Quarterly Financial Report October 1, 2012 to December 31, 2012

Northern Pipeline Agency
Quarterly Financial Report (unaudited)
For the Quarter Ended December 31, 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), Supplementary Estimates (B), 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 2012-2013 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) and Supplementary Estimates (B) 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 2012-2013 Main Estimates.

In fiscal year 2012-2013, frozen allotments were established by Treasury Board authority in departmental votes to prohibit the spending of funds identified as savings measures in Budget 2012.  The changes to departmental authorities for future years were 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 Second Fiscal Quarter and Comparative Results

This Quarterly Financial Report reflects the result as at December 31, 2012, including Main Estimates, Supplementary Estimates (A), Supplementary Estimates (B), and the Operating Budget Carry Forward for which full supply was released.  The details presented in this report focus on and compare the third quarter results of 2012-2013 with those of 2011-2012.

2.1 Authorities Available for Use and Planned Spending for the Year

As at December 31, 2012, the Agency has authorities available for use of $3,285,470 in 2012-2013 compared to $3,088,250 in 2011-2012, for a net increase of $ 197,220 or 6.4%. The differences are due to the following:

  • An increase in contribution funds of $180,000 to conduct consultations, primarily with Aboriginal groups who may be affected by the project;
  • An increase in operating funds of $20,000 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 2012-2013 represents $679,064 (20.7%) of total funding available compared to $1,029,560 (33.3%) spent at the same time last year, a net decrease of $350,496.

During the third quarter in 2012-2013, the Agency spent $(40,900) of the total funding available, compared to $585,114 or 19%, the same period in 2011-2012, for a net decrease of $626,014, which are primarily as a result of personnel costs, professional and special services and transfer payments.

  • Unlike the salary accrual in the third quarter of 2011-2012, a salary accrual was not done in the third quarter of 2012-2013.
  • The expense of professional and special services decreased by $57,745 between the third quarter of 2011-2012 ($79,287) and 2012-2013 ($21,542) due to reduced requirements for temporary help and legal services.
  • No contribution funds were issued in the third quarter of 2012-2013.

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

There were no significant changes to operations, personnel and programs.

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)  
 
  Fiscal year 2012-2013 Fiscal year 2011-2012
Budgetary Authorities Total available for use for the year ending* March 31, 2013 Used during the quarter ended December 31, 2011 Year-to-date used at quarter-end Total available for use for the year ending March 31, 2012 Used during the quarter ended December 31, 2012 Year-to-date used at quarter-end
Net Operating expenditures - Vote 30 3,163,150 (71,480) 587,324 2,963,150 585,114 935,735
Statutory Authority - Employee Benefit Plans 122,320 30,580 91,740 125,100 - 93,825
Total Budgetary Authorities 3,285,470 (40,900) 679,064 3,088,250 585,114 1,029,560

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


 

Table 2: Budgetary Expenditures by Standard Object (Unaudited)
 
  Fiscal year 2012-2013 Fiscal year 2011-2012
Expenditures: Planned expenditures for the year ending* March 31, 2013 Expended during the quarter ended December 31, 2012 Year-to-date used at quarter-end Planned expenditures for the year ending March 31, 2012 Expended during the quarter ended December 31, 2011 Year-to-date used at quarter-end
Personnel
 
817,320
 
(92,978)
 
490,321
 
820,100
 
291,059
 
679,434
 
Transportation and communication
 
128,643
 
15,911
 
51,395
 
188,897
 
17,599
 
56,037
 
Information
 
4,441
 
853
 
1,196
 
2,906
 
79
 
79
 
Professional and special services
 
391,886
 
21,542
 
39,355
 
454,805
 
79,287
 
85,353
 
Rentals
 
75,205
 
4,018
 
10,850
 
17,437
 
4,711
 
15,203
 
Repair and maintenance
 
3,732
 
-
 
2,906
 

 

 
Utilities, materials and supplies
 
8,147
 
2,622
 
5,790
 
5,813
 
6,592
 
7,667
 
Acquisition of machinery and equipment
 
26,215
 
7,132
 
7,882
 

 
987 
 
987
 
Transfer Payments
 
1,710,000
 
-
 
-
 
1,530,000 
 
184,800
 
184,800
 
Other subsidies and payments
 
119,881
 
-
 
5
 
65,386
 

 

 
Total net budgetary expenditures 3,285,470 (40,900) 679,064 3,088,250 585,114 1,029,560