounts payable to external parties	2,104,067	1,099,356
Accrued liabilities:
Salaries	951,439	745,643
Operating and Maintenance	61,632	125,090
Total accounts payable and accrued liabilities	3,708,976	3,091,065

7. Employee Future Benefits

(a)  Pension benefits

The CRTC's employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government.  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 2010-11 expense amounts to $4.3 million (2009-10 - $4.6 million), which represents approximately 1.9 times (1.9 times in 2009‑10) 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 authorities.  Information about the severance benefits, measured as at March 31, is as follows:

	2010-11	2009-10
	(in dollars)
Accrued benefit obligation, beginning of year	7,460,850	8,712,558
Expense for the year	1,046,970	(479,910)
Benefits paid during the year	(879,154)	(771,798)
Accrued benefit obligation, end of year	7,628,666	7,460,850

8. Related Party Transactions

The CRTC is related as a result of common ownership to all Government departments, agencies, and Crown Corporations.  The CRTC enters into transactions with these entities in the normal course of business and on normal trade terms.  During the year, the CRTC received common services which were obtained without charge from other Government departments as disclosed below.

(a) Common services provided without charge by other government departments:

During the year, the CRTC received services without charge from certain common service organizations, related to accommodation, the employer's contribution to the health and dental insurance plans and worker’s compensation coverage. These services provided without charge have been recorded in the department's Statement of Operations as follows:

	2010-11	2009-10
	(in dollars)
Spectrum Management expenses	-	10,000,000
Accommodation expenses	3,107,182	2,822,190
Health & Dental expenses	2,944,414	3,148,356
Worker's Compensation expenses	93,127	171,895
Total	6,144,723	16,142,441

 

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.  Industry Canada’s broadcasting spectrum management costs are included in those expenditure amounts reported by Industry Canada on an annual basis.  As a result, while these costs were previously reported in CRTC’s financial statements (i.e. $10 million), as of FY 2010-11 they will no longer be included.

Industry Canada Spectrum Management costs are recovered as a component of the Part II broadcasting licence fees collected by the CRTC.  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 centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public.  As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge.  The costs of these services, such as 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)  Other transactions with related parties:

	2010-11	2009-10
	(in dollars)
Accounts receivable from other government departments and agencies (Note 4)	118,657	43,722
Accounts payable to other government departments and agencies (Note 6)	591,838	1,120,976
Expenses – Other Government departments and agencies	2,085,458	2,060,034
Revenues – Other Government departments and agencies	0	0

9. Revenues – Rights and Privileges

Information on comparative data: FY 2009-10 versus FY 2010-11:

FY 2009-10 – On October 7, 2009 the Minister of Canadian Heritage announced an out of court settlement regarding CRTC Part II broadcasting licence fees.  This brought an end to the litigation that commenced in 2003. As part of this agreement, in exchange for the plaintiffs agreeing to discontinue their lawsuit, the Government issued a remission order (2009-1715 dated October 7, 2009) with respect to: a) the amount of Part II licence fees and interest that would have been payable by applicable licensees during the Government’s fiscal years 2007-08, 2008-09 and 2009-10; and b) the amount of costs and interest awarded to Her Majesty in right of Canada against the appellants by the Federal Court of Appeal decision dated April 28,2008.  As a result of the Government’s announcement, during FY 2009-10 the CRTC had recognized in the Public Accounts of Canada and its financial statements the total amount of Part II fees and accrued interest that would have been payable by broadcasters covering the three year period FY 2007-08, FY 2008-09 and FY 2009-10 (i.e. for those fees that would have been due and payable on 30 November 2007, 2008 and 2009).  This amounted to $433,847,811 ($415,279,112 in fees and $ 18,568,699 in interest).  This total amount was also written off by the CRTC as a bad debt expense in accordance with the authority provided for in the Government’s remission order.

FY 2010-11 – As a follow up to the recommendation of the Government following the out of court settlement on October 7, 2009, during FY 2010-11 the CRTC has implemented a new fee regime with a cap of $100 million regarding the Part II broadcasting licence fees. Commencing in 2011, this amount will be adjusted annually on a compound basis in accordance with the percentage increase or decrease, as the case may be, to the Consumer Price Index (CPI) for the calendar year prior to the year of the adjustment.  The CPI is the annual average all-items CPI for Canada that is published by Statistics Canada.

10. Revenues – Other Revenues

Other revenues is comprised of a) Do Not Call List (DNCL) administrative monetary penalties (AMPS), b) interest on overdue accounts receivable for CRTC broadcasting licence fees, telecommunications fees and AMPS, c) miscellaneous non tax revenue (e.g. access to information (ATI) fees) and d) gain on disposal of non-capital assets to outside parties.

11. Adoption of new accounting policies

During the year, the CRTC adopted the revised Treasury Board accounting policy TBAS 1.2: Departmental and Agency Financial Statements which is effective for the CRTC for the 2010-11 fiscal year. The major change in the accounting policies of the CRTC required by the adoption of the revised TBAS 1.2 is the recording of amounts due from the CRF as an asset on the Statement of Financial Position.

The adoption of the new Treasury Board accounting policies have been accounted for retroactively with the following impact on comparatives for 2009-10:

	2009-10		2009-10
	As previously stated	Effect of changes	Restated
Statement of Financial Position:	(in dollars)
Assets	4,111,428	3,085,978	7,197,406
Equity of Canada	-8,364,842	3,085,978	-5,278,864