Fiscal year 2015-2016
Statement of Management Responsibility Including Internal Control Over Financial Reporting
Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2016, and all information contained in these statements rests with the management of the Northern Pipeline Agency (“the Agency”). These financial statements have been prepared by management using the Government’s accounting policies, which are based on Canadian Public sector accounting standards.
Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management's best estimates and judgment, and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the Agency’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Agency’s Departmental Performance Report, is consistent with these financial statements.
Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.
Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training, and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the Agency; and through conducting an annual risk-based assessment of the effectiveness of the system of ICFR.
The system of ICFR is designed to mitigate risks to a reasonable level based on an on-going process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.
The Agency will be subject to periodic Core Control Audits performed by the Office of the Comptroller General and will use the results of such audits to adhere to the Treasury Board Policy on Internal Control.
In the interim, the Agency has undertaken a risk-based assessment of the system of ICFR for the year ended March 31, 2016, in accordance with the Treasury Board Policy on Internal Control, and the action plan is summarized in the annex.
The financial statements of the Agency have not been audited.
|
Original signed by:
Christyne Tremblay Commissioner September 02, 2016 Ottawa, Canada |
Original signed by:
Wayne Marshall Director of Operations August 25, 2016 Calgary, Canada |
| 2016 | 2015 | |
|---|---|---|
| Liabilities | ||
| Accounts payable and accrued liabilities (note 4) | 56,038 | 59,976 |
| Deferred revenue (note 5) | 4,075,883 | 4,282,129 |
| Total gross liabilities | 4,131,921 | 4,342,105 |
Liabilities held on behalf of Government |
||
| Deferred revenue (note 5) | (4,075,883) | (4,282,129) |
| Total liabilities held on behalf of Government | (4,075,883) | (4,282,129) |
Total net liabilities |
56,038 |
59,976 |
Financial assets |
||
| Due from Consolidated Revenue Fund | 21,928 | 29,187 |
| Accounts receivable (note 6) | 263,397 | 43,089 |
| Total gross financial assets | 285,325 | 72,276 |
Financial assets held on behalf of Government |
||
| Accounts receivable (note 6) | (242,396) | (30,400) |
| Total financial assets held on behalf of Government | (242,396) | (30,400) |
Total net financial assets |
42,929 |
41,876 |
Departmental net debt |
13,109 |
18,100 |
Non-financial assets |
||
| Tangible capital assets (note 7) | 13,109 | 18,100 |
| Total non-financial assets | 13,109 | 18,100 |
Departmental net financial position |
- |
- |
Contractual obligations (note 8)
The accompanying notes form an integral part of these financial statements.
|
Original signed by:
Christyne Tremblay Commissioner September 02, 2016 Ottawa, Canada |
Original signed by:
Wayne Marshall Director of Operations August 25, 2016 Calgary, Canada |
| 2016 Planned Results |
2016 | 2015 | |
|---|---|---|---|
| Expenses | |||
| Salaries and employee benefits | 344,560 | 228,858 | 273,801 |
| Professional and special services | 298,215 | 202,170 | 227,202 |
| Rentals | 60,000 | 10,280 | 10,846 |
| Transportation and communications | 30,000 | 3,948 | 1,695 |
| Amortization (note 7) | 3,095 | 3,040 | 3,381 |
| Utilities, materials, supplies | 5,000 | 346 | 783 |
| Transfer payments | 10,000 | - | - |
| Acquisition of machinery and equipment | 1,000 | - | - |
| Information | 1,000 | - | - |
| Small equipment | 1,000 | - | - |
| Total Recoverable Expenses | 753,870 | 448,642 | 517,708 |
| Services provided without charge by other government departments (note 9) |
3,000 | 2,661 | 2,898 |
| Total expenses | 756,870 | 451,303 | 520,606 |
| Revenues | |||
| Regulatory Revenue | 753,870 | 448,642 | 517,708 |
| Revenue earned on behalf of government | (753,870) | (448,642) | (517,708) |
| Total Revenues | - | - | - |
| Net cost of operations before government funding and transfers |
756,870 | 451,303 | 520,606 |
| Government funding and transfers | |||
| Net cash provided by Government | 457,852 | 517,114 | |
| Change in due from Consolidated Revenue Fund | (7,259) | 594 | |
| Services provided without charge by other government departments (note 9) |
2,661 | 2,898 | |
| Transfer of assets to other government departments | (1,951) | - | |
| Net cost of operations after government funding and transfers |
- | - | |
| Departmental net financial position - beginning of year |
- | - | |
| Departmental net financial position – End of year |
- | - | |
The accompanying notes from an integral part of these financial statements.
| 2016 | 2015 | |
|---|---|---|
| Net cost of operations after government funding and transfers | - | - |
| Change due to tangible capital assets | ||
| Transfer of tangible capital assets to other government departments (note 7) |
(1,951) | - |
| Amortization of tangible capital assets (note 7) | (3,040) | (3,381) |
| Total change due to tangible capital assets | (4,991) | (3,381) |
| Net decrease in departmental net debt | (4,991) | (3,381) |
| Departmental net debt - Beginning of year | 18,100 | 21,481 |
| Departmental net debt - End of year | 13,109 | 18,100 |
| The accompanying notes form an integral part of these financial statements. | ||
| 2016 | 2015 | |
|---|---|---|
| Operating activities | ||
| Net cost of operations before government funding and transfers: | 451,303 | 520,606 |
Non-cash items: |
||
| Amortization of tangible capital assets (note 7) | (3,040) | (3,381) |
| Services provided without charge by other government departments (note 9) |
(2,661) | (2,898) |
Variations in Statement of financial position: |
||
| Increase in net accounts receivable | 8,312 | 12,289 |
| Decrease (increase) in accounts payable and accrued liabilities |
3,938 | (9,502) |
| Cash used in operating activities | 457,852 | 517,114 |
Net cash provided by Government of Canada |
457,852 |
517,114 |
The accompanying notes form an integral part of these financial statements.
Northern Pipeline Agency
Notes to the Financial Statements (unaudited)
For the Year Ended March 31
1. Authority and objectives
In 1978, Parliament enacted the Northern Pipeline Act to:
- give effect to an Agreement on Principles applicable to a Northern Natural Gas Pipeline (the Agreement) between the Governments of Canada and the United States of America; and
- establish the Northern Pipeline Agency (the Agency) to oversee the planning and construction of the Canadian portion of the project.
The Agency is designated as a department and named under Schedule I.1 of the Financial Administration Act, reporting to Parliament through the Minister of Natural Resources.
The Agency has a single program. The object of the program is to oversee and regulate the planning and construction of the Canadian portion of the Alaska Highway Natural Gas Pipeline Project.
In accordance with Section 29 of the Northern Pipeline Act (the Act) and with the National Energy Board Cost Recovery Regulations, the Agency is required to recover all of its annual operating costs from the companies holding certificates of public convenience and necessity. Currently, Foothills Pipe Lines Ltd. (Foothills) is the sole holder of such certificates.
The Agency is reimbursed all recoverable expenses by Foothills and the funds are deposited in the Consolidated Revenue Fund (“CRF”) of the Government of Canada. The Government of Canada, in turn, provides funds for working capital through an annual Parliamentary appropriation which is paid from the CRF.
Foothills has put the Alaska Highway gas pipeline project on hold pending further study of an alternative project that would exclude Canada. In 2015-16, and to align with reduced project activities in the foreseeable future, the Agency has scaled down its operations while continuing to fulfil Canada’s obligations as set out in the Agreement and the Act.
2. Summary of significant accounting policies
These financial statements have been prepared using the Government’s accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.
Significant accounting policies are as follows:
(a) Parliamentary authorities:
The Agency is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Agency do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the “Expenses” and “Revenues” sections of the Statement of Operations and Departmental Net Financial Position are the amounts reported in the Future-oriented Statement of Operations included in the 2015-2016 Report on Plans and Priorities. Planned results are not presented in the “Government funding and transfers” section of the Statement of Operations and Departmental Net Financial Position and in the Statement of Change in Departmental Net Debt because these amounts were not included in the 2015-2016 Report on Plans and Priorities.
(b) Net cash provided by Government:
The Agency operates within the CRF, which is administered by the Receiver General for Canada. All cash received by the Agency is deposited to the CRF and all cash disbursements made by the Agency are paid from the CRF. The net cash provided by the Government is the difference between all cash receipts and all cash disbursements including transactions between the Agency and departments of the federal government.
(c) Amount due from or to the CRF:
Amounts due from or to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the Agency is entitled to draw from CRF without further authorities to discharge liabilities.
(d) Revenue/Deferred revenue:
Revenues from regulatory fees recovered from Foothills are recognized in the year in which the expenses were incurred.
Funds received from external parties for specified purposes are recorded upon receipt as deferred revenue. These revenues are recognized in the period in which the related expenses are incurred.
Revenues that are non-respendable are not available to discharge the Agency’s liabilities. While the Commissioner is expected to maintain accounting control, she has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity’s gross revenues.
(e) Expenses:
Expenses are recorded on the accrual basis.
Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met all eligibility criteria or the entitlements established for the transfer payment program.
Services provided without charge from other government departments for Management Services provided by the Natural Resources Canada are recorded as operating expenses at their estimated cost.
(f) Employee future benefits:
All employees of the Agency are seconded from other government departments. Future benefits for seconded employees, including pension benefits, providing services to the Agency are funded by the employee’s home-base department. Estimated costs charged by Treasury Board Secretariat are included in the employee benefits charged to the Agency.
(g) Accounts receivable:
Accounts receivable are stated at the lower of cost and net recoverable value. A valuation allowance is recorded for accounts receivable where recovery is considered uncertain.
(h) Tangible capital assets:
All tangible capital assets having an initial cost of $1,000 or more are recorded at their acquisition cost. The Agency does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian reserves and museum collections.
Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the assets as follows:
| Machinery and equipment | 10 years |
| Office furniture and equipment | 10 years |
| Informatics hardware | 4 years |
(i) Measurement uncertainty:
The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. Salaries and employee benefits and the useful life of tangible capital assets are the most significant items where estimates are used. Actual results could differ significantly from those estimated. Management’s estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year in which they become known.
3. Parliamentary authorities
The Government of Canada funds the expenses of the Agency through parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, the Agency has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled as follows:
(a) Reconciliation of net cost of operations to current year authorities used:
| 2016 | 2015 | |
|---|---|---|
| (in dollars) | ||
| Net cost of operations before government funding and transfers | 451,303 | 520,606 |
| Adjustments for items affecting net cost of operations but not affecting authorities: |
||
| Services provided without charge by other government departments | (2,661) | (2,898) |
| Amortization of tangible capital assets | (3,040) | (3,381) |
| Refund to prior years' expenditure | - | 1,983 |
| Other adjustment | 10,453 | - |
| Total items affecting net cost of operations but not affecting authorities | 4,752 | (4,296) |
| Current year authorities used | 456,055 | 516,310 |
(b) Authorities provided and used:
| 2016 | 2015 | |
|---|---|---|
| (in dollars) | ||
| Authorities provided: | ||
| Vote 1 – Program expenditures | 701,215 | 701,325 |
| Statutory amounts | 30,086 | 37,465 |
| Less: | ||
| Lapsed - Operating | (275,246) | (222,480) |
| Current year authorities used | 456,055 | 516,310 |
4. Accounts payable and accrued liabilities
The following table presents details of the Agency’s accounts payable and accrued liabilities balances:
| 2016 | 2015 | |
|---|---|---|
| (in dollars) | ||
| Accounts payable to other government departments and agencies | 55,566 | 59,326 |
| Accounts payable to external parties | 332 | 203 |
| Total accounts payable | 55,898 | 59,529 |
| Accrued liabilities | 140 | 447 |
| Total accounts payable and accrued liabilities | 56,038 | 59,976 |
5. Deferred revenue
Deferred revenue consists of:
| 2016 | 2015 | |
|---|---|---|
| (in dollars) | ||
| Deferred Revenue, beginning of year | 4,282,129 | 4,452,433 |
| Net billings in the fiscal year | 242,396 | 347,404 |
| Recoverable expenses in the current year | (448,642) | (517,708) |
| Deferred Revenue, end of year | 4,075,883 | 4,282,129 |
| Deferred revenues held on behalf of Government | (4,075,883) | (4,282,129) |
| Net closing balance | - | - |
6. Accounts receivable
The following table presents details of the Agency’s accounts receivable balances:
| 2016 | 2015 | |
|---|---|---|
| (in dollars) | ||
| Receivables - Other government departments and agencies | 21,001 | 12,689 |
| Receivables - External parties | 242,396 | 30,400 |
| Gross accounts receivable | 263,397 | 43,089 |
| Accounts receivable held on behalf of Government | (242,396) | (30,400) |
| Net accounts receivable | 21,001 | 12,689 |
7. Tangible capital assets
| (in dollars) | Cost | Accumulated amortization | Net Book Value | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Capital asset class | Opening balance | Acquisition | Disposals, write-offs and adjustment (1) | Closing balance | Opening balance | Amortization | Disposals, write-offs and adjustment (1) | Closing balance | 2016 | 2015 |
| Machinery and equipment | 24,829 | - | - | 24,829 | 9,946 | 2,482 | - | 12,428 | 12,401 | 14,883 |
| Office furniture and equipment | 12,362 | - | 4,324 | 8,038 | 9,145 | 558 | 2,373 | 7,330 | 708 | 3,217 |
| Informatics Hardware | 2,760 | - | - | 2,760 | 2,760 | - | - | 2,760 | - | - |
| Total | 39,951 | - | 4,324 | 35,627 | 21,851 | 3,040 | 2,373 | 22,518 | 13,109 | 18,100 |
(1) During the year, the Agency transferred office furniture to another government department with a net effect of $ 1,951 on the agency net financial position.
8. Contractual obligations
The nature of the Agency’s activities can result in multi-year contracts whereby the Agency will be obligated to make future payments when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:
| 2017 | 2018 | Total | |
|---|---|---|---|
| (in dollars) | |||
| Operating Leases | 9,471 | 9,471 | 18,942 |
9. Related party transactions
The Agency is related as a result of common ownership to all Government of Canada departments, agencies and Crown corporations. The Agency enters into transactions with these entities in the normal course of business and on normal trade terms. In addition, the Agency has an agreement with Natural Resources Canada related to the provision of finance and procurement, financial system, human resources and assets management services.
During the year, the Agency received common services which were obtained without charge from other government departments as disclosed below.
(a) Common services provided without charge by other government department
Management services provided without charge by Natural Resources Canada was $2,661 ($2,898 in 2015).
The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provided by Public Services and Procurement Canada are not included in the Department’s Statement of Operations and Departmental Net Financial Position.
(b) Other transactions with related parties
| 2016 | 2015 | |
|---|---|---|
| (in dollars) | ||
| Expenses – Other government departments and agencies | 432,754 | 491,633 |
Expenses disclosed in (b) exclude common services provided without charge which are already disclosed in (a).
10. Easement fee
In 1983, the Government of Canada, pursuant to Subsection 37(3) of the Act, granted Foothills a twenty-five year easement upon and under lands in the Yukon Territory. For the right of easement, Foothills is to pay the Agency an annual amount of $30,400; of this annual amount, $2,806 ($2,806 in 2015) is collected on behalf of and forwarded directly to the Government of the Yukon Territory. The balance of $27,594 ($27,594 in 2015) was remitted to the Government of Canada by the Agency. The $30,400 is not recorded in the Statement of Operations and Departmental Net Financial Position.
11. Financial instruments
The Agency’s financial instruments consist of accounts receivable, accounts payable, deferred revenues and accrued liabilities. Unless otherwise noted, it is management’s opinion that the Agency is not exposed to significant interest, currency or credit risk arising from these financial instruments. Unless otherwise disclosed in these financial statements, management estimates that the carrying values of the financial instruments approximate their fair value due to their impending maturity.
Annex to the Statement of Management Responsibility
Including Internal Control over Financial Reporting
of the Northern Pipeline Agency
for fiscal year 2015-16 (unaudited)
Summary of the assessment of effectiveness of the system of internal control over financial reporting and the action plan
- Introduction
This unaudited Annex provides summary information on the measures taken by the Northern Pipeline Agency (the Agency) to maintain an effective system of internal control over financial reporting (ICFR).
The Agency has a service partnership agreement with Natural Resources Canada (NRCan) regarding a full range of administrative and financial services, including: the maintenance of a delegation instrument and financial signing authority Specimen Signature Records, financial statement preparation, accounting, and financial and procurement transactions processing. As a result, the Agency’s system of internal control is reliant on NRCan’s system of internal control.
The Agency will leverage the results of the periodic core control audits performed by the Office of the Comptroller General when performed. [1]
Detailed information on the Agency’s authority, mandate, and programs can be found in the 2015-16 Departmental Performance Report and the 2016-17 Report on Plans and Priorities.
- Assessment results during fiscal year 2015-16
For the most part, the Agency operates under NRCan’s control environment.
Summary information on the maintenance of an effective system of ICFR by NRCan can be found in the Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting of Natural Resources Canada for fiscal year 2015-16 (the NRCan Annex), which accompanies the NRCan 2015-16 Financial Statements.
Differences in processes between NRCan and the Agency are as follows:
- Some electronic tools used by NRCan are not used by the Agency;
- The billing process for the recovery of expenditures from Foothills Pipe Lines Ltd./TransCanada PipeLines Limited is unique to the Agency.
Those differences are incorporated within the NRCan internal control documentation.
During 2015-16, as part of the on-going monitoring of its system of ICFR, NRCan completed the following exercises for processes that impact the financial information of the Agency:
- Reassessment of the control environment portion of the entity-level controls and of the internal controls in the areas of financial close [2] and reporting and grants and contributions (standard).
- IT General Controls were reassessed for Main IT general controls, IT general controls of the Application for Modules and Interfaces (AMI), the departmental e-Tools, and the SAP Logical Security.
Information on the results of the assessments mentioned above can be found in the NRCan Annex, which accompanies the NRCan 2015-16 Financial Statements. The NRCan Annex also refers to other processes assessed in 2015-16 which are not applicable to the Agency.
- Assessment plan
A Service Partnership Agreement between NRCan and the Agency for administrative and financial services is still in effect. The NRCan on-going monitoring plan for the annual risk-based assessment of its system of ICFR appears in the NRCan Annex that accompanies the NRCan 2015-16 Financial Statements.
[1]Core control audits of small departments are conducted by the Office of the Comptroller General over a periodic cycle, to assess an individual department’s compliance with key controls from Treasury Board policy instruments. When such an audit is performed in the future, the Agency may refer to the audit report rather than produce this Annex for the relevant fiscal year.
[2]Financial close refers to the posting of accounting entries at period-end to ensure all financial activity for the period is accurately recorded in the accounts.
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