Financial Statements: Local Programming Improvement Fund – August 31, 2013

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Independent Auditors' Report

To the Board of Directors of the

Canadian Local Programming Improvement Fund

We have audited the accompanying financial statements of the Local Programming Improvement Fund, which comprise the statements of financial position as at August 31, 2013 and 2012 and September 1, 2011 and the statements of operations, changes in fund balance and cash flows for the years ended August 31, 2013 and 2012, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits.  Except as explained below, we conducted our audits in accordance with Canadian generally accepted auditing standards.  Those standards require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.  The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.  In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.  An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our qualified audit opinion.

Basis for Qualified Opinion

Fund contributions are based on reports of prior-year gross revenues derived from broadcasting activities provided to the Canadian Radio-television and Telecommunications Commission ["CRTC"] by the licensed terrestrial Broadcasting Distribution Undertakings and Direct-to-Home undertakings. A summary of this information was supplied to us by the CRTC. We did not audit the reports submitted to the CRTC.  Therefore, we are unable to determine whether any adjustments to Fund contributions and Fund distributions might be necessary.

Qualified Opinion

In our opinion, except for the possible effects of the matter described in the Basis for qualified opinion paragraph, the financial statements present fairly, in all material respects, the financial position of the Local Programming Improvement Fund as at August 31, 2013 and 2012 and September 1, 2011 and the results of its operations and its cash flows for the years ended August 31, 2013 and 2012 and in accordance with Canadian accounting standards for not-for-profit organizations.

Notes to Financial Statements

1. Purpose of the Fund and Accounting Framework

The Local Programming Improvement Fund [the "Fund" or the "LPIF"] is a fund created by the Canadian Radio-television and Telecommunications Commission ["CRTC"] in October 2008 pursuant to Broadcasting Public Notice CRTC 2008-100 and is not subject to income taxes.  The purpose of the Fund is to support local programming produced by conventional television stations operating in non-metropolitan markets. The objectives of the Fund are to ensure that viewers in smaller Canadian markets continue to receive a diversity of local programming, to improve the quality and diversity of local programming in these markets and to ensure that viewers in French-language markets are not disadvantaged by the smaller size of those markets.

On September 1, 2012, the Fund adopted Canadian accounting standards for not-for-profit organizations ["ASNPO"]. These are the first financial statements prepared in accordance with ASNPO.

In accordance with the transitional provisions of ASNPO, the Fund has adopted the changes retrospectively, subject to certain exemptions allowed under these standards. The transition date is September 1, 2011 and all comparative information provided has been presented by applying ASNPO. There were no adjustments to fund balances as at September 1, 2011 or excess of revenue over expenses for the year ended August 31, 2012 as a result of the transition to ASNPO.

2. Future Operations

Pursuant to Broadcasting Regulatory Policy CRTC 2012-385, the CRTC will phase out the Fund. The contribution rate will be reduced from 1.0% for the 2013 broadcast year to 0.5% for the 2014 broadcast year. As of September 1, 2014, the LPIF will be discontinued.

3. Summary of Significant Accounting Policies

These financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations. The following significant accounting policies have been used in the preparation of these financial statements.

[a] Revenue Recognition

The LPIF is funded through contributions by licensed terrestrial Broadcasting Distribution Undertakings and Direct-to-Home undertakings. The contribution for the 2013 broadcast year is 1.0% of the prior broadcast year's gross revenue derived from the broadcasting activities of licensees. Any adjustments are accounted for in the year during which the change is communicated to the Fund Administrator by the CRTC.

The LPIF follows the deferral method of accounting for contributions. Restricted contributions are recognized as revenue in the year in which related restrictions are met. Unrestricted contributions are recognized as revenue when received or receivable, if the amount can be reasonably estimated, and collection is reasonably assured.

Interest revenue is recognized when earned.

[b] Fund Distributions

LPIF funding is distributed to eligible stations as follows: one-third of total funds are divided evenly among all eligible stations in anglophone and francophone markets and the remaining two-thirds are divided so that 70% goes to anglophone markets, and 30% to francophone markets. These remaining two-thirds are then allocated on the basis of average net spending on local programming over three years and are proportional to the percentage of LPIF funding available to eligible stations within a linguistic market. Eligibility for participation in LPIF funding is determined by the CRTC.  Any adjustments are accounted for in the year during which the change is communicated to the Fund Administrator by the CRTC.

[c] Financial Instruments

The Fund's financial instruments consist of cash, contributions receivable, accounts payable and accrued liabilities, distributions payable and other payables.

Measurement

Financial instruments are recorded at fair value on initial recognition.

The Fund subsequently measures all of its financial assets and financial liabilities at amortized cost.

Impairment

Financial assets measured at amortized cost are tested for impairment when there are indicators of impairment. The amount of any write-down or subsequent recovery is recognized in net income. A previously recognized write-down can be reversed to the extent of the improvement.

[d] Use of Estimates

The preparation of financial statements in conformity with Canadian accounting standards for not-for-profit organizations requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets and liabilities.  These estimates are reviewed periodically and adjustments are made to excess of revenue over expenses as appropriate in the year they become known.

4. Financial Risks and Concentration of Risk

It is management's opinion that the Fund is not exposed to significant interest rate, liquidity, market, currency or credit risks arising from its financial instruments. There has been no change to the risk exposure from 2012.

5. Canadian Local Programming Improvement Fund

The Canadian Local Programming Improvement Fund ["CLPIF"] oversees the administration of the Fund and the Fund Administrator's performance of its duties.  Any expenses of the CLPIF are paid by and considered to be an expense of the Fund.

6. Other Payables

Funds received during the year in excess of funds requested are recorded as other payables. These amounts will be applied against contribution requests of the next broadcast year or refunded to the contributor at their request.

7. Commitment

Fund administration agreement

The CLPIF has engaged the services of a company to administer the Fund at a fee of $360,000 plus applicable taxes for the broadcast year ending August 31, 2014 plus an additional $100,000 plus applicable taxes for the six month wind-up period ending February 28, 2015.

Date modified:

2015-03-09