2017-2018 - Financial Statements

Copyright Board of Canada

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, 2018, and all information contained in these statements rests with the management of the Copyright Board of Canada (the 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 Board’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Board’s Departmental Results 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 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 Board is subject to periodic Core Control Audits performed by the Office of the Comptroller General and uses the results of such audits to adhere to the Treasury Board (TB) Policy on Internal Control.

A core Control Audit was performed in 2015-16 by the Office of the Comptroller General of Canada.

The financial statements of the Board have not been audited.

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

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

(in dollars)
	2018		2017
Liabilities
Accounts payable and accrued liabilities (note 4)	173,844		188,764
Vacation pay and compensatory leave	169,786		154,837
Employee future benefits (note 5)	81,242		82,136
Total liabilities	424,872		425,737
Financial Assets
Due from Consolidated Revenue Fund	152,024		121,809
Accounts receivable and advances (note 6)	28,017		70,123
Total gross financial assets	180,041		191,932
Financial assets held on behalf of Government
Accounts receivable and advances (note 6)	(28,017)		(70,123)
Total financial assets held on behalf of Government	(28,017)		(70,123)
Total net financial assets	152,024		121,809
Departmental net debt	272,848		303,928
Non-financial assets
Tangible capital assets (note 7)	188,320		140,674
Total non-financial assets	188,320		140,674
Departmental net financial position	$ (84,528)		$ (163,254)
Contractual Obligations (note 8)
The accompanying notes form an integral part of these financial statements.

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

(in dollars)
	2018		2018		2017
	Planned Results
Expenses
Copyright tariff setting and issuance of licences	$ 2,855,919		$ 2,948,420		$ 2,711,467
Internal Services	669,908		689,658		671,090
Total expenses	3,525,827		3,638,078		3,382,557
Revenues
Sales of services	-		120		205
Foreign exchange gain			40		-
Revenues earned on behalf of Government			(160)		(205)
Total revenues	-		-		-
Net cost of operations before government funding and transfers	3,525,827		3,638,078		3,382,557
Government funding and transfers
Net cash provided by Government			3,242,053		3,150,517
Change in due from the Consolidated Revenue Fund			30,215		(50,900)
Services provided without charge by other government departments (note 9)			444,536		433,532
Net cost of operations after government funding and transfers			(78,726)		(150,592)
Departmental net financial position - Beginning of year			(163,254)		(313,846)
Departmental net financial position - End of year			$ (84,528)		$ (163,254)
Segmented Information (note 10)
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)
	2018		2017
Net cost of operations after government funding and transfers	$ (78,726)		$ (150,592)
Change due to tangible capital assets
Acquisition of tangible capital assets	56,755		150,722
Adjustments to tangible capital assets	8,263		-
Amortization of tangible capital assets	(17,372)		(10,048)
Total change due to tangible capital assets	47,646		140,674
Net decrease in departmental net debt	(31,080)		(9,918)
Departmental net debt - Beginning of year	303,928		313,846
Departmental net debt - End of year	$ 272,848		$ 303,928
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)
	2018		2017
Operating activities
Net cost of operations before government funding and transfers	$ 3,638,078		$ 3,382,557
Non-cash items:
Amortization of tangible capital assets	(17,372)		(10,048)
Adjustments to tangible capital assets	8,263		-
Services provided without charge by other government departments (note 9)	(444,536)		(433,532)
Variations in Statement of Financial Position:
Decrease in accounts payable and accrued liabilities	14,920		69,281
Increase in vacation pay and compensatory leave	(14,949)		(22,415)
Decrease in future employee benefits	894		13,952
Cash used in operating activities	3,185,298		2,999,795
Investing Activities
Acquisition of Tangible Capital Assets	56,755		150,722
Net cash provided by Government of Canada	$ 3,242,053		$ 3,150,517
The accompanying notes form an integral part of these financial statements.

1. Authority and Objectives

The Copyright Board of Canada (the 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 Board's principal mandate is to set royalties which are fair and equitable for both copyright owners and 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 Board has two program activities:

• Copyright tariff setting and issues of licences; and
• Internal services

The Act requires that the Board certify tariffs in the following fields: the public performance or communication of musical works and of sound recordings of musical works, the retransmission of distant television and radio signals, the reproduction of television and radio programs by educational institutions and private copying. In other fields where rights are administered collectively, the Board can be asked by a collective society to set a tariff; if not, the Board can act as an arbitrator if the collective society and a user cannot agree on the terms and conditions of a licence.

The Board reports annually to Parliament through the Minister of Innovation, Science and Economic Development.

2. Summary of Significant Accounting Policies

These financial statements are prepared using the Board’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 Board is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the 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 “Expenses” and “Revenues” sections of the Statement of Operations and Departmental Net Financial Position are the amounts reported in the Future-oriented Statement of Operations included in the 2017–18 Departmental Plan. Planned results are not presented in the “Government funding and transfers” section of the Statement of Operations and Departmental Net Financial Position and in the Statement of Change in Departmental Net Debt because these amounts were not included in the 2017–18 Departmental Plan.

• Amounts due from or to the CRF 
  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 the Board is entitled to draw from the CRF in order to discharge its liabilities without generating additional charges against its authorities.

• Revenues 
  Revenues are recognized in the period the event giving rise to the revenues occurred. 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 as a reduction of the entity's gross revenues.

• 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; and 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 carrying value.

• Employee future benefits

  • Pension benefits 
    Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. The Board’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. The 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.
  • Severance benefits 
    The accumulation of severance benefits for voluntary departures ceased for applicable employee groups. The remaining obligation for employees who did not withdraw benefits is calculated using information derived from the results of the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

   

• Accounts receivable 
  Accounts receivable are initially recorded at cost. When necessary, an allowance for valuation is recorded to reduce the carrying value of accounts receivable to amounts that approximate their net recoverable value.

• Tangible capital assets 
  All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. Tangible capital assets do not include immovable assets located on reserves as defined in the Indian Act, works of art, museum collection and Crown land to which no acquisition cost is attributable; and intangible assets.

• Measurement uncertainty 
  The preparation of these financial statements requires management to make estimates and assumptions that affect the reported and disclosed amounts of assets, liabilities, revenues and expenses reported in the financial statements and accompanying notes at March 31. The estimates are based on facts and circumstances, historical experience, general economic conditions and reflect the Government’s best estimate of the related amount at the end of the reporting period. 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 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.

• Related party transactions 
  Related party transactions, other than inter-entity transactions, are recorded at the exchange amount. 
  
  Inter-entity transactions are transactions between commonly controlled entities. Inter-entity transactions, other than restructuring transactions, are recorded on a gross basis and are measured at the carrying amount, except for the following: 

  • Services provided on a recovery basis are recognized as expenses on a gross basis and measured at the exchange amount.
  • Certain services received on a without charge basis are recorded for departmental financial statement purposes at the carrying amount.

   

3. Parliamentary Authorities

The 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, the Board 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

	2018		2017
	(in dollars)
Net cost of operations before government funding and transfers	$ 3,638,078		$ 3,382,557
Adjustments for items affecting net cost of operations but not affecting authorities:
Services provided without charge by other government departments	(444,536)		(433,532)
Amortization of tangible capital assets	(17,372)		(10,048)
Decrease in employee future benefits	894		13,952
Adjustment of previous year's accounts payable	3,152		2,192
Refund of prior year's expenditures	5,920		6,631
Increase in vacation pay and compensatory leave	(14,949)		(22,415)
Other	-		2,500
Total items affecting net cost of operations but not affecting authorities	(466,891)		(440,720)
Adjustments for items not affecting net cost of operations but affecting authorities
Acquisitions of tangible capital assets	56,755		150,772
Salary overpayments	3,098		3,169
Other	(40)		-
Current year authorities used	$ 3,231,000		$ 3,095,728

(b) Authorities provided and used

	2018		2017
	(in dollars)
Authorities Provided:
Vote 45 - Operating expenditures	$ 3,088,584		$ 2,954,587
Statutory amounts	258,617		241,204
	3,347,201		3,195,791
Less:
Less:
Lapsed authorities: Operating expenditures	(116,201)		(100,063)
Current year authorities used	$ 3,231,000		$ 3,095,728

4. Accounts payable and accrued liabilities

The following table presents details of the Copyright Board’s accounts payable and accrued liabilities.

	2018		2017
	(in dollars)
Accrued salaries and wages	111,069		89,152
Accounts payable - External parties	62,775		94,159
Accounts payable - Other government departments and agencies	-		5,453
Total accounts payable	$ 173,844		$ 188,764

5. Employee future benefits

1. Pension benefits

   The Board’s employees participate in the Public Service Pension Plan (the “Plan”), which is sponsored and administered by the Government of Canada. 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 Plan benefits and they are indexed to inflation.

   Both the employees and the Board contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Economic Action Plan 2012, employee contributors have been divided into two groups - Group 1 relates to existing plan members as of December 31, 2012 and Group 2 relates to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate.

   The 2016-17 expense amounts to $215,082 ($226,375 in 2015-16). For Group 1 members, the expense represents approximately 1.12 times (1.25 times in 2015-16) the employee contributions and, for Group 2 members, approximately 1.08 times (1.24 times in 2015-16) the employee contributions.

   The Board’s responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the Consolidated Financial Statements of the Government of Canada, as the Plan’s sponsor.

2. Severance benefits

   Severance benefits provided to the Board’s employees were previously based on an employee’s eligibility, years of service and salary at termination of employment. However, since 2011 the accumulation of severance benefits for voluntary departures progressively ceased for substantially all employees. Employees subject to these changes were given the option to be paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits upon departure from the public service. By March 31, 2018, substantially all settlements for immediate cash out were completed. Severance benefits are unfunded and consequently, the outstanding obligation will be paid from future authorities.

   The changes in the obligations during the year were as follows:

   	2018		2017
   	(in dollars)
   Accrued benefit obligation - Beginning of year	$ 82,136		$ 96,088
   Expense for the year	(894)		(13,952)
   Accrued benefit obligation - End of year	$ 81,242		$ 82,136

6. Accounts Receivable and Advances

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

	2018		2017
	(in dollars)
Receivables from other government departments and agencies	$ 21,416		$ 64,454
Employee advances and overpayments	6,601		5,669
Gross accounts receivables and advances	28,017		70,123
Accounts receivable held on behalf of Government	(28,017)		(70,123)
Net accounts receivable and advances	$ -		$ -

7. Tangible Capital Assets

Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the assets as follows:

Asset Class					Amortization period
Machinery and equipment					10 years
Computer hardware					3 to 5 years
Leasehold Improvements					10 years

(in dollars)

Cost
Capital asset class	Opening balance	Acquisitions	Adjustments (1)
Machinery and equipment	43,536	-	-
Computer hardware	115,291	-	-
Leasehold Improvements	150,722	56,755	8,853
Total	309,549	56,755	8,853

Accumulated Amortization
Capital asset class	Opening balance	Amortization	Adjustments (1)	Closing Balance
Machinery and equipment	43,536	-	-	43,536
Computer hardware	115,291	-	-	115,291
Leasehold improvements	10,048	17,372	590	28,010
Total	168,875	17,372	590	186,837

Net Book Value
Capital asset class	2018	2017
Machinery and equipment	-	-
Computer hardware	-	-
Leasehold Improvements	188,320	140,674
Total	188,320	140,674

(1) Adjustments include professional fees directly attributed to the Leasehold Improvements paid in fiscal year 2017-18.

8. Contractual Obligations

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

	2019	2020	2021	2022	2023 and thereafter	Total
(in dollars)
Other goods and services	197,000	111,000	17,000	17,000	17,000	359,000
	$ 197,000	$ 111,000	$ 17,000	$ 17,000	$ 17,000	$ 359,000

9. Related party transactions

The Board is related as a result of common ownership to all government departments, agencies, and Crown corporations. Related parties also include individuals who are members of key management personnel or close family members of those individuals, and entities controlled by, or under shared control of, a member or key management personnel or close family member of that individual.

The Board enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the Board 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 Board received without charge from certain common service organizations, related to accommodation and the employer's contribution to the health and dental insurance plans. These services provided without charge have been recorded at the carrying value in the Board’s Statement of Operations and Departmental Net Financial Position as follows:

	2018	2017
	(in dollars)
Accommodation	$ 294,335	$ 293,577
Employer's contribution to the health and dental insurance plans	150,201	139,955
Total	$ 444,536	$ 433,532

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 Services and Procurement Canada and audit services provided by the Office of the Auditor General are not included in the Board’s Statement of Operations and Departmental Net Financial Position.

(b) Other transactions with other government departments and agencies

	2018	2017
	(in dollars)
Expenses - Other Government departments and agencies	535,665	764,913

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

10. Segmented Information

Presentation by segment is based on the Board program alignment 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, by major object of expense and by major type of revenue. The segment results for the period are as follows:

(in dollars)		Copyright Tariff Setting and Issuance of Licences		Internal Services		2018 Total		2017 Total
Operating expenses
Salaries and employee benefits		$ 1,782,786		$ 418,184		$ 2,200,970		$ 1,934,008
Professional and special services		538,185		128,364		666,549		683,684
Accommodation		238,411		55,924		294,335		293,578
Communication		176,119		41,312		217,431		131,206
Rental		71,768		16,839		88,607		110,906
Travel		40,526		9,506		50,032		30,446
Equipment repair and maintenance		32,244		7,563		39,807		79,385
Utilities, materials and supplies		31,266		7,334		38,600		56,828
Furniture and equipment		16,557		3,884		20,441		52,484
Amortization		17,372		-		17,372		10,048
Other operating expenses		2,548		598		3,146		(644)
Postage and freight		638		150		788		628
Total expenses		2,948,420		689,658		3,638,078		3,382,557
Revenues
Sales of services		120		-		120		205
Foreign exchange gain		32		8		40		-
Revenues earned on behalf of Government		(152)		(8)		(160)		(205)
Total Revenues		-		-		-		-
Net cost from continuing operations		$ 2,948,420		$ 689,658		$ 3,638,078		$ 3,382,557