Quarterly Financial Report for the quarter ended September 30, 2017

2017-2018

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. 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).

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 has come into force on July 1, 2017.

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.

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 Departmental Plan (DP) 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 2016-17 and the 2017-18 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 Results Report (DRR).

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 collected 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 2017-18 DP 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). To-date in 2017-18, there is a net decrease in budgetary authorities of $0.67 million compared to the authorities granted in 2016-17. Factors contributing to the net decrease include:

Decrease

Expenditures

The CRTC’s spending for the second quarter ended September 30, 2017 is higher compared to the previous fiscal year. Year to date total gross budgetary expenditures for 2017-18 are up ($3.3 million) over the previous fiscal year. The main reasons for this difference in spending is an increases in expenditures attributable to salary related items.

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 involved 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 2016-187 for 2016-17 and 2017-307 for 2017-18 .

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. Subsequent increases to the Unsolicited Telecommunications Fees occurred on 1 April 2016 and 1 April 2017.

As a result of these increases, the CRTC’s National Do Not Call List (DNCL) investigation and enforcement activities for 2016-17 were funded at 100% of the required $3.3 million budgetary authority.  Fees collected for 2016-17 exceeded the regulatory costs noted in Compliance and Enforcement Order 2017-307 the excess amount of $822,478 has been refunded to telemarketers accordingly.

The contract for the operation of the National DNCL expires in January 2018. The CRTC has completed the Request for Proposal [RFP] process for its renewal. While there are a number of identified risks associated with the outcome of the RFP process, the financial/business model to collect fees from telemarketers and transfer to the Receiver General to cover the regulatory costs, will stay the same.

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:


Ian Scott
Chairman and Chief Executive Officer
Gatineau, Canada
November 7, 2017


Scott Hutton
A / Chief Financial Officer
Gatineau, Canada
November 6, 2017

Statement of Authorities (unaudited)

Fiscal year 2017-18 (in thousands of dollars)
Total available for use for the year ending March 31, 2018* Used during the quarter ended September 30, 2017 Year to date used at quarter-end
       
Vote 1 – Program expenditures 55,404 14,738 28,548
Less: Revenues netted against expenditures (47,745) (660) (46,951)
Net Vote 1 – Program expenditures 7,659 14,078 (18,403)
Statutory authorities – EBP 6,446 1,611 3,223
Total Budgetary Authorities 14,105 15,689 (15,181)

* Only includes Authorities available for use and granted by Parliament at quarter-end.

Fiscal year 2016-17 (in thousands of dollars)
Total available for use for the year ending March 31, 2017* Used during the quarter ended September 30, 2016 Year to date used at quarter-end
Vote 1 – Program expenditures 55,408 12,662 24,948
Less: Revenues netted against expenditures (47,685) (660) (46,671)
Net Vote 1 – Program expenditures 7,723 12,002 (21,723)
Statutory authorities – EBP 7,051 1,763 3,526
Total Budgetary Authorities 14,774 13,765 (18,197)

* Only includes Authorities available for use and granted by Parliament at quarter-end.

Departmental budgetary expenditures by Standard Object (unaudited)

Fiscal year 2017-18 (in thousands of dollars)
Planned expenditures for the year ending March 31, 2018 Used during the quarter ended September 30, 2017 Year to date used at quarter-end
Expenditures:
Personnel (including EBP) 47,500 14,195 28,051
Transportation and communications 1,882 325 581
Information 1,287 492 738
Professional and special services 7,587 820 1,459
Rentals 911 75 398
Repair and maintenance 414 45 99
Utilities, materials and supplies 389 48 77
Acquisition of machinery and equipment 1,880 349 365
Other subsidies and payments 0 0 2
Total gross budgetary expenditures 61,850 16,349 31,770
Less: revenues netted against expenditures
Revenues (Part I Broadcasting licence fees, Telecommunications fees and Unsolicited telecommunications fees) (47,745) (660) (46,951)
Total revenues netted against expenditures (47,745) (660) (46,951)
Total net budgetary expenditures 14,105 15,689 (15,181)
Fiscal year 2016-17 (in thousands of dollars)
Planned expenditures for the year ending March 31, 2017 Used during the quarter ended September 30, 2016 Year to date used at quarter-end
Expenditures:
Personnel (including EBP) 48,046 12,406 24,426
Transportation and communications 1,888 414 811
Information 1,291 78 329
Professional and special services 7,630 1,076 1,893
Rentals 914 96 504
Repair and maintenance 415 62 81
Utilities, materials and supplies 390 62 118
Acquisition of machinery and equipment 1,885 231 312
Other subsidies and payments 0 0 0
Total gross budgetary expenditures 62,459 14,425 28,474
Less: revenues netted against expenditures
Revenues (Part I Broadcasting licence fees, Telecommunications fees, and Unsolicited telecommunications fees) (47,685) (660) (46,671)
Total revenues netted against expenditures (47,685) (660) (46,671)
Total net budgetary expenditures 14,774 13,765 (18,197)
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