Quarterly Financial Report From July 1 2014 to September 30, 2014

Northern Pipeline Agency
Quarterly Financial Report (unaudited)
For the Quarter Ended September 30, 2014
 

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 Budget 2014 - The Road to Balance: Creating Jobs and Opportunities (Budget 2014).  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 Programs

The Northern Pipeline Agency (“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 (Foothills).  The pipeline is to carry natural gas from Prudhoe Bay, Alaska, to the lower 48 states. Foothills is now owned by TransCanada PipeLines Limited (TCPL).

Further details on the Agency’s authority, mandate and programs are available in Part II of the 2014-2015 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), for the 2014-2015 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.

In regards to the Agency’s specific situation, it will not be drawing on Budget 2012 funding for 2014-2015.  Please see the explanation in Section 5 below.

Although the Agency uses the full accrual method of accounting to prepare and present its annual unaudited 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 September 30, 2014, including Main Estimates, Supplementary Estimates (A), and the details presented in this report focus on and compare the second quarter results of 2014-2015 with those of 2013-2014.

2.1 Authorities Available for Use and Planned Spending for the Year

As at September 30, 2014, the Agency has authorities available for use of $750,000 in 2014-2015 compared to $3,123,930 in 2013-2014, for a net decrease of $2,373,930 or 76%. The difference is due to the following:

• An overall reduction of net operating funds totalling $691,675 due to less consultation activities, primarily with Aboriginal groups who may be affected by the project since the Agency is scaling down operations, as described in section 3.1.
• A decrease in the grants and contribution funds totalling $1,610,000;
• A decrease in employee benefit plans of $72,255.

In 2014–2015, and to align with reduced AHGP project activities in the foreseeable future, the Agency will scale down its operations while continuing to fulfil Canada’s obligations as set out in the Northern Pipeline Act (the Act) and the Agreement under the Act.

2.2 Authorities Used and Amounts Expended during the Second quarter

During the second quarter in 2014-2015, the Agency spent $86,308 or 11.51 % of the total funding available, compared to $260,092 or 8.33% of the total funding available the same period in 2013-2014, for a net decrease of $173,784. The key differences are as follows:

• Expenditures on Salaries decreased by $171,289 or 69.17% between the second quarter of 2014-2015 and second quarter of 2013-2014, as the Agency has scaled down its personnel costs.
• No expenditures on Transportation and Communication occurred during the second quarter of 2014-2015, compared to $1,885 during the second quarter of 2013-2014, as a result of the reduced need for transportation to engage groups and TCPL on project activities.
• Expenditures on Rental decreased by $727 or 20.13% between the second quarter of 2014-2015 and second quarter of 2013-2014, as the Agency scaled down and less office space is required.
• No contribution funds were issued in the second quarter of 2014-2015, nor were there funds issued in the second quarter of 2013-2014.

3. Risks and Uncertainties

In planning for an efficient and effective review and regulation of the project, the Agency must adapt to project developments by the proponent, i.e., to carry out its responsibilities and to make the necessary preparations in concert with the pace of the project’s development.

3.1 Risk Mitigation Framework

The Agency identifies and responds to the pace of the project’s development by continual 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 TCPL announced a work plan to assess liquefied natural gas (LNG) exports from south-central Alaska as an alternative to a natural gas pipeline through Canada.  In February 2013, TCPL notified the Agency that no further work is planned on the AHGP for now, and of their intentions to maintain the AHGP assets in Canada. To align with the reduction in the AHGP project activities for the foreseeable future, the Agency has scaled down its operations, while continuing to fulfill Canada’s obligations as set out in the Act.

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

There were no significant changes to operations, personnel and programs during the second quarter of 2014-2015.

5. Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that are being implemented in order 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 2014-2015, in light of the March 30, 2012 announcement by TCPL noted in Section 3.1 (Risk Mitigation Framework) above.

Approved by:

Table 1: Statement of Authorities (Unaudited) (in dollars)

	Fiscal year 2014-2015			Fiscal year 2013-2014
Budgetary Authorities	*Total available for use for the year ending March 31,  2015	Used during the quarter ended September 30, 2014	Year-to-date used at quarter-end	*Total available for use for the year ending March 31, 2014	Used during the quarter ended September 30, 2013	Year-to-date used at quarter-end
Net Operating expenditures - Vote 30	701,325	74,140	154,109	3,003,000	229,860	506,091
Statutory Authority - Employee Benefit Plans	48,675	12,168	24,337	120,930	30,232	60,465
Total Budgetary Authorities	750,000	86,308	178,446	3,123,930	260,092	567,366

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

Table 2: Budgetary Expenditures by Standard Object (Unaudited) (in dollars)

	Fiscal year 2014-2015			Fiscal year 2013-2014
Expenditures:	*Planned expenditures for the year ending March 31, 2015	Expended during the quarter ended September 30, 2014	Year-to-date used at quarter-end	*Planned expenditures for the year ending March 31, 2014	Expended during the quarter ended September 30, 2013	Year-to-date used at quarter-end
Personnel	343,675	76,340	166,056	815,930	247,629	530,457
Transportation and communication	59,925	-	-	143,312	1,885	4,776
Information	1,100	-	-	3,125	-	19
Professional and special services	285,400	7,049	7,297	365,830	6,911	25,086
Rentals	35,525	2,884	5,251	68,982	3,611	6,432
Repair and maintenance	100	-	-	2,388	-	-
Utilities, materials and supplies	5,285	109	226	10,314	91	631
Acquisition of machinery and equipment	8,990	-	-	17,323	-	-
Transfer Payments	10,000	-	-	1,620,000	-	-
Other subsidies and payments	-	(74)**	(384)**	76,726	(35)	(35)
Total net budgetary expenditures	750,000	86,308	178,446	3,123,930	260,092	567,366

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

** Credit rebate issued by the Bank of Montreal MasterCard Service.