Statement of Management Responsibility Including Internal Control Over Financial Reporting 2011-2012


Annex to the statement of management responsibility including internal control over financial reporting – Fiscal year 2011-2012 (unaudited)

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2012, and all information contained in these statements rests with the management of the CRTC. These financial statements have been prepared by management using the Government's accounting policies, which are based on Canadian public sector accounting standards.

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 management's best estimates and judgment, and gives due consideration to materiality.  To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the CRTC’s financial transactions.  Financial information submitted in the preparation of the Public Accounts of Canada, and included in the CRTC’s Departmental Performance Report, is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.

Management 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 CRTC and through conducting an annual risk-based assessment of the effectiveness of the system of ICFR as required by the Policy on Internal Control (PIC). 

The system of ICFR is designed to mitigate risks to a reasonable level based on an on-going process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

The CRTC will be subject to periodic Core Control Audits performed by the Office of the Comptroller General and will use the results of such audits to adhere to the Treasury Board Policy on Internal Control. The CRTC commenced its implementation of the PIC in 2011-12, the annual risk-based assessment of the system of ICFR for the year ended March 31, 2012 was not completed.  Work associated with the annual risk-based assessment of the system of ICFR will start in 2012-13 in accordance with the PIC. The results and action plans taken to date are summarized in the annex to these financial statements.

The financial statements of the Commission have not been audited.
Jean-Pierre Blais, Chairman and CEO
Gatineau, Canada
August 31, 2012
John Traversy,
Secretary General
Gatineau, Canada
August 31, 2012

 

Canadian Radio-television and Telecommunications Commission
Statement of Financial Position (Unaudited)
As at March 31, 2012
(in thousands of dollars)

  2011-12 2010-11
Liabilities   Restated
(Note 11)
Accounts payable and accrued liabilities (Note 4) 4,187 3,709
Vacation pay and compensatory leave 1,843 1,757
Deferred revenue (Note 5) 1,411 -
Employee future benefits (Note 6) 4,982 7,629
Total gross liabilities 12,423 13,095
 
Liabilities held on behalf of Government    
Deferred revenue (Note 5) (1,411) -
Total liabilities held on behalf of Government (1,411) -
     
Total net liabilities 11,012 13,095
     
Financial assets    
Due from Consolidated Revenue Fund 4,145 3,705
Accounts receivable and advances (Note 7) 359 188
Total gross financial assets 4,504 3,893
     
Financial assets held on behalf of Government    
Accounts receivable and advances (Note 7) (152) (65)
Total financial assets held on behalf of Government (152) (65)
     
Total net financial assets 4,352 3,828
     
Departmental net debt 6,660 9,267
     
Non-financial assets    
Prepaid expenses 409 169
Tangible capital assets (Note 8) 3,748 4,155
Total non-financial assets 4,157 4,324
     
Departmental net financial position (2,503) (4,943)
     

The accompanying notes form an integral part of these financial statements.

Jean-Pierre Blais, Chairman and CEO
Gatineau, Canada
August 31, 2012
John Traversy,
Secretary General
Gatineau, Canada
August 31, 2012

 

Canadian Radio-television and Telecommunications Commission
Statement of Change in Departmental Net Debt (Unaudited)
For the Year Ended March 31, 2012
(in thousands of dollars)

  2011-12 2011-12 2010-11
  Planned
Results
  Restated
(Note 11)
Expenses      
       
Canadian Broadcasting 21,243 22,935 22,764
Canadian Telecommunications 23,090 23,724 21,481
Internal services 19,986 16,183 15,929
Expenses incurred on behalf of Government (108) (47) (272)
Total expenses 64,211 62,795 59,902
       
Revenues      
       
Rights and privileges 100,000 101,800 100,000
Regulatory fees 59,972 60,507 62,997
Miscellaneous revenues 23 468 1,958
Revenues earned on behalf of Government (118,695) (119,820) (122,391)
Total revenues 41,300 42,955 42,564
       
Net cost of operations before government funding and transfers 22,911 19,840 17,338
       
Government funding and transfers      
Net cash provided by Government   15,257 10,940
Change in due from Consolidated Revenue Fund   440 620
Services provided without charge by other government departments (Note 9)   6,583 6,144
Net revenue from operations after government funding and transfers   (2,440) (366)
       
Departmental net financial position - Beginning of year   (4,943) (5,309)
       
Departmental net financial position - End of year   (2,503) (4,943)

Segmented information (note 10)

The accompanying notes form an integral part of these financial statements.

Canadian Radio-television and Telecommunications Commission
Statement of Change in Departmental Net Debt (Unaudited)
For the Year Ended March 31, 2012
(in thousands of dollars)

  2011-12 2010-11
Net revenue from operations after government funding and transfers (2,440) (366)
     
Change due to tangible capital assets    
Acquisition of tangible capital assets 1,026 1,445
Amortization of tangible capital assets (1,433) (1,180)
Total change due to tangible capital assets (407) 265
 
Change due to prepaid expenses 240 27
     
Net increase (decrease) in departmental net debt (2,607) (74)
     
Departmental net debt - Beginning of year 9,267 9341
     
Departmental net debt - End of year 6,660 9,267

The accompanying notes form an integral part of these financial statements.

Canadian Radio-television and Telecommunications Commission
Statement of Cash Flows (Unaudited)
For the Year Ended March 31, 2012
(in thousands of dollars)

  2011-12 2010-11
    Restated
(Note 11)
Operating activities    
Net cost of operations before government funding and transfers 19,840 17,338
Non-cash items:    
Amortization of tangible capital assets (1,433) (1,180)
Services provided without charge by other government departments (Note 9) (6,583) (6,144)
     
Variations in Statement of Financial Position:    
Increase (decrease) in accounts receivable and advances 84 73
Increase (decrease) in prepaid expenses 240 27
Decrease (increase) in accounts payable and accrued liabilities (478) (618)
Decrease (increase) in vacation pay and compensatory leave (86) 167
Decrease (increase) in future employee benefits 2,647 (168)
Cash used in operating activities 14,231 9,495
     
Capital investing activities    
Acquisitions of tangible capital assets 1,026 1,445
Cash used in capital investing activities 1,026 1,445
     
Net cash provided by Government of Canada 15,257 10,940

The accompanying notes form an integral part of these financial statements.

Canadian Radio-television and Telecommunications Commission
Notes to the Financial Statements (unaudited)
For the Year Ended March 31, 2012

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 new investigative and enforcement responsibilities and powers to counter spam and malware.  The legislation may come into force in 2013.

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 to those provided specifically to a program.

2. Summary of significant accounting policies

These financial statements have been prepared using the Government’s accounting policies stated below, which are based on Canadian public sector accounting standards.  The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

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 revenue of operations to requested authorities:

  2011-12 2010-11
  (in thousands of dollars)
    Restated (Note 11)
Net cost of operations before government funding and transfers 19,840 17,338
     
Adjustments for items affecting net revenue of operations but not affecting authorities:
Decrease (increase) in employee future benefits 2,647 (168)
Services provided without charge by other government departments (6,583) (6,145)
Amortization of tangible capital assets (1,433) (1,180)
Refund of prior years’ expenditures and adjustments to payables at year end 32 37
Decrease (increase) in vacation pay and compensatory leave (86) 167
Sub-total (5,423) (7,289)
     
Adjustments for items not affecting net revenue of operations but affecting authorities:
     
Acquisitions of tangible capital assets 1,026 1,445
Increase (decrease) in prepaid expenses 240 27
Sub-total 1,266 1,472
     
Current year authorities used 15,683 11,521

(b) Authorities provided and used:

  2011-12 2010-11
  (in thousands of dollars)
Authorities provided:
Vote 50 - Operating expenditures 18,803 7,562
Statutory amounts 6,437 6,166
     
Less:
Authorities available for future years   (2,207)
Lapsed: Operating (9,557)  
     
Current year authorities used 15,683 11,521

4. Accounts Payable and Accrued Liabilities

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

  2011-12 2010-11
  (in thousands of dollars)
Accounts payable - Other government departments and agencies 103 592
Accounts payable - External parties 2,697 2,104
Total accounts payable 2,800 2,696
     
Accrued liabilities 1,387 1,013
Total accounts payable and accrued liabilities 4,187 3,709

5. Deferred revenue

Deferred revenue represents the balance at year-end of unearned revenues stemming from amounts received from external parties for fees prior to services being performed.  During  March 2012 (i.e 2011-12) a number of broadcasting undertakings paid their 2012-13 Part I broadcasting licence fees in advance of the April 10, 2012 due date. As a result of this partial collection of the Part I broadcasting licence fees, which are restricted to fund the expenditures related to the CRTC broadcasting activities for the government fiscal year 2012-2013, the CRTC has recorded this amount as deferred revenue. Revenue is recognized in the period that these expenditures are incurred or the service is performed. Details of the transactions related to this account are as follows:

  2011-12 2010-11
  (in thousands of dollars)
Opening balance - -
Amounts received 1,411 -
Revenues recognized - -
Gross closing balance 1,411 -
Deferred revenues held on behalf of Government (1,411) -
Net closing balance - -

6. 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 2011-2012 expenses amounts to $4.6 million in 2011-12 ($4.3 million in 2010-11), which represents approximately 1.8 times (1.9 times in 2010-2011) 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 salary at termination of employment.  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:

As part of collective agreement negotiations with certain employee groups, and changes to conditions of employment for executives and certain non-represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.

  2011-12 2010-11
  (in thousands of dollars)
     
Accrued benefit obligation - beginning of year 7,629 7,461
Expense for the year 248 1,047
Benefits paid during the year (2,895) (879)
Accrued benefit obligation, End of year 4,982 7,629

7. Accounts Receivable and Advances

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

  2011-12 2010-11
  (in thousands of dollars)
    Restated (Note 12)
Receivables - Other government departments and agencies 204 119
Receivables - External parties 300 167
Employee advances 3 3
Subtotal 507 289
     
Allowance for doubtful accounts on receivables from external parties (148) (101)
     
Gross accounts receivable 359 188
     
Accounts receivable held on behalf of Government - National Do Not call List (AMP's) (152) (65)
     
Net accounts receivable 207 123

8. Tangible Capital Assets (in thousands of dollars)

  Cost Accumulated amortization Net book value
Capital asset class Opening balance Acquisitions Disposals and write-offs Closing balance Opening balance Amortization Disposals and write-offs Closing balance 2012 2011
Equipment 232 - - 232 189 30 - 219 13 43
Vehicles 75 - 21 54 46 11 21 36 18 29
Informatics Equipment 2,492 334   2,826 1,634 510 - 2,144 682 858
Informatics Software 6,681 692 - 7,373 3,658 873 - 4,531 2,842 3,023
Leasehold Improvements 219 - - 219 17 9 - 26 193 202
Total 9,699 1,026 21 10,704 5,544 1,433 21 6,956 3,748 4,155

9. Related Party Transactions

The CRTC is related as a result of common ownership 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. 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 receives 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 CRTC's Statement of Operations and Departmental Net Financial Position as follows:

  2011-12 2010-11
  (in thousands of dollars)
Employer's contribution to the health and dental insurance plans 3,420 2,944
Accommodation 3,065 3,107
Worker's compensation 98 93
Total 6,583 6,144
     

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 in the CRTC's Statement of Operations and Departmental Net Financial Position, 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:

  2011-12 2010-11
  (in thousands of dollars)
Accounts receivable from other government departments and agencies (Note 7) 204 119
Accounts payable to other government departments and agencies (Note 4) 103 592
Expenses - Other Government departments and agencies 1,746 2,085

Expenses and revenues disclosed in note (b) exclude common services provided without charge, which are already disclosed in (a).

10. Segmented information

Presentation by segment is based on the CRTC's program activity architecture. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2. The following table presents the expenses incurred and revenues generated for the main program activities, by major object of expense and by major type of revenue. The segment results for the period are as follows:

  Canadian Broadcasting Canadian Telecommuni-cations Internal services 2011-12 Total 2010-11 Total
Restated (Note 11)
(in thousands of dollars)
Expenses
Salaries and employee benefits 16,633 17,700 13,277 47,610 45,948
Professional and special services 1,475 1,638 1,432 4,545 3,698
Accommodation 1,083 1,124 858 3,065 3,107
Travel and relocation 1,086 998 131 2,215 2,190
Amortization 717 716 - 1,433 1,180
Information, advertising and communications services 566 212 289 1,067 1,132
Repair and maintenance 537 529 1 1,067 1,108
Furniture and equipment 495 504 10 1,009 768
Materials and supplies 119 136 172 427 351
Rentals 224 120 12 356 318
Bad debt - 47 - 47 272
Other     1 1 102
Expenses incurred on behalf of Government   (47)   (47) (272)
Total expenses 22,935 23,677 16,183 62,795 59,902
           
Revenues (Note 2(d))
Rights and privileges 101,800 - - 101,800 100,000
Regulatory fees 25,905 19,904 14,698 60,507 62,997
Other revenues 12 456 - 468 1,958
Revenues earned on behalf of Government (110,615) (7,794)   (119,820) (122,391)
Total revenues 17,102 12,566 14,698 42,955 42,564
 
Net cost of operations before government funding and transfers 5,833 11,111 1,485 19,840 17,338

11. Accounting changes

During 2011, amendments were made to Treasury Board Accounting Standard 1.2––Departmental and Agency Financial Statements to improve financial reporting by government departments and agencies. The amendments are effective for financial reporting of fiscal years ending March 31, 2012, and later. The significant changes to the
Department’s financial statements are described below. These changes have been applied retroactively, and comparative information for 2010-11 has been restated.

Net debt (calculated as liabilities less financial assets) is now resented in the Statement of Financial Position. Accompanying this change, the Department now presents a Statement of Change in Net Debt and no longer presents a Statement of Equity.

Revenue and related accounts receivable are now presented net of non-respendable amounts in the Statement of Operations and Departmental Net Financial Position and Statement of Financial Position. The effect of this change was to increase the net cost of operations before Government funding and transfers by $119,820,000 for 2012 ($122,391,000 for 2011) and decrease total financial assets by $152,000 for 2012 ($65,000 for 2011).

Government funding and transfers, as well as the credit related to services provided without charge by other government departments, are now recognized in the Statement of Operations and Departmental Net Financial Position below “Net cost of operations before government funding and transfers.” In previous years, the Department recognized these transactions directly in the Statement of Equity of Canada. The effect of this change was to decrease the net cost of operations after government funding and transfers by $22,280,000 for 2012 ($17,704,000 for 2011).

(in thousands of dollars) 2010-11   2010-11
  As previously stated Effect of change Restated
Statement of Financial Position:      
Assets held on behalf of Government - (65) (65)
Departmental financial position (4,878) (65) (4,943)
       
Statement of Operations and Departmental Net Financial Position:      
Revenues 164,955 (122,391) 42,564
Expenses 60,174 (272) 59,902
       
Government funding and transfers      
Net cash provided by Government - 10,940 10,940
Change in due from Consolidated      
Revenue fund - 620 620
Services provided without charge by other government departments - 6,144 6,144
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