Quarterly Financial Report From October 1, 2013 to December 31, 2013

Northern Pipeline Agency
Quarterly Financial Report (unaudited)
For the Quarter Ended December 31, 2013
 

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 2013 (Budget 2013).  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 Ltd. is now owned completely by TransCanada PipeLines Limited (TransCanada).

Further details on the Agency’s authority, mandate and programs are available in Part II of the 2013-14 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), Supplementary Estimates (B), as well as transfers from Treasury Board, for the 2013-14 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 2013 was tabled in Parliament on March 21, after the tabling of the Main Estimates on February 25, 2013, while 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 in Budget 2013 could not be reflected in the 2013-14 Main Estimates and the measures in Budget 2012 were not reflected in the 2012-13 Main Estimates.

In fiscal year 2013-14, frozen allotments were established by Treasury Board authority in departmental votes to prohibit the spending of funds identified as savings measures in Budget 2013. 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. The same approach was taken in 2012-13 for savings measures in Budget 2012.

In regards to the Agency’s specific situation, the Agency will not be drawing on Budget 2012 funding for 2013-14.  Please see the explanation in Section 5 below.

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 December 31 Fiscal Quarter and Comparative Results

This Quarterly Financial Report reflects the result as at December 31, 2013, including Main Estimates, Supplementary Estimates (A), Supplementary Estimates (B), and the Operating Budget Carry Forward. The details presented in this report focus on and compare the third quarter results of 2013-14 with those of 2012-13.

2.1 Authorities Available for Use and Planned Spending for the Year

As at December 31, 2013, the Agency has authorities available for use of $3,123,930 in 2013-14 compared to $3,285,470 in 2012-13, for a net decrease of $ 161,540 or 4.92%. The key differences are due to the following:

• A reduction of program expenditures by $100,000 includes transfer payments of $90,000 and other program expenditures of $10,000; and
• A reduction by $60,150 as no operating budget carry forward was allowed for 2013-14; and
• A decrease in employee benefit plans of $1,390.

2.2 Authorities Used and Amounts Expended During the Quarter

During the third quarter in 2013-14, the Agency spent $244,690 or 7.83% of the total funding available, compared to $(40,900) of the total funding available the same period in 2012-13, for a net increase of $285,590. However, year to date for 2013-14 expenditure is at $812,056 compared to $679,064 for the same period in 2012-13, for a net increase of $132,992 or 19.58%. The key differences are as follows:

• During the third quarter of 2013-14, the personnel expenditure was $213,335 compared to $(92,978) for the same quarter of 2012-13. The reason for this difference is because salary accrual was not undertaken in 2012-13.
• Due to a reduced amount of engagement activities, there was a 85.77% decrease in transportation expenditures between the third quarter of 2012–13 and third quarter of 2013–14, from $15,911 to $2,264.
• Expenditures on professional and special services increased by $4,337 or 20.13 % between the third quarter of 2012-13 and 2013-14 due to necessary legal and publication costs associated with the completion of an Order in Council decision resulting in a remission order being released in December 2013.
• No acquisition of machinery or equipment occurred in the third quarter 2013-14, compared to $7,132 expended in the same quarter of 2012–13.

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. On March 30, 2012, ExxonMobil, ConocoPhillips, BP (gas producers) and TransCanada announced a work plan to assess LNG exports from south-central Alaska as an alternative to a natural gas pipeline through Canada.  In January 2014, the State of Alaska Governor Parnell announced that the State had signed an agreement with the gas producers and TransCanada outlining a roadmap for the proposed all-Alaska liquefied natural gas (LNG) export project studies to proceed.

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. As a result of the project not being actively pursued by TransCanada at this time, the Agency will continue to ramp down its operations over 2013-14. The Agency will maintain a core minimum team to fulfil existing responsibilities until such time as TransCanada resumes the project or those Agency actions or decisions are needed.

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

During the third quarter of 2013–14, six of the ten staff departed the Agency. The six staffs were either on assignments or term positions with the Agency that ended, or where staff found other employment and left the Agency. The remaining four staff absorbed the program workload given the reduced level of activities involved.

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 2013-14, in light of the March 30, 2012 announcement noted in the Risk and Uncertainties section above. 

 

Approved by:

Serge P. Dupont, Commissioner		Wayne J. Marshall, Director of Operations
Date Signed: February 25, 2014 Ottawa, Canada		Date Signed: February 25, 2014 Calgary, Alberta

 

Table 1: Statement of Authorities (Unaudited)  
 

	Fiscal year 2013-2014				Fiscal year 2012-2013
	*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, 2014	December 31, 2013	quarter-end		March 31, 2013	December 31, 2012	quarter-end
Net Operating expenditures - Vote 30	3,003,000	214,457	721,358		3,163,150	(71,480)	587,324
Statutory Authority - Employee Benefit Plans	120,930	30,233	90,698		122,320	30,580	91,740
Total Budgetary Authorities	3,123,930	244,690	812,056		3,285,470	(40,900)	679,064

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

Table 2: Budgetary Expenditures by Standard Object (Unaudited)
 

	Fiscal year 2013-2014				Fiscal year 2012-2013
	*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, 2014	December 31, 2013	quarter-end		March 31, 2013	December 31, 2012	quarter-end
Personnel	815,930	213,335	743,792		817,320	(92,978)	490,321
Transportation and communication	143,312	2,264	7,039		128,640	15,911	51,395
Information	3,125	671	690		4,441	853	1,196
Professional and special services	365,830	25,879	50,966		391,886	21,542	39,355
Rentals	68,982	1,579	8,011		75,205	4,018	10,850
Repair and maintenance	2,388	669	669		3,732	-	-
Utilities, materials and supplies	10,314	406	1,037		8,147	2,622	5,790
Acquisition of machinery and equipment	17,323	-	-		26,215	7,132	7,882
Transfer Payments	1,620,000	-	-		1,710,000	-	72,270
Other subsidies and payments	76,726	(113)	(148)		119,881	-	5
Total net budgetary expenditures	3,123,930	244,690	812,056		3,285,470	(40,900)	679,064

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