Copyright Board of Canada (116)

Statement of Management Responsibility Including Internal Control Over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2012, and all information contained in these statements rests with the management of the Copyright Board of Canada (Copyright Board). 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 Copyright Board's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Copyright Board'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 Copyright Board and through conducting an annual risk-based assessment of the effectiveness of the system of ICFR.

The system of ICFR is designed to mitigate risks to a reasonable level based on an ongoing process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

The Copyright Board 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 Copyright Board has undertaken a risk-based assessment of the system of ICFR for the year ended March 31, 2012, in accordance with the Treasury Board Policy on Internal Control, and the action plan is summarized in the annex.

The financial statements of the Copyright Board have not been audited.

The paper version was signed by
Deputy Head	Claude Majeau	Ottawa, Ontario
Chief Financial Officer	Gilles McDougall	Ottawa, Ontario

Copyright Board of Canada
Statement of Financial Position (Unaudited)
As at March 31

(in dollars)
	2012		2011
			Restated (Note 10)
Liabilities
Accounts payable and accrued liabilities (note 4)	$ 117 072		$ 74 161
Vacation pay and compensatory leave	155 471		82 216
Employee future benefits (note 5)	202 573		322 176
Total liabilities	475 116		478 553
Financial Assets
Due from Consolidated Revenue Fund	54 160		38 765
Accounts receivable and advances (note 8)	62 912		35 396
Total gross financial assets	117 072		74 161
Financial assets held on behalf of Government
Accounts receivable and advances (note 8)	(62 912)		(35 396)
Total financial assets held on behalf of Government	(62 912)		(35 396)
Total net financial assets	54 160		38 765
Departmental net debt	420 956		439 788
Non-financial assets
Tangible capital assets (note 6)	30 998		42 037
Total non-financial assets	30 998		42 037
Departmental net financial position	$ (389 958)		$ (397 751)
Contractual obligations (note 7)
The accompanying notes form an integral part of these financial statements.

The paper version was signed by
Deputy Head	Claude Majeau	Ottawa, Ontario
Chief Financial Officer	Gilles McDougall	Ottawa, Ontario

Copyright Board of Canada
Statement of Operations and Departmental Net Financial Position (Unaudited)
For the Year Ended March 31

(in dollars)
	2012		2012		2011
	Planned Results				Restated (Note 10)
Expenses
Tariff Setting and Issuance of Licences	$ 2 385 991		$ 2 307 519		$ 2 445 497
Internal Services	1 097 208		540 640		558 441
Total expenses	3 483 199		2 848 159		3 003 938
Net cost of operations before government funding and transfers	3 483 199		2 848 159		3 003 938
Government funding and transfers
Net cash provided by Government	3 117 026		2 491 901		2 710 425
Change in due from the Consolidated Revenue Fund	16 116		15 395		(154 935)
Services provided without charge by other government departments (note 8)	347 271		348 656		358 296
Net cost of operations after government funding and transfers	2 786		(7 793)		90 152
Departmental net financial position - Beginning of year	(312 939)		(397 751)		(307 599)
Departmental net financial position - End of year	$ (315 725)		$ (389 958)		$ (397 751)
The accompanying notes form an integral part of these financial statements.

Copyright Board of Canada
Statement of Change in Departmental Net Debt (Unaudited)
For the Year Ended March 31

(in dollars)
	2012		2012		2011
	Planned Results
Net cost of operations after government funding and transfers	$ 2 786		$ (7 793)		$ 90 152
Change due to tangible capital assets
Amortization of tangible capital assets	(11 039)		(11 039)		(11 039)
Total change due to tangible capital assets	(11 039)		(11 039)		(11 039)
Net increase (decrease) in departmental net debt	(8 253)		(18 832)		79 113
Departmental net debt - Beginning of year	354 976		439 788		360 675
Departmental net debt - End of year	$ 346 723		$ 420 956		$ 439 788
The accompanying notes form an integral part of these financial statements.

Copyright Board of Canada
Statement of Cash Flows (Unaudited)
For the Year Ended March 31

(in dollars)
	2012		2011
			Restated (Note 10)
Operating activities
Net cost of operations before government funding and transfers	$ 2 848 159		$ 3 003 938
Non-cash items:
Amortization of tangible capital assets	(11 039)		(11 039)
Services provided without charge by other government departments (note 9)	(348 656)		(358 296)
Variations in Statement of Financial Position:
Decrease (increase) in accounts payable and accrued liabilities	(42 911)		156 493
Decrease (increase) in vacation pay and compensatory leave	(73 255)		5 689
Decrease (increase) in future employee benefits	119 603		(86 360)
Cash used in operating activities	2 491 901		2 710 425
Net cash provided by Government of Canada	$ 2 491 901		$ 2 710 425
The accompanying notes form an integral part of these financial statements.

1. Authority and Objectives          

The Copyright Board of Canada (Copyright Board) is an independent administrative agency which has been conferred department status for purposes of the Financial Administration Act. Its mandate stems from the Copyright Act.

The Copyright Board of Canada plays a major role in the collective administration of copyright, particularly where the public performance and the communication to the public, by telecommunication, of musical works, as well as the retransmission of distant radio and television signals are concerned. The Copyright Board plays a surveillance role in three ways with respect to collective societies which administer very large repertoires of works created by a multitude of originators both in Canada and in other countries: as an economic regulatory body, by approving tariff proposals by the various copyright collective societies; as an arbitrator in private disputes; and as an arbitrator of the public interest.

The Copyright Board's principal mandate is to set royalties which are fair and equitable for both copyright owners and the users of copyright-protected works, as well as issuing non-exclusive licences authorizing the use of works when the copyright owner cannot be located.

The Copyright Board reports annually to Parliament through the Minister of Industry.

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:

• Parliamentary authorities - The Copyright Board is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Copyright Board do 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 authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the Statement of Operations and Departmental Net Financial Position are the amounts reported in the future-orientated financial statements included in the 2011-12 Report on Plans and Priorities.
• Net cash provided by Government - The Copyright Board operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by Copyright Board is deposited to the CRF, and all cash disbursements made by Copyright Board are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements, including transactions between departments of the Government.
• Amounts due from or 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 Copyright Board is entitled to draw from the CRF without further authorities to discharge its liabilities.
• Expenses - Expenses are recorded on the 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, and the employer's contribution to the health and dental insurance plans are recorded as operating expenses at their estimated cost.
• Employee future benefits
  • Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer plan administered by the Government of Canada. Copyright Board's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. The Copyright Board's responsibility with regard to the Plan is limited to its contribution. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.
  • Severance benefits: Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. 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.
• Accounts receivable are stated at the lower cost and net recoverable value. A valuation allowance is recorded for accounts receivable where recovery is considered uncertain.
• Tangible capital assets - All tangible capital assets having an initial cost of $10,000 or more are recorded at their acquisition cost. Copyright Board 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 assets as follows:
  
  

  Asset	Amortization period
  Machinery and Equipment	10 years
  Computer Hardware	3 to 5 years

  
  
  
• Measurement uncertainty - The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities 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 liability for employee severance benefits and the useful life of tangible capital assets. Actual results could 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

Copyright Board receives most of its funding through annual 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. Accordingly, Copyright Board has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences between net results of operations and appropriations are reconciled in the following tables.

(a) Reconciliation of net cost of operations to current year authorities used

	2012		2011
	(in dollars)
Net cost of operations before government funding and transfers	$ 2 848 159		$ 3 003 938
Adjustments for items affecting net cost of operations but not affecting authorities:
Services provided without charge by other government departments	(348 656)		(358 296)
Amortization of tangible capital assets	(11 039)		(11 039)
Increase (decrease) in employee severance benefits	119 603		(86 360)
Adjustment of previous year's Accounts Payable	6 461		12 010
Increase in vacation pay and compensatory leave	(73 255)		5 689
Total items affecting net cost of operations but not affecting authorities	(306 886)		(437 996)
Current year authorities used	$ 2 541 273		$ 2 565 942

(b) Authorities provided and used

	2012		2011
	(in dollars)
Authorities Provided:
Vote 45 - Operating expenditures	$ 2 815 245		$ 2 976 601
Statutory amounts	249 622		259 500
	3 064 867		3 236 101
Less:
Authorities available for future years
Lapsed authorities: Operating expenditures	523 594		670 159
Current year authorities used	$ 2 541 273		$ 2 565 942

4. Accounts payable and accrued liabilities

	2012		2011
	(in dollars)
Accounts payable to external parties	107 655		69 801
Accrued salaries and wages	4 9 417		4 360
Total accounts payable and accrued liabilities	$ 117 072		$ 74 161

5. Employee Benefits

1. Pension benefits

   Copyright Board'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 Copyright Board contribute to the cost of the Plan. The 2011-2012 expense amounts to $224,660 ($233,073 in 2010-11), which represents approximately 1.8 times (1.9 times in 2010-11) the contributions by employees.

   Copyright Board'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

   Copyright Board 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.

   	2012		2011
   	(in dollars)
   Accrued benefit obligation - Beginning of year	$ 322 176		$ 235 816
   Expense for the year	(49 911)		118 789
   Benefits paid during the year	(69 692)		(32 429)
   Accrued benefit obligation - End of year	$ 202 573		$ 322 176

6. Tangible Capital Assets

(in dollars)

Cost
Capital asset class	Opening balance	Closing balance
Machinery and equipment	43 536	43 536
Computer hardware	115 291	115 291
Total	$ 158 827	$ 158 827

Accumulated Amortization
Capital asset class	Opening balance	Amortization	Closing Balance
Machinery and equipment	41 420	1 059	42 479
Computer hardware	75 370	9 980	85 350
Total	$ 116 790	$ 11 039	$ 127 829

Net Book Value
Capital asset class	2012	2011
Machinery and equipment	1 057	2 116
Computer hardware	29 941	39 921
Total	$ 30 998	$ 42 037

7. Contractual Obligations

The nature of the Copyright Board's activities can result in some large multi-year contracts and obligations whereby the Copyright Board will be committed to make future payments when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

Goods and services	2013	2014	2015	2016	2017 and thereafter	Total
	(in dollars)
	838 431	56 148	4 613	968	-	900 160
	$ 838 431	$ 56 148	$ 4 613	$ 968	$ -	$ 900 160

8. Related party transactions

Copyright Board is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. Copyright Board enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, Copyright Board received common services which were obtained without charge from other Government departments as discussed below.

(a) Common services provided without charge by other government departments

During the year, Copyright Board received without charge from certain common service organizations, accommodation and the employer's contribution to the health and dental insurance plans. These services provided without charge have been recorded in the Copyright Board's Statement of Operations and Departmental Net Financial Position as follows:

	2012	2011
	(in dollars)
Accommodation	$ 229 946	$ 227 677
Employer's contribution to the health and dental insurance plans	118 719	130 619
Total	$ 348 656	$ 358 296

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 the payroll and cheque issuance services provided by Public Works and Government Services Canada and audit services provided by the Office of the Auditor General are not included in the Copyright Board's Statement of Operations and Departmental Net Financial Position.

(b) Other transactions with related parties

	2012	2011
	(in dollars)
Receivables from other Federal Government departments	62 912	35 396
Expenses - Other Government departments and agencies	830 209	752 169

Expenses disclosed in (b) exclude common services provided without charge, which are already disclosed in (a).

9. Segmented Information

(in dollars)		Tariff Setting and Issuance of Licences		Internal Services		2012 Total		2011 Total
Operating expenses
Salaries and employee benefits		$ 1 509 525		$ 355 996		$ 1 865 521		$ 2 012 628
Professional and special services		321 960		75 522		397 482		377 582
Accommodation		186 257		43 690		229 947		227 677
Travel		115 433		27 077		142 510		155 472
Communication		70 127		16 449		86 576		85 732
Rental		54 005		12 668		66 673		66 962
Utilities, materials and supplies		26 687		6 310		32 997		38 846
Amortization		11 039		-		11 039		11 039
Informatics equipment and software		6 213		1 457		7 670		9 185
Postage and freight		5 829		1 367		7 196		8 086
Equipment repair and maintenance		410		96		506		716
Furniture and furnishings		-		-		-		7 911
Other operating expenses		34		8		42		2 102
Total expenses		2 307 519		540 640		2 848 159		3 003 938
Net cost of operations		$ 2 307 519		$ 540 640		$ 2 848 159		$ 3 003 938

10. Accounting Changes

During 2011, amendments were made to Treasury Board Accounting Standard 1.2-Departmental and Agency Financial Statements to improve financial reporting by government departments and agencies. The amendments are effective for financial reporting of fiscal years ending March 31, 2012, and later. The significant changes to the Department's financial statements are described below. These changes have been applied retroactively, and comparative information for 2010-11 has been restated.

Net debt (calculated as liabilities less financial assets) is now presented in the Statement of Financial Position. Accompanying this change, the Department now presents a Statement of Change in Net Debt and no longer presents a Statement of Equity.

Accounts receivable are now presented net of non-respendable amounts in the Statement of Operations and Departmental Net Financial Position and Statement of Financial Position. The effect of this change was to decrease total financial assets by $62,912 for 2012 ($35,396 for 2011).

Government funding and transfers, as well as the credit related to services provided without charge by other government departments, are now recognized in the Statement of Operations and Departmental Net Financial Position below "Net cost of operations before government funding and transfers." In previous years, the Department recognized these transactions directly in the Statement of Equity of Canada. The effect of this change was to decrease the net cost of operations after government funding and transfers by $2,855,952 for 2012 ($2,913,786 for 2011).

	2011 As previously stated	Effect of change	2011 Restated
Statement of Financial Position :
Assets held on behalf of Government	$ -	$ (35 396)	$ (35 396)
Departmental financial position	(362 355)	(35 396)	(397 751)
Statement of Operations and Departmental Net Financial Position :
Government funding and transfers
Net cash provided by Government	-	2 710 425	2 710 425
Change in due from Consolidated Revenue Fund	-	(154 935)	(154 935)
Services provided without charge by other government departments	-	358 296	358 296

11. Comparative information

Comparative figures have been reclassified to conform to the current year's presentation.

ANNEX TO THE STATEMENT OF MANAGEMENT RESPONSIBILITY INCLUDING INTERNAL CONTROL OVER FINANCIAL REPORTING OF THE COPYRIGHT BOARD OF CANADA FOR FISCAL YEAR 2011-2012 (UNAUDITED)

1. INTRODUCTION

Under the Treasury Board Policy on Internal Control, departments are required to demonstrate the measures they are taking to maintain an effective system of internal control over financial reporting (ICFR). As such, departments are expected to conduct annual assessments of their system of ICFR, establish action plans to address any necessary adjustments, and to attach to their Statement of Management Responsibility a summary of their assessment results and action plan.

The Copyright Board of Canada (the Copyright Board) will use the results of the periodic Core Control Audit performed by the Office of the Comptroller General to adhere to the Treasury Board Policy on Internal Control. Until such audit takes place, the Copyright Board will proceed with a risk-based assessment of the system of ICFR. Below is a summary of the results of the assessment conducted as of March 31, 2012.

It is important to note that the Copyright Board has a service arrangement with Industry Canada for financial, administrative and financial systems management. The Copyright Board also relies on the Privy Council Office for appointing members of the Board and on the Public Service Commission for hiring civil servants. The key controls documented by Industry Canada are generally applicable to the Copyright Board, including those for financial signing authorities, financial reporting and year-end closing procedures, systems access, and compensation services. Many of the key controls for the Copyright Board are reliant on Industry Canada's system of ICFR.

2. Assessment results as of March 31, 2012

The Copyright Board is in the early planning stages for the assessment of the system of ICFR. This will lay the ground work for future assessments of the system of ICFR and will determine how to leverage the work that has been completed by Industry Canada and how to make use of the existing controls that have been documented. During the 2011-12 fiscal year, the Copyright Board assessed the materiality of accounts on its financial statements to determine which key areas of ICFR would apply. It was determined that the most material and important accounts reported in the statements for the Copyright Board are the operating expenses which includes salaries as well as other operating expenses. Over and above the implicit overarching importance of entity level controls and IT general controls (ITGC), this evaluation resulted in the identification of three business processes which are essential to ensure accurate financial reporting for operating expenses:

• Payroll and Benefits
• Operating Expenditures
• Financial Close and Reporting

As these processes are managed by Industry Canada on behalf of the Copyright Board (with the exception of entity level controls) reliance on Industry Canada's ICFR will be instrumental in evaluating the effectiveness of the Copyright Board's internal controls. Industry Canada is currently at the ongoing monitoring stage of ICFR in which its own key controls have been documented and evaluated, and are being periodically assessed according to a pre-determined schedule based on risk. The Copyright Board should be able to leverage Industry Canada's work on internal controls during future Core Control Audits and assessments.

3. ASSESSMENT PLAN

The Copyright Board is expected to take part in a Core Control Audit during the 2012-2013 fiscal year. This audit is expected to provide an assessment of the Copyright Board's entity level controls as well as key business process controls. Where required, the Copyright Board will proceed with remediation measures after the audit. Future ITGC evaluations will rely on the Copyright Board's host department's testing plan and results, which can be found in their annual assessments.