Operational and financial information at a glance

• $1.5M of administrative budget transferred to CFFF programs to increase project funding.
• Telefilm responded to the Treasury Board Secretariat's cost containment measures and decreased its professional services expenses by 45% and travel and hospitality expenses by 19% since 2008-2009.
• Overall management expense ratio remained stable (6.2%) notwithstanding the implementation of new CMF programs.
• CMF Services Agreement has been renewed for fiscal 2011-2012.

Responsible administrator

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Client services

For 2010-2011, a strategic planning year, Telefilm reached out more actively to gain a clear understanding of client satisfaction and industry needs:

• The Executive Director went from coast to coast meeting with key industry players from all regions of Canada.
• Telefilm's Strategy and Research group prepared omnibus surveys and performed industry research.
• Selected employees were consulted to supply input for program revisions and improved client services.

The findings and lessons learned from these exercises are reported in our new corporate plan Fostering Cultural Success.

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Transparency and accountability

Telefilm uses operational and financial key performance indicators (KPIs) to monitor progress towards its operational goals. These indicators also allow us to address efficiency and risk issues, and help us deliver a certain level of service to our clients. The following KPIs were selected for their direct impact on service response times, for their financial impact on CFFF clients, and for administrative cost efficiency dealing with public funds.

Operational indicators	Targets	Results
		2008-2009	2009-2010	2010-2011
Response times for production funding decisions • CFFF: Decision issued	Decision date planned	Target not met	Target met	Target met
	10 weeks	Target not met	Target not met	Target almost met
CMFPA service levels: • Response time   indicators	Targets to meet	Most targets met	Most targets met	Some targets met
Project payment triggered	≤ 3 days	Target met	Target met	Target met
Supplier payment triggered	≤ 20 days	Target met	Target met	Target met
Critical IT system hours available	≥ 97.5%	Target met	Target met	Target met
Critical IT systems incident-free days	≥ 90%	Target met	Target met	Target met

CFFF production funding decision

The standards set by Telefilm's service charter are ambitious, but we are committed to meeting them. Significant process improvements are planned for next fiscal.

CMFPA service levels

The introduction of new programs, including selective programs such as the Experimental stream, as well as the Convergent stream caused a significant increase in the number of applications received and contracts signed. This resulted in only some of the CMFPA service levels being met. Process improvements are being evaluated in collaboration with the CMF in order to meet the service levels.

Financial indicators ($M)	Targets	Results
	2010-2011	2008-2009	2009-2010	2010-2011
CFFF assistance expenses	$85.7M	Target met	Target met	$96.5M Target met
Administrative budget: Maximum threshold	$28.7M	Target met	Target met	$27.1M Target met

Financial indicators expose Telefilm's two most important risks from an administrative perspective: lapsing funds for CFFF, and overspending the administrative budget.

CFFF is on track

The CFFF target establishes the lowest level of program expenditures required in order to avoid lapsing funds, taking into account all budgetary transfers. The CFFF target was met as in previous years. Overspending was funded with recoveries.

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Efficiency in administrative budget utilization

The administrative budget target represents the maximum financial resources available for utilization (calculated on a cash modified basis and before budget transfer). This budget cannot be compared to the operating and administrative expenses in the financial statements since it is accounted for on an accrual basis.

Once again target was met and for a third year in a row a portion of the administrative budget was transferred to industry programs. From Telefilm's annual parliamentary appropriation for administration, $1.5M was transferred to CFFF programs benefiting the industry. In addition, $1M of administrative expenses for fiscal 2011-2012 were prepaid through the 2010-2011 budget, leaving Telefilm in a very good position. In short, Telefilm manages public funds carefully and effectively.

Cost containment measures

Telefilm met both the spirit and the intent of the Treasury Board Secretariat's cost containment measures by performing a thorough review of its discretionary spending.

• Professional services expenses (-45%) and travel & hospitality expenses
  (-19%) decreased consistently over the last two years.
• Given Telefilm's mandate, advertising and publications expenses have not been targeted for cutbacks.

Level of expenses ('000)

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Efficient administrator

Management expenses ratio (MER)

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Telefilm uses the management expense ratio (MER) and other metrics as part of its efficiency assessment for program delivery. It measures, as a percentage, the financial resources expended to deliver each program based on its annual expenses. Measurement requires a specific calculation taking into account operating and administrative expenses (net of amortization) and relevant program expenses. The ratio calculation has limitations and should not be used to compare different programs because of differences in program decision-making models.

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Reliability of information

This financial review has been prepared by management and should be read in conjunction with our audited financial statements and related notes for the year ended March 31, 2011. The Financial Statements have been prepared in accordance with Canadian generally accepted accounting principles. The financial review provides a complete, fair and balanced account of Telefilm's past performance and future outlook. The content is factual and based on meaningful, relevant and reliable information. Management has developed and maintains effective systems, controls and procedures to ensure that information used internally and disclosed externally is complete, reliable, comparable, relevant and timely. This financial review has been presented to the Management Committee and the Executive Director, to the Audit and Finance Committee, and finally to the Board of Directors for approval. Financial Statements along with the Independent Auditor's Report are presented in the next section.

Accounting standards & estimates

No new accounting standards were adopted for 2010-2011. Management uses its best estimates and assumptions to prepare financial information that could have a material impact on the financial statements. Significant accounting assumptions are discussed in Note 2i) Measurement uncertainty, in the Financial Statements. Telefilm revised some assumptions and the calculation method for the severance benefit obligation (see Note 7b) Severance benefit obligation, in the Financial Statements).

Financial reporting standard

Telefilm determined that the CICA Public Sector Accounting Standards are the most appropriate basis of accounting for its financial statements. These standards will apply to the next fiscal year beginning on April 1, 2011. The estimated financial impact is a decrease in liabilities and an increase in the Equity of Canada established at $3.3M (see Note 3: New accounting standards adopted, Future accounting changes in the Financial Statements).

Financial results at a glance

Funds were used in an optimal way in fiscal 2010-2011 with a net result
of $-2.6M. Negative results at Telefilm merely demonstrate that the Corporation used all available current funding and also used its accumulated recoveries to cover funding shortfall.

Overall assistance expenses reached $100.3M – a decrease of 13% over last fiscal that is mainly attributable to the winding down and closing of the Canada New Media Fund (CNMF) (-$13.1M). Recoveries are stable at $9.1M, but are in a declining trend. Administrative expenses decreased to $28.4M, diminishing by 2% from last fiscal, a second-year-in-a-row decrease. Revenues are up by 18% at $10.1M, the rise coming from higher CMF service fees due to new programs. Government funding dropped significantly by $13.6M, principally due to the phase-out of the CNMF.

Assistance expenses

Fiscal 2010-2011, with an assistance expense level of $100.3M, shows a more realistic preview of years to come. A material decline from last year (-$15M) is primarily explained by the phase-out of the CNMF. Details of assistance expenses are shown in Schedules A and B of the Financial Statements. A slight decrease in assistance expenses is expected for 2011-2012, based mainly on the expectation of lower recoveries.

Assistance expenses are mainly funded through parliamentary appropriation, but also from current and accumulated recoveries. The following pie chart presents the amounts of funding and percentage of total by source.

Assistance expenses funding: $100.3M

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Recoveries

Recoveries derive from recoupable advances related to Telefilm's participation in marketing and development of films and from returns on equity investments in the production of films.

The above graphic illustrates the decreasing trend of recoveries over three years. Recoveries are unpredictable, and the higher total in 2008-2009 was due in large part to two successful Canadian films on the international market. 2011-2012 recoveries forecast are extrapolated from prior years.

In compliance with the former CNMF contribution agreement with PCH, Telefilm remitted about $0.6M this fiscal to the consolidated revenue fund.

Operating and administrative expenses

Operating and administrative expenses are shown in Schedule C of the Financial Statements. For a second year in a row, Telefilm recorded a decrease in operating and administrative expenses. At $28.4M, these expenses are 2% lower from last year.

Salaries account for 67% of total expenses. Salary expenditures increased only by 3% demonstrating financial discipline while phasing out the CNMF and implementing new programs for the CMF. Expenses for professional services and travel and hospitality also dropped 17% and 13% respectively, the result of a thorough budgetary review.

Finally, expenses for amortization also decreased since numerous assets are at the end of their useful lives. Overall, Telefilm does not expect significant increases in expenses next fiscal.

Administrative expenses have two major funding sources: parliamentary appropriation and CMF management fees. The following pie chart presents the amounts of funding and percentage of total by source on an accrual basis.

Administrative expenses funding: $28.5M

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Government funding and revenues

Parliamentary appropriation was stable over the past year and reached $105.6M, it is recorded on the statement of operations, net of intangible assets work in progress ($.063M). Parliamentary appropriation is expected to be about the same for next fiscal.

Revenue from CMF management fees increased significantly over last year (+$1.7M) due to the increase in applications and the launch of the new programs. The services agreement has been renewed for fiscal 2011-2012. PCH contributions are at zero, explained by the phase-out of the CNMF.

Net result

The total net result of -$2.6M was good for Telefilm. It demonstrates that all current funding was used and that any shortfall on current funding has been made up by accumulated recoveries. All funds, CFFF, other funds and CNMF, have used accumulated recoveries through the Equity of Canada for funding their expenses. The above graphic shows the net result for each fund.

It is normal that these funds are in a shortfall situation given that Telefilm also recorded recoveries, and that these are reinvested in a timely manner. These reinvestments are subject to audiovisual production cycles that are not necessarily synchronized with Telefilm's fiscal year-end.

Balance sheet

The following section is intended to highlight key items on the balance sheet as well as main variations from last fiscal year. The complete balance sheet with actual and comparative figures is presented in the Financial Statements.

Total Assets amount to $49.2M, and our Receivable from Canada at $37.2M is the equivalent of our cash in bank. This is the most important asset, representing over three quarters of our entire assets. This liquid asset will fund our $33.9M contractual commitments (see Note 10 a) Assistance expenses of the Financial Statements.)

Major fluctuations in receivables come from CMF and PCH. CMF's $1M increase is mainly due to additional fees for delivery of the fourth quarter activities; while the PCH decrease is explained by the last fiscal (2009-2010) CNMF transactions to be reimbursed. The last important balance sheet variation comes from a net value decrease of $1.2M in fixed and intangible assets, mostly related to amortization.

Equity of Canada reached $41.9M this fiscal year. It is the principal item on the balance sheet and represents 85% of the liabilities and equity. It mostly represents, on an accrual basis, recoveries not entirely reinvested (see contractual commitments mentioned above) and therefore not yet recorded as assistance expenses. The decrease in equity is directly linked to the net result of the current fiscal year (-$2.6M). Deferred government assistance represents the unamortized funding recorded for the fixed and intangible assets ($3.3M), and the decrease is mostly correlated to amortization expenses. Current liabilities closed at $2.4M. The rise of $0.8M is due to the CNMF recoveries to be remitted to the consolidated revenue fund and the administrative trade account payables.

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Cash flow summary

Our Receivable from Canada is the equivalent of our cash on hand. Cash on hand decreased slightly ($0.2M) this fiscal year, closing at $37.2M. Financing activities are related to parliamentary appropriation, recorded as deferred governmental assistance ($0.1M), while investing activities belongs to system-related work in progress (-$0.1M). Cash flows showed continuing stability in 2010-2011. Major variations from last fiscal came from operating activities where the net result, the receivable from PCH and the current liabilities all had a higher impact in 2009-2010, decreasing liquidities by $9.9M.

Nine-year overview

Nine-year overview (PDF - 111 kb)