Quarterly Financial Report for the quarter ended June 30, 2018

2018-2019

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. 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. The 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 provisions 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 came 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 from 2015-16 onward.

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 2017-18 and the 2018-19 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 Benefit Plans (EBP), Budgetary Vote for the Anti-spam Legislation activities and for the Voter Contact Registry). The balance is financed 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. The 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 2018-19 DP in the supplementary information section entitled “Future-Oriented Statement of Operations”.

Authorities

To date in 2018-19, there is a net increase in budgetary authorities of $0.08 million compared to the authorities granted in the 2017-18 Main Estimates. Factors contributing to the net increase include:

Increase

Decrease

Expenditures

The CRTC’s spending for the first quarter ended June 30, 2018 is lower compared to the previous fiscal year. Year-to-date total gross budgetary expenditures for 2018-19 are down slightly ($1.0 million) over the previous fiscal year. The main reason for this difference in spending is a decrease 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 issued in CRTC Compliance and Enforcement Orders 2017-307 for 2017-18 and 2018-164 for 2018-19.

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 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 1 August 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 DNCL investigation and enforcement activities for 2017-18 were funded at 100% of the required $3.3 million budgetary authority. Fees collected for 2017-18 exceeded the regulatory costs noted in Compliance and Enforcement Order 2017-307; the excess amount of $592,723 will be refunded to telemarketers accordingly.

The contract for the operation of the National DNCL expired in January 2018. The CRTC completed the Request for Proposal (RFP) process for its renewal. A new operator was selected and began its operations of the National DNCL in January 2018. 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 them 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


Ian Scott
Chairman and Chief Executive Officer
Gatineau, Canada
Date: August 6, 2018


Claude Doucet, CPA, CGA
Chief Financial Officer
Gatineau, Canada
Date: August 3, 2018

Statement of Authorities (unaudited)

Fiscal year 2018-19 (in thousands of dollars)
Total available for use for the year ending March 31, 2019* Used during the quarter ended June 30, 2018 Year to date used at quarter-end
Vote 1 – Program expenditures 54,508 12,807 12,807
Less: Revenues netted against expenditures (49,449) (47,623) (47,623)
Net Vote 1 – Program expenditures 5,059 (34,816) (34,816)
Statutory authorities – EBP 6,505 1,626 1,626
Total Budgetary Authorities 11,564 (33,190) (33,190)

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

Fiscal year 2017-18 (in thousands of dollars)
Total available for use for the year ending March 31, 2018* Used during the quarter ended June 30, 2017 Year to date used at quarter-end
Vote 1 – Program expenditures 52,786 13,810 13,810
Less: Revenues netted against expenditures (47,745) (46,291) (46,291)
Net Vote 1 – Program expenditures 5,041 (32,481) (32,481)
Statutory authorities – EBP 6,445 1,611 1,611
Total Budgetary Authorities 11,486 (30,870) (30,870)

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

Departmental budgetary expenditures by Standard Object (unaudited)

Fiscal year 2018-19 (in thousands of dollars)
Planned expenditures for the year ending March 31, 2019 Used during the quarter ended June 30, 2018 Year to date used at quarter-end
Expenditures:
Personnel (including EBP) 49,301 12,667 12,667
Transportation and communications 1,809 291 291
Information 1,403 325 325
Professional and special services 5,249 537 537
Rentals 1,069 239 239
Repair and maintenance 494 51 51
Utilities, materials and supplies 338 33 33
Acquisition of machinery and equipment 1,347 286 286
Other subsidies and payments 3 4 4
Total gross budgetary expenditures 61,013 14,433 14,433
Less: revenues netted against expenditures
Revenues (Part I Broadcasting licence fees, Telecommunications fees and Unsolicited telecommunications fees) (49,449) (47,623) (47,623)
Total revenues netted against expenditures (49,449) (47,623) (47,623)
TOTAL NET BUDGETARY EXPENDITURES 11,564 (33,190) (33,190)
Fiscal year 2017-18 (in thousands of dollars)
Planned expenditures for the year ending March 31, 2018 Used during the quarter ended June 30, 2017 Year to date used at quarter-end
Expenditures:
Personnel (including EBP) 47,500 13,857 13,857
Transportation and communications 1,537 256 256
Information 1,051 246 246
Professional and special services 6,210 639 639
Rentals 744 323 323
Repair and maintenance 338 53 53
Utilities, materials and supplies 317 29 29
Acquisition of machinery and equipment 1,534 16 16
Other subsidies and payments 0 2 2
Total gross budgetary expenditures 59,231 15,421 15,421
Less: revenues netted against expenditures
Revenues (Part I Broadcasting licence fees, Telecommunications fees, and Unsolicited telecommunications fees) (47,745) (46,291) (46,291)
Total revenues netted against expenditures (47,745) (46,291) (46,291)
TOTAL NET BUDGETARY EXPENDITURES 11,486 (30,870) (30,870)
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