Statement of Management Responsibility Including Internal Control Over Financial Reporting

Return to 2012-2013 Departmental Performance Report

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2013, 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. In the interim, the CRTC has undertaken a risk-based assessment of the system of ICFR for the year ended March 31, 2013, in accordance with the Treasury Board Policy on Internal Control, and the results and action plan are summarized in the annex.

The financial statements of the CRTC have not been audited.

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 and Official Languages.

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. This Act received Royal Assent in 2010 but is not yet proclaimed in force.

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:

1. 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 Anti-spam legislation activities) and the balance by vote-netted fees it collects from the regulated 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 the Part I licence fees collected from broadcasters and a portion of the annual telecommunications fees collected from telecommunications carriers to finance the costs it incurs in regulating the broadcasting and telecommunications industries (i.e. respendable revenue). The balance of these two fees recovers the costs for items funded through 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.

   The accounting of fees collected and the charges to the authorities in a given year does not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through fee collection and through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the Statement of Operations are the amounts reported in the future-oriented financial statements included in the 2012-13 Report on Plans and Priorities. The future-oriented financial statements for 2012-2013 have been restated to reflect the revenue net of non-respendable amounts. This restatement resulted in a $120,581,000 increase in net costs of operations before government funding and transfers. In addition, the future-oriented financial statements have also been reclassified to conform to the current year presentation.

2. Net cash provided by Government - The CRTC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the CRTC is deposited to the CRF and all cash disbursements made by the CRTC are paid from the CRF. The net cash provided to Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the Government.
3. Amounts due from/to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the CRTC is entitled to draw from the CRF without further authorities to discharge its liabilities.

4. Revenues - The CRTC collects fees under the authority of the Broadcasting Act and Telecommunications Act and the regulations made pursuant to these Acts, namely the Broadcasting Licence Fee Regulations, 1997 and the Telecommunications Fee Regulations, 2010. The CRTC’s regulatory fees (Part I broadcasting licence fees and annual telecommunications fees) recover the CRTC’s costs associated with its broadcasting, telecommunications, and internal services activities. The Part II licence fees are regulatory charges imposed in relation to a broadcaster’s privilege (i.e. rights and privileges). These fees recover part of the Government of Canada’s substantial annual investment in the Canadian broadcasting system. Miscellaneous revenues are mainly comprised of revenues received as a result of administrative monetary penalties (AMPs) imposed due to contraventions of the Telecommunications Act relating to the National Do Not Call List (DNCL) and other revenues such as: interest on overdue accounts receivable for CRTC broadcasting licence fees, telecommunications fees and AMPs, miscellaneous non tax revenue (e.g. access to information (ATI) fees), and gain on disposal of non-capital assets to outside parties. All revenue from AMPs is recorded as non-respendable non-tax revenue.

   Under the authority of the Telecommunications Act, a public consultation process was completed during 2012-13 that resulted in the creation of the Unsolicited Telecommunications Fees Regulations. These regulations came into effect on April 1, 2013. These regulatory fees will be used to recover the cost of the CRTC’s compliance and enforcement activities associated with the National Do Not Call List.

   Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.

   Funds received from external parties for specified purposes are recorded upon receipt as deferred revenue. These revenues are recognized in the period in which the related expenses are incurred.

   Funds that have been received are recorded as deferred revenue, provided the Department has an obligation to other parties for the provision of goods, services or the use of assets in the future.

   Other 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 Department'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 entity's gross revenues.

5. Expenses - Expenses are recorded on an accrual basis:

   Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.

   Services provided without charge by other government departments for accommodation, the employer’s contribution to the health and dental insurance plans and worker’s compensation are recorded as operating expenses at their estimated cost.

6. Employee future benefits

   1. Pension benefits - Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. The CRTC’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. 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.
   2. Severance benefits - Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.
7. Accounts receivables are stated at the lower of costs and net recoverable value; a valuation allowance is established for receivables where recovery is considered uncertain.

8. Tangible capital assets – All tangible capital assets and leasehold improvements having an initial cost of $5,000 or more are recorded at their acquisition cost. The CRTC does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections.

   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

9. Measurement uncertainty - The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are the allowance for doubtful accounts, the liability for employee severance benefits and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

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. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. 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 cost of operations to current year authorities used:

(b) Authorities proviced and used

4. Accounts Payable and Accrued Liabilities

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

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 2013 (i.e 2012-13) a number of broadcasting undertakings paid their 2013-14 Part I broadcasting licence fees in advance of the April 11, 2013 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 2013-2014, 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:

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 2012-2013 expense amounts to $4.5 million ($4.6 million in 2011-12), which represents approximately 1.7 times (1.8 times in 2011-2012) 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.

7. Accounts Receivable and Advances

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

8. Tangible Capital Assets

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:

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:

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:

Date modified:

2013-11-05