Quarterly Financial Report April 1, 2012 to June 30, 2012

Northern Pipeline Agency
Quarterly Financial Report (unaudited)
For the Quarter Ended June 30, 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 as well asCanada’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) 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.

Further details on the Agency’s authority, mandate and program activities are available in Part II of the 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 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 2012-13 Main Estimates.

In fiscal year 2012-2013, frozen allotments will be established by Treasury Board authority in departmental votes to prohibit the spending of funds identified as savings measures in Budget 2012.  In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.

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. However, the spending authorities voted by Parliament remain on an expenditure basis.

2. Highlights of the First Fiscal Quarterand Comparative Results

This Quarterly Financial Report reflects the result as at June 30, 2012, including Main Estimates and Supplementary Estimates A for which full supply was released.  The details presented in this report focus on and compare the first quarter results of 2012-2013 with those of 2011-2012.

2.1 AuthoritiesAvailable for Use and Planned Spending for the Year

As at June 30, 2012, the Agency has authorities available for use of $3,225,320 in 2012-2013 compared to $1,328,100 in 2011-12, for a net increase of $1,897,220 or 143%. The changes occurred as follows:

• New authority - contribution funding of $1,710,000 to conduct consultations, primarily with Aboriginal groups who may be affected by the project,
• An increase in operating funds of $190,000 to support the consultation activities,
• A decrease in employee benefit plans of $2,780.

2.2 Authorities Used and Amounts Expended During the Quarter

During the first quarter of 2012-13, the Agency spent $82,949 or 2.58% of the total funding available, compared to $131,257 or 9.89%, during the same period in 2011-12, for a net decrease of $48,308, which is primarily as a result of personnel costs not yet invoiced from other departments for personnel seconded to the Agency.

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 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 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 Alaska Highway Gas Pipeline Project, if and when the project moves forward.

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

Budget 2011 provided new authority of $1.9M to create a cost-recovered consultation initiative, primarily focused on Aboriginal groups.  Four additional Full Time Equivalent personnel were seconded to the Agency to enhance consultation and technical capacity. 

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:

 

Serge P. Dupont Commissioner		Chrystia Chudczak Assistant Commissioner
August 28, 2012 Date Signed Ottawa, Canada

 

 

Table 1: Statement of Authorities (Unaudited)  
 

	Fiscal year 2012-2013 (in dollar)			Fiscal year 2011-2012 (in dollar)
	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, 2013	June 30, 2012	quarter-end	March 31, 2012	June 30, 2011	quarter-end
Net Operating expenditures Vote 30	3,103,000	52,369	52,369	1,203,000	99,982	99,982
Statutory Authority - Employee Benefit Plans	122,320	30,580	30,580	125,100	31,275	31,275
Total Budgetary Authorities	3,225,320	82,949	82,949	1,328,100	131,257	131,257

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

Table 2: Budgetary Expenditures by Standard Object (Unaudited)
 

	Fiscal year 2012-2013 (in dollar)			Fiscal year 2011-2012 (in dollar)
	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
Expenditures:	March 31, 2013	June 30, 2012	quarter-end	March 31, 2012	June 30, 2011	quarter-end
Personnel	817,320	57,049	57,049	820,100	104,991	104,991
Transportation and communication	118,436	14,269	14,269	130,000	15,854	15,854
Information	4,089	-	-	2,000	-	-
Professional and special services	360,795	3,835	3,835	313,000	4,740	4,740
Rentals	69,238	6,987	6,987	12,000	4,447	4,447
Repair and maintenance	3,436	-	-	2,000	-	-
Utilities, materials and supplies	7,501	809	809	4,000	1,225	1,225
Acquisition of machinery and equipment	24,135	-	-	-	-	-
Transfer Payments	1,710,000	-	-	-	-	-
Other subsidies and payments	110,370	-	-	45,000	-	-
Total net budgetary expenditures	3,225,320	82,949	82,949	1,328,100	131,257	131,257

* Planned expenditures do not reflect measures announced in Budget 2012.