Effective date: January 01, 2003
Responsibility: Vice President and Chief Financial Officer
STATEMENT OF POLICY
The Corporation will maximize return on investments within the parameters of the Broadcasting Act and Treasury Board guidelines taking into account identified risk exposures and employing the management strategy set out in the Guidelines and Procedures to this policy.
- This policy was updated March 2012.
- This policy was updated September 2008.
- This policy was updated September 2006.
- This policy was updated April 2004.
- 2.3.4 - Cash Funds
- 2.3.5 - Cheque Control
- 2.3.12 - General Accounting and Reporting Guidelines
- 2.3.17 - Management of Foreign Currency Risk
- 2.9.3 - Delegation of Signing Authority
PERSON RESPONSIBLE FOR INTERPRETATION AND APPLICATION
All questions pertaining to the interpretation or application of this policy should be referred to the Director, Policy and Internal Control. The responsibility for interpretation of this policy ultimately resides with the Director, Cash Management.
DEPARTMENT RESPONSIBLE TO UPDATE THIS WEBPAGE
PROCEDURES AND GUIDELINES
To maximize the return on investments within the parameters of the Broadcasting Act and Treasury Board guidelines.
APPLICABLE PROVISIONS OF THE BROADCASTING ACT AND TREASURY BOARD GUIDELINES.
- Section 57(1) and (2) of the Broadcasting Act authorizes the Corporation to maintain bank accounts in its own name and that all money received by the Corporation shall be deposited in these accounts ''and shall be administered by the Corporation exclusively in the exercise of its powers and the performance of its duties and functions''.
- Section 57(3) of the Broadcasting Act states that ''The Corporation may invest any money administered by it in bonds or other securities of, or guaranteed by, the Government of Canada''.
- Section 46.1 of the Broadcasting Act permits the Corporation, with the approval of the Minister of Finance, to borrow up to $25,000,000 or such greater amount as may be authorized by Parliament; however, Borrowing Guidelines provided by the Department of Finance specify that the CBC may not borrow to satisfy working capital requirements.
- Treasury Board’s Directive on the Use of the Consolidated Revenue Fund for Crown Corporations (effective October 1, 2009) sets out the following requirements in Section 6.1:
“When the Government of Canada provides financing to a Crown corporation through the drawdown of funds from an appropriation, the chief financial officer of the department making payments to the Crown corporation is responsible for ensuring the following:
6.1.1 A drawdown process is in place that limits the draw on appropriated funds to cover the short-term cash flow requirements of the Crown corporation and the drawdown is not made in advance of need. The individual draws will be for as short a period as operationally feasible (e.g., twice monthly or in some instances monthly).
6.1.2 A statement of cash flow prepared by the Crown corporation showing that its cash requirements are closely tied to the expected net disbursements for the period encompassed by the drawdown is documented.
6.1.3 The drawdown, at the end of the government's fiscal year (i.e., March 31), from a lapsing appropriation is not in excess of need for the purpose of preventing appropriated funds from lapsing.”
CBC/Radio-Canada receives parliamentary appropriation funding from Heritage Canada on the 1st and 15th of each month.
IDENTIFIED RISK EXPOSURES
CBC/Radio-Canada investments are subject to the following identified risks:
- Interest rate risk - Investment income is affected by movements in interest rates compared to forecast. Depending on the availability of cash, investments with maturity dates spread over the fiscal year will reduce this risk;
- Matching risk - Investment income is affected by the accuracy of cash flow forecasts. Procedures are in place to produce accurate forecasts;
- Investment risk - This risk is comprised of credit risk, market risk, liquidity risk, foreign exchange or currency risk and securities price risk.
CBC/RADIO-CANADA MANAGEMENT OF INVESTMENT RISK EXPOSURE
- All investments must be 100% guaranteed by the Government of Canada to ensure that CBC/Radio-Canada has negligible exposure to credit risk.
- Investments shall be short-term and purchased with the intent to hold until maturity in order that market value fluctuations applicable to liquidity risk do not apply.
- If there is a requirement to purchase foreign denominated securities, cash management shall evaluate the investments available along with other tools (i.e. forward contracts, options, etc.) in order to recommend the option with the least risk to the Corporation.
- Because the Corporation is restricted to investment in securities that are guaranteed by the Government of Canada, all securities are readily marketable with little or no risk.
- CBC shall draw down funds from parliamentary appropriations to maintain approximately 10% of the total annual operating and capital budgets as a cash-float to ensure adequate cash flow is available to cover payroll and other disbursements and to generate investment income.
- CBC shall maximize return on short-term surplus funds.
- CBC shall manage long-term special funds to generate maximum revenues for specific projects.
- CBC shall negotiate investments with the intent to hold until maturity.
- CBC shall evaluate foreign currency denominated investments, guaranteed by the Government of Canada, along with forward contracts and options when a foreign currency hedging requirement is identified.
- CBC shall match cash receipts (revenues, appropriation draw downs and investment maturities) to forecasted expenditures;
- CBC shall invest its cash float within policy to generate maximum revenue.
TOOLS TO MANAGE INVESTMENTS
CBC/Radio-Canada shall use the following principal investment management tools:
- Market commentary, forecasts and money market rates for investments,
- Corporate cash forecasts,
- Corporate budgets,
- Consultation with financial institution staff, and
- Hindsight reviews and updating revenue forecasts.
- CBC/Radio-Canada shall manage the investments on a daily basis, utilizing contacts with financial institutions. Investments guaranteed by the Government of Canada include Treasury Bills, Government of Canada Bonds and Crown Corporation bonds/commercial paper.
- CBC/Radio-Canada shall manage investments by:
- Reviewing at least three options to invest (when available);
- Matching maturity and amount of investments to dates when funds are required;
- Except where special funds are to be invested, selecting investment periods between 1 and 12 months to maximize returns.
- For special funds, supplementary approval is required from the Vice-President & Chief Financial Officer and the President or their delegates for investment periods longer than 12 months.
- The cash float shall be managed as follows:
- Balance required to fund short-term operating needs shall be maintained in CBC/Radio-Canada’s bank account and will earn interest.
- Short-term funds shall be invested in Treasury Bills (2-week to 3 months) where the rate of return exceeds the bank account interest rate.
- Additional funds shall be invested in longer-term investments (up to one year) with staggered maturity dates for the balance of the float, which provides liquidity protection and enables CBC/Radio-Canada to take advantage of higher yields often available on longer-term investments.
- Longer-term maturities should not be selected when the yield is only marginally better than shorter-term investments unless there are justifiable reasons to do so. Based on historical data, a spread of 30 points or better should be expected for one-year investments.
ROLES AND RESPONSIBILITIES
- The Director, Cash Management shall establish bank accounts, draw on Parliamentary Appropriations, and fund bank accounts and investments in accordance with policy.
- The Vice-President & Chief Financial Officer and the President, or their delegates must authorize investments for periods longer than 12 months.
- The President and CEO, or his/her delegates, must approve investments with a financial value in excess of $5 million with duration of less than 4 years. Delegation, if granted, must be provided outside the context of the Delegation of Signing Authority policy 2.9.3 as DSA delegation is limited to $5 million.
- The Board of Directors must approve investments with a financial value in excess of $100 million or with duration of more than 4 years
- Corporate Finance and Administration staff shall consolidate, revise and update expenditure and revenue forecasts revised on a monthly and annual basis and shall consolidate, review and communicate to Heritage Canada on a monthly basis requests to draw the bi-monthly parliamentary appropriations.
- Corporate Finance and Administration Staff shall monitor bank accounts daily and surplus funds shall be invested in accordance with this policy.