Future-Oriented Statement of Operations 2016-2017

Canadian Radio-television and Telecommunications Commission
Future-Oriented Statement of Operations (Unaudited)

For the Year Ended March 31
(in thousands of dollars)
Forecast Results 2015-16 Planned Results 2016-17
Expenses
Canadian Content Creation 17,288 17,249
Connection to the Communication System 21,466 22,512
Protection within the Communication System 12,110 12,525
Internal services 16,124 15,700
Expenses incurred on behalf of Government (201) (329)
Total expenses 66,787 67,657
Revenues
Rights and privileges 109,426 110,630
Regulatory fees 60,280 60,689
Miscellaneous revenues 1,588 2,093
Revenues earned on behalf of Government (123,609) (125,727)
Total revenues 47,685 47,685
Net cost of operations before government funding and transfers 19,102 19,972

The accompanying notes form an integral part of the future-oriented statement of operations.

Notes to Future-Oriented Statement of Operations

1. Methodology and Significant Assumptions

The future-oriented statement of operations has been prepared on the basis of the government priorities and departmental plans as described in the Report on Plans and Priorities.

The information in the forecast results for fiscal year 2015-16 is based on actual results as at November 30, 2015 and on forecasts for the remainder of the fiscal year. Forecasts have been made for the planned results for the 2016-17 fiscal year.

The main assumptions underlying the forecasts are as follows:

  1. The department’s activities will remain substantially the same as in the previous year.
  2. Expenses and revenues, including the determination of amounts internal and external to the government, are based on experience. The general historical pattern is expected to continue with the exception of administrative monetary penalties (AMPs). It is not possible to accurately forecast revenues related to AMPs associated with enforcement activities for the Unsolicited Telecommunications Rules (UTRs), Canada’s Anti-Spam Legislation (CASL), and the Voter Contact Registry (VCR).  Amounts may vary significantly from year to year based on factors including trends in compliance as well as the number and complexity of investigations. For example, enforcement activities for the VCR are expected to increase during the period of federal elections.
  3. Allowances for bad debt expenses are based on historical experience. The general historical pattern is expected to continue, but may vary, given higher maximum AMPs available under CASL.

The assumptions are adopted as at December 31st, 2015.

2. Variations and Changes to the Forecast Financial Information

While every attempt has been made to forecast final results for the remainder of 2015-16 and for 2016-17, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing this future-oriented statement of operations the CRTC has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Factors that could lead to material differences between the future-oriented statement of operations and the historical statement of operations include the following:

Once the Report on Plans and Priorities is presented, the CRTC will not be updating the forecasts for any changes in financial resources made in ensuing supplementary estimates. Variances will be explained in the Departmental Performance Report.

3. Summary of Significant Accounting Policies

The future-oriented statement of operations has been prepared using the Government’s accounting policies in effect for the 2015-16 fiscal year, 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:

  1. Expenses

    Expenses are recorded on an accrual basis. Expenses for the Department’s operations are recorded when goods are received or services are rendered, including services provided without charges for accommodation, employee contributions to health and dental insurance plans and worker’s compensation, which are recorded as expenses at their estimated cost. Vacation pay and compensatory leave, as well as severance benefits, are accrued and expenses are recorded as the benefits are earned by employees under their terms of employment.

    Expenses also include a provision for bad debt on accounts receivable and amortization of tangible capital assets, which are capitalized at their acquisition cost. 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
  2. Revenues

    Revenues from rights and privileges, regulatory fees and unsolicited telecommunications feesare recognized in the accounts based on the services provided in the year.

    Miscellaneous revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.

    Revenues that are non-respendable are not available to discharge the CRTC's liabilities. While the Deputy Head is expected to maintain accounting control, he or she has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the CRTC's gross revenues.

(a) Rights & Privileges

Part II licence fees ­These fees recover part of the Government of Canada’s substantial annual investment in the Canadian broadcasting system.

(b) Regulatory Fees

The CRTC collects fees pursuant to regulations made under the authority of the Broadcasting Act and Telecommunications Act.

The CRTC’s annual Part I licence fees and telecommunications fees are based on the broadcasting and telecommunications regulatory costs incurred each year by the Commission and other federal departments or agencies, and are equal to the aggregate of:

Unsolicited Telecommunications Fees - These fees are used to fund the CRTC’s Do Not Call List (DNCL) investigation and enforcement activities, on a cost recovery basis, from fees assessed to telemarketers.

(c) Miscellaneous Revenues

Miscellaneous revenues are comprised of: (a) 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 fees), and (d) gain on disposal of non-capital assets to outside parties. All revenue from AMPs is recorded as non-respendable non-tax revenue and is considered revenues earned on behalf of the government.

4. Parliamentary Authorities

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 CASL and VCR activities) 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, pursuant to paragraph 29.1(2)(a) of the Financial Administration Act, 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. Part II broadcasting licence fees are entirely classified as non-respendable revenue.

Financial reporting of authorities provided to the CRTC do not parallel financial reporting according to generally accepted accounting principles because authorities are primarily based on cash flow requirements. Items recognized in the future-oriented statement of operations in one year may be funded through parliamentary authorities in prior, current, or future years. Accordingly, the CRTC has different net cost 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 requested authorities
(in thousands of dollars)
  Forecast Results 2015-16 Planned Results 2016-17
Net cost of operations before government funding and transfers 19,102 19,972
Adjustments for items affecting net cost of operations but not affecting authorities:
Decrease (increase) in employee future benefits (85) (38)
Services provided without charge by other government departments (6,523) (6,359)
Amortization of tangible capital assets (1,141) (1,069)
Decrease (increase) in vacation pay and compensatory leave 72 (20)
Total items affecting net cost of operationsbut not affecting authorities (7,677) (7,486)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets 639 785
Increase (decrease) in prepaid expenses (38) 19
Total items not affecting net cost of operations but affecting authorities 601 804
Requested authorities 12,026 13,290
b) Authorities requested
(in thousands of dollars)
  Forecast Results 2015-16 Planned Results 2016-17
Authorities requested:
Vote 50 - Operating expenditures 7,698 7,723
Statutory amounts 6,877 7,051
Less:
Forecast estimated lapse: Operating (2,549) (1,484)
Requested authorities 12,026 13,290

Authorities presented reflect current forecasts of statutory items, approved initiatives included and expected to be included in Estimates documents and, when reasonable estimates can be made, estimates of amounts to be allocated from Treasury Board central votes.

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