Tuesday, June 21, 2011

Access Copyright's 2010 Financial Statments

I was asked to give a talk to writers about Access Copyright's 2010 financial report sometime ago. You may find their report at: http://www.accesscopyright.ca/media/6371/2010_annual_report.pdf.

Here are some of the comments that I made.

1. The auditors stated in their Basis for Qualified Opinion that the copying records had the issue that 'the completeness of which is not susceptible to satisfactory audit verification.' Acknowledging that other reprographic mechanisms have similar problems, the auditors went on to say: 'we were unable to determine whether any increase might be necessary to licence fee revenue, provision for royalties for distribution, excess of revenues over expenses for the year, accounts receivable, undistributed royalties and net assets." Hmm.

2. AC spends money on mentoring other RROs in the Caribbean/China and so on. Perhaps writers would rather the money for these junkets be sent to writers instead.

3. Operating budget expenditures include: professional fees of $851K, and $730K in Copyright Board applications. One might ask, who are these paid to? Are they paid to staff members? or to businesses in which staff members might have a financial interest?

4. Expenses are $8.7 million and this is the figure that is used to calculate many others. If one adds the amount sent to the Cultural Foundation, $491K, it brings expenses up to $9.19 mil, or 27.2%. Pretty high.

5. If a writer wants to know what the board members are responsible for, look at 2(f) Undistributed Revenues. This clause means that, among other things, the $63.5 million in Money Market Funds were left there, and base payment Payback authors received $176 each due to their own representatives on the board.

6. 2(h) Tariff under appeal. Basic education providers have appealed the tariff the Copyright Board thought was reasonable. As education may win on appeal, should AC be treating the possible money as 'deferred revenue'?

7. 2(k) Revenue Recognition takes the novel approach in 'deferring' what it has not received and 'accruing' what it may never get in the same clause. That's interesting, and perhaps a bit unfair. I mentioned that I have a friend who spent his career at the federal Auditor General. I will be asking him his thoughts on the financial statements. I will let you know what he says in due course. This and most of the rest are examples of why writers who are AC members should have basic accounting and legal advice, paid by AC, but at arms-length from it, so that we can receive advice from professionals hired to tell us what our best position is.

8. Cash and Cash Equivalents are held in Money Market Funds of $63.6 million. The latter are usually thought of as too risky an investment for money that has to be invested at low risk. The other thing is most writers would rather have the money. Those funds represent 1673.7% of what writers received under Payback. Do remember that board members make the decisions on how much money goes to writers.

9. Nowhere in the financial statements, nor in the annual report itself, does AC mention that writers received a small $3.8 million. The balance sheet, on the other hand, notes that AC has assets of $104.2 million. This amount is 2742.1% more than what writers received. Having made the calculation myself, I now find it hard to believe how disproportionate it is. I think most other writers will think the same.

10. Footnote 7 is where the figures on the Cultural Foundation may be found. I have had numerous specific requests to find these figures. There is $4.3 million in these funds. Had the board distributed these amounts, writer payments would have more than doubled.

11. Let me show you a comparison of Total Revenue versus Total Expenses.

2007 2008 2009 2010

Total Revenue 37.3Mil 36.8 34.8 33.8
Total Expenses 7.1 Mil 6.7 8.2 8.7

Percentage 19.0 18.2 23.6 25.7

Here is the point: revenue is dropping and expenses are rising. And expenses have risen 22.5% in four years. And, as I mentioned above, if we add the $491K sent to the Foundation rather than distributed to writers, expenses were $9.19 million. or 27.2% of total revenue.

These are big figures and illustrate once more that writers could use some advice from a lawyer and an accountant telling them what is in their best interests.

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