NPA Future-oriented Financial Statements

Statement of Management Responsibility

The Agency’s management is responsible for these future-oriented financial statements, including responsibility for the appropriateness of the assumptions on which these statements are prepared.  These statements are based on the best information available and assumptions adopted as at December 31, 2012 and reflect the plans described in the Report on Plans and Priorities. 

These Future-oriented Financial Statements have not been audited.

 

Serge P. Dupont Commissioner		Chrystia Chudczak Assistant Commissioner
January 30th, 2013 Ottawa, Canada		January 30th, 2013 Ottawa, Canada

 

Northern Pipeline Agency
Future-oriented Statement of Financial Position (Unaudited)
As at March 31

	Estimated Results 2013	Planned Results 2014
Liabilities
Accounts payable and accrued liabilities (note 6)	$166,421	$200,941
Deferred revenue (note 7)	2,302,099	3,267,222
Total gross liabilities	2,468,520	3,468,163
Liabilities held on behalf of Government
Deferred revenue (note 7)	(2,302,099)	(3,267,222)
Total liabilities held on behalf of Government	(2,302,099)	(3,267,222)
Total net liabilities	166,421	200,941
Financial assets
Due from Consolidated Revenue Fund	139,905	179,061
Accounts receivable and advances (note 8)	1,242,877	366,658
Total gross financial assets	1,382,782	545,719
Financial assets held on behalf of Government
Accounts receivable (note 8)	(1,242,477)	(366,258)
Total financial assets held on behalf of Government	(1,242,477)	(366,258)
Total net financial assets	140,305	179,461
Departmental net debt	26,116	21,480
Non-financial assets
Tangible capital assets (note 9)	26,116	21,480
Total non-financial assets	26,116	21,480
Departmental net financial position	$0	$0

Contractual obligations (Note 10)
The accompanying notes form an integral part of these future-oriented financial statements.
Information for the year ending March 31, 2013 includes actual amounts from April 1, 2012 to December 31, 2012.

 

Serge P. Dupont Commissioner		Chrystia Chudczak Assistant Commissioner
January 30th, 2013 Ottawa, Canada		January 30th, 201 Ottawa, Canada

 

Northern Pipeline Agency
Future-oriented Statement of Operations and Departmental Net Financial Position (Unaudited)
For the Year Ending March 31
 

	Estimated Results 2013	Planned Results 2014
Expenses
Salaries and employee benefits	$1,324,799	$1,317,272
Professional and special services	438,040	1,369,269
Transportation and communication	88,048	244,505
Rentals	56,153	133,519
Small equipment	16,019	35,734
Utilities, Materials, Supplies	6,368	17,633
Information	2,500	5,998
Amortization	4,754	4,636
Other	5	-
Transfer payment	135,948	-
Total Recoverable Expenses	2,072,634	3,128,566
Services provided without charge by other government departments (note 11)	104,826	5,522
Revenues
Regulatory Revenue/ Revenue earned on behalf of government	2,072,634	3,128,566
Revenue earned on behalf of government	(2,072,634)	(3,128,566)
Total Revenues	0	0
Net cost of operations before government funding	2,177,460	3,134,088
Government funding
Net cash provided by Government	2,589,485	3,089,410
Change in due from Consolidated Revenue Fund	(516,851)	39,156
Services provided without charge by other government departments	104,826	5,522
Net cost of operations after government funding	0	0
Departmental net financial position - Beginning of year	0	0
Departmental net financial position - End of year	$0	$0

Information for the year ending March 31, 2013 includes actual amounts from April 1, 2012 to December 31, 2012.
The accompanying notes form an integral part of these future-oriented financial statements.

Northern Pipeline Agency
Future-oriented Statement of Operations in Departmental Net Net Debt (Unaudited)
For the Year Ending March 31

	Estimated Results 2013	Planned Results 2014
Net cost of operations after government funding and transfers	$ 0	$0
Change due to tangible capital assets
Amortization of tangible capital assets	(4,754)	(4,636)
Total change due to tangible capital assets	(4,754)	(4,636)
Net increase (decrease) in departmental net debt	(4,754)	(4,636)
Departmental net debt - Beginning of year	30,870	26,116
Departmental net debt - End of year	$26,116	$21,480

The accompanying notes form an integral part of these future-oriented  financial statements
Information for the year ending March 31, 2013 includes actual amounts from April 1, 2012 to December 31, 2012.

Northern Pipeline Agency
Future-oriented Statement of Cash Flows (Unaudited)
For the Year Ending March 31

	Estimated Results 2013	Planned Results 2014
Operating activities
Net cost of operations before government funding:	$2,177,460	$3,134,088
Non-cash items:
Amortization of tangible capital assets	(4,754)	(4,636)
Services provided without charge by OGD (note 11)	(104,826)	(5,522)
Variations in Statement of financial position:
Increase (decrease) in accounts receivable and advances	(13,181)	-
(Increase) decrease in accounts payable and accrued liabilities	534,786	(34,520)
Cash used in operating activities	2,589,485	3,089,410
Net cash provided by Government of Canada	$2,589,485	$3,089,410

The accompanying notes form an integral part of these future-oriented financial statements.

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;
• 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.1of the Financial Administration Act, reporting to Parliament through the Minister of Natural Resources.

The objectives of the Agency are to:

1. carry out and give effect to the Agreement of September 20, 1977 between Canada and the United States underpinning the project;
2. carry out, through the Agency, federal responsibilities in relation to the pipeline;
3. facilitate the efficient and expeditious planning and construction of the pipeline, taking into account local and regional interests;
4. facilitate consultation and coordination with the governments of the provinces and the territories traversed by the pipeline;
5. maximize the social and economic benefits of the pipeline while minimizing any adverse social and environmental effects; and
6. advance national economic and energy interests and to maximize related industrial benefits by ensuring the highest possible degree of Canadian participation.

In 1982, the sponsors of the Pipe line announced that the target date for completion had been set back until further notice and all parties scaled down their activities. Work continues to prepare the Agency to meet commitments set out in the Northern Pipeline Act should Foothills Pipe Lines Ltd. decide to proceed with the second stage of the Alaska Highway Gas Pipeline (AHGP) project .

In accordance with Section 29 of the Northern Pipeline 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 issued by the Agency.  Currently, Foothills is the sole holder of such certificates. The Government of Canada provides funds for working capital through an annual Parliamentary appropriation.

2. Significant Assumptions

The future-oriented financial statements have been prepared on the basis of  government priorities and the plans of the Agency as described in the Report on Plans and Priorities.

The main assumptions are as follows:

1. The Agency's activities are as reflected in 2012-13 authorities and 2013-14 Main Estimates.
2. Expenses and revenues, including the determination of amounts internal and external to the government, are based on historical experience, known information and expert opinion of people with appropriate knowledge of the Agency’s activities.
3. Estimated year-end information for 2012-13 is used as the opening position for the 2013-14 planned results.

These assumptions are adopted as at December 31, 2012.

On March 30, 2012, ExxonMobil, ConocoPhillips, BP and TransCanada announced that they are working together on a work plan to assess liquefied natural gas exports from south-central Alaska as an alternative to a natural gas pipeline through Canada. By virtue of its mandate, the Agency must be ready, engaged and prepared to lead the review of the AHGP project. As we understand that the AHGP remains an option for the transportation of Alaska natural gas, the Agency will continue to work with other federal agencies, provincial and territorial governments, and Aboriginal organizations to meet the objectives of the Act and the Agreement. Budget 2012 set aside financial authorities for the Agency to carry out federal regulatory responsibilities related to the project as it unfolds.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to accurately forecast final results for the remainder of 2012-13 and for 2013-14, the actual results achieved for both years are likely to vary from the forecast information presented; this variation could be material.

In preparing these future-oriented financial statements, the Agency has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events believed to be reasonable under the circumstances.

As the Agency regulates a single project, changes in the project proponent's plans and activities could lead to material differences between the future-oriented and the Agency’s audited financial statements.

Once the Report on Plans and Priorities is presented, the Agency will not be updating the forecasts for any changes to appropriations or forecast financial information made in ensuing supplementary estimates. Variances will be explained in the Departmental Performance Report.

These Future-oriented Financial Statements are based on spending authorities granted by Parliament and are consistent with the Main Estimates and Operating Budget Carry Forward for the 2012-13 fiscal year.

4. Summary of Significant Accounting Policies

The future-oriented financial statements have been prepared in accordance with the Treasury Board accounting policies in effect for the 2012-13 fiscal year. These accounting policies, stated below, are consistent with Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles.

Significant accounting policies are as follows:

a) Parliamentary appropriations:

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 appropriations are primarily based on cash flow requirements. Consequently, items recognized in the Future-oriented Statement of Operations and the Future-oriented Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 5 provide a high-level reconciliation between the bases of reporting.

b) Net cash provided by Government:

The Agency operates within the Consolidated Revenue Fund (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 made by the Agency within the federal Government.

c) Due from the Consolidated Revenue Fund (CRF):

Amounts due from/to the Consolidated Revenue Fund 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 the CRF without further Parliamentary expenditure authorities to discharge its liabilities.

d) Revenue/Deferred revenue is recognized on an accrual basis:

Revenues from regulatory fees recovered from Foothills are recognized in the year in which the expenses were incurred.

Revenues that have been received but not yet earned are recorded as deferred revenues. Deferred revenues represent the accumulation of excess billings over the actual expenses.

Revenues that are non-respendable are not available to discharge the Agency’s liabilities. While the Commissioner is expected to maintain accounting control,

he 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.

Contribution payments are recorded as expenses in the year in which the recipient meets the eligibility criteria or fulfills the terms of a contractual transfer agreement, provided that the transfer is authorized and a reasonable estimate can be made.

Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.

Services provided without charge from other government departments are recorded as operating expenses at their estimated cost and credited directly to equity.

f) Employee future benefits:

Future benefits for seconded employees, including pension benefits, providing services to the Agency are funded by the employee’s home-base department. Estimated costs are included in the employee benefits charged to the Agency.

g) Accounts receivable:

Receivables are stated at amounts expected to be ultimately realized. A provision is made for receivables where recovery is considered uncertain.

h) Tangible capital assets:

All tangible capital assets and leasehold improvements having an initial cost of $1,000 or more are recorded at their acquisition cost. Tangible capital assets owned by the Agency are valued at cost, net of accumulated amortization. Amortization is calculated using the straight-line method, 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 future-oriented financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the future-oriented financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. Actual results could differ significantly from those estimated.   Management’s estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the future-oriented financial statements in the year they become known.

5. Parliamentary Appropriations

The Government of Canada funds the expenses of the Agency through Parliamentary appropriations. Items recognized in the Future-oriented Statement of Operations and Financial Position in one year may be funded through Parliamentary appropriations 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 in the following tables:

(a) Reconciliation of net cost of operations to requested authorities

	Estimated Results 2013	Planned Results 2014
Net cost of operations before government funding	$2,177,460	$3,134,088
Adjustments for items affecting net cost of operations but
not affecting authorities:
Add (Less):
Services received without charge by other government departments	(104,826)	(5,522)
Amortization of tangible capital assets	(4,754)	(4,636)
Forecast authorities available	$2,067,880	$3,123,930

 

(b) Authorities requested
 

	Estimated Results 2013	Planned Results 2014
Vote 30 - Program expenditures	$3,103,000	$3,003,000
Vote 25 - Transfer from Vote 25	60,150
Statutory amounts	122,320	120,930
Lapsed - Operating	(1,217,590)
Forecast authorities available	$2,067,880	$3,123,930

Authorities presented reflect current forecasts of statutory items, approved initiatives included and expected to be included in Estimates documents and, when reasonable estimates can be made, estimates of amounts to be allocated from Treasury Board central votes.

6. Accounts payable

The following table presents details of the Agency’s accounts payable.

	Estimated Results 2013	Planned Results 2014
Payable to other government department and agencies	$130,387	$163,457
Payable to external parties	36,034	37,484
Total	$166,421	$200,941

7. Deferred revenue

Deferred revenue consists of:

	Estimated Results 2013	Planned Results 2014
Deferred revenue, opening balance	$984,212	$2,302,099
Net billings in the fiscal year	3,390,521	4,093,689
Recoverable expenses in the current year	(2,072,634)	(3,128,566)
Deferred revenue, gross closing balance	2,302,099	3,267,222
Deferred revenues held on behalf of Government	(2,302,099)	(3,267,222)
Net closing balance	$0	$0

8. Accounts Receivable and Advances

The following table presents details of the Agency’s accounts receivable and advances balances.

	Estimated Results 2013	Planned Results 2014
Receivables from external parties	$1,242,477	$366,258
Employee advances	400	400
Gross accounts receivable	1,242,877	366,658
Accounts receivable held on behalf of Government	(1,242,477)	(366,258)
Net account receivable	$400	$400

9. Tangible Capital Assets

Asset Class	Planned Results (2014)									Estimated Results 2013
	Cost				Accumulated Amortization				Net Book Value	Net Book Value
	Opening Balance	Acquisitions	Disposal and other adjs	Closing Balance	Opening Balance	Amortization	Disposal and other adjs	Closing Balance	As at March 31, 2014	As at March 31, 2013
Machinery and equipment	$24,829	-	-	$24,829	$4,980	$2,483	-	$7,463	$17,366	$19,849
Office furniture and equipment	12,362	-	-	12,362	7,012	1,236	-	8,248	4,114	5,350
Informatics hardware	9,301	-	-	9,301	8,384	917	-	9,301	0	917
Total	$46,492	-	-	$46,492	$20,376	$4,636	-	$25,012	$21,480	$26,116

10. Contractual Obligations

The nature of the Agency's activities can result in some large multi-year contracts and obligations 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:

	2013	2014	2015	2016	2017 and thereafter
Operating leases	16,678	17,257	17,302	11,440	10,193

11. 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 applicable to all individuals and enterprises except that certain services, as defined previously, are received without charge.

Common services received without charge by other government departments
These services received without charge have been recognized in the Agency's Future-oriented Statement of Operations as follows:

	Estimated Results 2013 (in dollars)	Planned Results 2014 (in dollars)
Audit services provided by the Office of the Auditor General of Canada	$99,301	$0
Management services provided by Natural Resources Canada	5,522	5,522
Total	$104,826	$5,522

 

The Government has structured some of its administrative activities for efficiency and cost-effectiveness purposes so that one department performs these on behalf of all without charge.  The costs of these services, which include payroll and cheque issuance services provided by Public Works and Government Services Canada are not included as an expense in the Agency’s Future-oriented Statement of Operations. 

Bill C-38 eliminated the requirement for the Agency to undergo an annual audit.  Section 13 of the Northern Pipeline Act, which dictated that “the accounts and financial transactions of the Agency shall be audited annually by the Auditor General of Canada and a report thereon shall be made to the Minister”, has been removed.  Fiscal year 2012-2013 will be the last year to be audited by the Office of Auditor General.  The Agency is investigating the usefulness of replacing the annual audit.

12. Easement Fee

In 1983, the Government of Canada, pursuant to Subsection 37(3) of the Northern Pipeline 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 is collected on behalf of and forwarded directly to the Government of the Yukon Territory; the balance of $27,594 is remitted to the Government of Canada by the Agency.

13. Accounting Change

The Agency has adopted the Public Sector accounting Board Standard 3410-Transfer Payments which became effective April 1, 2012 and had to be applied prospectively. This resulted in expensing prepaid transfer payments in the amount of $72,270.