Quarterly Financial Report July 1, 2012 to September 30, 2012

Northern Pipeline Agency

Quarterly Financial Report


For the Quarter Ended September 30, 2012
 

Statement outlining results, risks and significant changes in operations, personnel and programs

1. Introduction

This quarterly financial report should be read in conjunction with the Main Estimates, Supplementary Estimates (A), and the Net Budgetary Authorities published on the Treasury Board Secretariat website, as well as Canada’s Economic Action Plan 2012 (Budget 2012).  It has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by Treasury Board. This quarterly financial report has not been subject to an external audit or review.

1.1 Authority, Mandate and Program Activities

The Northern Pipeline Agency (hereinafter referred to as “the Agency”) was created by legislation in 1978 to carry out federal responsibilities in relation to the planning and construction in Canada of the Alaska Highway Gas Pipeline (AHGP) project by Foothills Pipe Lines Limited.  The pipeline is to carry natural gas from Prudhoe Bay, Alaska, to the lower 48 states.  Foothills Ltd. is now owned by TransCanada PipeLines Ltd.

Further details on the Agency’s authority, mandate and program activities are available in Part II of the Main Estimates.

1.2 Basis of Presentation

This quarterly financial report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the Agency’s spending authorities granted by Parliament, and authorities used by the Agency are consistent with the Main Estimates and Supplementary Estimates (A) as well as transfers from Treasury Board, for the 2012-2013 fiscal year. This quarterly report has been prepared using a special purpose financial reporting framework. 

The authority of Parliament is required before monies can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts or through legislation in the form of statutory spending authority for specific purposes.

As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year.  Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on

February 28, 2012.  As a result, the measures announced in the Budget 2012 could not be reflected in the 2012-13 Main Estimates.

In fiscal year 2012-2013, frozen allotments will be established by Treasury Board authority in departmental votes to prohibit the spending of funds identified as savings measures in Budget 2012.  In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.

Although the Agency uses the full accrual method of accounting to prepare and present its annual audited financial statements that are part of the Departmental Performance Report and its Annual Report, the spending authorities voted by Parliament remain on an expenditure basis.

2. Highlights of the First Fiscal Quarterand Comparative Results

This Quarterly Financial Report reflects the result as at September 30, 2012, including Main Estimates and Supplementary Estimates (A) and the Operating Budget Carry Forward for which full supply was released.  The details presented in this report focus on and compare the second quarter results of 2012-2013 with those of 2011-2012.

2.1 AuthoritiesAvailable for Use and Planned Spending for the Year

As at September 30, 2012, the Agency has authorities available for use of $3,285,470 in 2012-2013 compared to $1,388,250 in 2011-12, for a net increase of $1,897,220 or 137%. The differences are due to the following:

  • New authority - contribution funding of $1,710,000 to conduct consultations, primarily with Aboriginal groups who may be affected by the project;
  • An increase in operating funds of $190,000 to support the consultation activities;
  • A decrease in employee benefit plans of $2,780.

2.2 Authorities Used and Amounts Expended During the Quarter

Year-to-date spending in 2012-13 represents $719,964(21.9%) of total funding available compared to $444,446 (32%) spent at the same time last year, a net increase of $275,518.

During the second quarter in 2012-13, the Agency spent $637,015 or 19.4% of the total funding available, compared to $313,189 or 22.6%, the same period in 2011-12, for a net increase of $323,826, which are primarily as a result of personnel cost, professional and special services and transfer payments.

  • Personnel expenses increased by $242,866 between the second quarter of 2011-12 ($283,384) and 2012-13 ($526,250) due to increased number of employees on assignment with the Agency.
  • The expense of professional and special services increased by $12,652 between the second quarter of 2011-12 ($1,326) and 2012-13 ($13,978) due to services the Agency received from other government departments.
  • Contribution funds of $72,270 were issued in the second quarter of 2012-13 to conduct consultations with Aboriginal groups.

3. Risks and Uncertainties

The Agency must plan for an efficient and effective review and regulation of the project taking into account changes since the Northern Pipeline Act (the Act) came into force and the pipeline was certificated in the late 1970s. Some of the changes in Yukon include new environmental legislation, devolution of some federal responsibilities, and settlement of most of the First Nations land claims along the pipeline route.

The Agency must also adapt to the pace of project development by the proponent, i.e., to carry out its responsibilities and to make the necessary preparations.

Failure to make timely preparations could jeopardize the Government of Canada’s performance of responsibilities under the 1977 Canada-US Agreement (the Agreement) and the Northern Pipeline Act, and pursuant to TransCanada’s rights related to its existing Certificates of Public Convenience and Necessity, and its existing pipeline easement in the Yukon.

3.1 Risk Mitigation Framework

The Agency identifies and responds to the pace of the project’s development by continuous corporate-level forecasting, tracking and management of issues that could affect or require a response from the Agency.  For example, on March 30, 2012, ExxonMobil, ConocoPhillips, BP and TransCanada announced a work plan to assess liquefied natural gas exports from south-central Alaska as an alternative to a natural gas pipeline through Canada. 

During this period, the Agency will continue to work with federal agencies, provincial and territorial governments, the United States and Aboriginal organizations to meet the objectives of the Act and the Agreement.  The Agency remains ready, engaged and prepared to lead the review of the AHGP project, if and when the project moves forward.

4. Significant Changes in Relation to Operations, Personnel and Programs

Budget 2011 provided new authority of $1.9M to create a cost-recovered consultation initiative, primarily focused on Aboriginal groups.  Five additional Full Time Equivalent personnel were seconded to the Agency to enhance consultation and technical capacity. 

5. Budget 2012 Implementation

This section provides an overview of the measures announced in Budget 2012 which aim to refocus government and programs; make it easier for Canadians and business to deal with their government; and modernize and reduce the back office.

Budget 2012 provided the Agency with authorities of $47 million over two years (to be cost recovered) to carry out federal regulatory responsibilities related to the AHGP project. However, the Agency will not be drawing on Budget 2012 funding for 2012-2013, in light of the March 30, 2012 announcement noted in the Risk Mitigation Framework section above. 

Approved by:

 

 

 

 

 

 

 

 

Table 1: Statement of Authorities (Unaudited)  
 

(in dollar) Fiscal year 2012-2013   Fiscal year 2011-2012
  Total available for use for the year ending* Used during the quarter ended Year-to-date used at   Total available for use for the year ending* Used during the quarter ended Year-to-date used at
Budgetary Authorities March 31, 2013 September 30, 2012 quarter-end   March 31, 2012 September 30, 2011 quarter-end
Net Operating expenditures - Vote 30 3,163,150 606,435 658,804   1,263,150 250,639 350,621
               
Statutory Authority - Employee Benefit Plans 122,320 30,580 61,160   125,100 62,550 93,825
               
Total Budgetary Authorities 3,285,470 637,015 719,964   1,388,250 213,189 444,446

* Includes only Authorities available for use and granted by Parliament at quarter-end: Main and Supplementary Estimates (A)

 

 

 

 

 

Table 2: Budgetary Expenditures by Standard Object (Unaudited)
 

  Fiscal year 2012-2013   Fiscal year 2011-2012
  Planned expenditures for the year ending* Expended during the quarter ended Year-to-date used at   Planned expenditures for the year ending* Expended during the quarter ended Year-to-date used at
Expenditures: March 31, 2013 September 30, 2012 quarter-end   March 31, 2012 September 30, 2011 quarter-end
               
Personnel 817,320 526,250 583,299   820,100 283,384 388,375
Transportation and communication 128,643 21,215 35,484   145,393 22,584 38,438
Information 4,441 343 343   2,237 - -
Professional and special services 391,886 13,978 17,813   350,061 1,326 6,066
Rentals 75,205 (155) 6,832   13,421 6,045 10,492
Repair and maintenance 3,732 - -   2,237 - -
Utilities, materials and supplies 8,147 2,359 3,168   4,474 (150) 1,075
Acquisition of machinery and equipment 26,215 750

750

  - - -
Transfer Payments 1,710,000 72,270 72,270   - - -
Other subsidies and payments 119,881 5 5   50,327 - -
               
Total net budgetary expenditures 3,285,470 637,015 719,964   1,388,250 313,189 444,446

* Planned expenditures do not reflect measures announced in Budget 2012. See explanation provided in section 5.