Quarterly Financial Report From April 1 2014 to June 30, 2014

Northern Pipeline Agency
Quarterly Financial Report (unaudited)
For the Quarter Ended June 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 (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) 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 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 June 30, 2014, including Main Estimates, Supplementary Estimates (A), and the details presented in this report focus on and compare the first quarter results of 2014-2015 with those of 2013-2014.

2.1 Authorities Available for Use and Planned Spending for the Year

As at June 30, 2014, the Agency has authorities available for use of $750,000 in 2013-2014 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 First Quarter

During the first quarter in 2014-2015, the Agency spent $92,138 or 12.29% of the total funding available, compared to $307,274 or 9.84% of the total funding available the same period in 2013-2014, for a net decrease of $215,136, which is primarily as a result of personnel costs as well as professional and special services.

• Expenditures on salaries decreased by $193,113 or 68.28% between the first quarter of 2014-2015 and first quarter of 2013-14, as the Agency has scaled down its personnel costs.
• Expenditures on professional and special services decreased by $17,928 or 98.64% between the first quarter of 2014-2015 and the first quarter of 2013-2014, due to the completion of the Agency’s knowledge management and digitalization projects to digitize major historical and archival records of policy, project and other records.
• No expenditures on transportation and communication occurred during the first quarter of 2014-15, compared to $2,891 during the first quarter of 2013-14, as a result of the reduced need for transportation to engage groups and TCPL on project activities.
• No contribution funds were issued in the first quarter of 2014-2015, nor were there funds issued in the first 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 first quarter of 2014-2015. Since the previous quarterly report as at December 31, 2013 (Third Quarter of 2013-2014), the Agency staff level has dropped further from four staff to three.

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:

Bob Hamilton, Commissioner		Wayne Marshall, Director of Operations
Date Signed August 29, 2014 Ottawa, Ontario		Date Signed August 29, 2014 Calgary, Alberta

 

Table 1: Statement of Authorities (Unaudited)

Budgetary Authorities	Fiscal year 2014-2015			Fiscal year 2013-2014
	*Total available for use for the year ending 31-Mar-15	Used during the quarter ended 30-Jun-14	Year-to-date used at  quarter-end	*Total available for use for the year ending 31-Mar-14	Used during the quarter ended 30-Jun-13	Year-to-date used at  quarter-end
Net Operating expenditures - Vote 30	701,325	79,969	79,969	3,003,000	277,042	277,042
Statutory Authority - Employee Benefit Plans	48,675	12,169	12,169	120,930	30,232	30,232
Total Budgetary Authorities	750,000	92,138	92,138	3,123,930	307,274	307,274

* 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)

Expenditures:	Fiscal year 2014-2015			Fiscal year 2013-2014
	*Planned expenditures for the year ending  31-Mar-15	Expended during the quarter ended 30-Jun-14	Year-to-date used at quarter-end	*Planned expenditures for the year ending 31-Mar-14	Expended during the quarter ended 30-Jun-13	Year-to-date used at quarter-end
Personnel	343,675	89,715	89,715	815,930	282,828	282,828
Transportation and communication	59,925	-	-	143,312	2,891	2,891
Information	1,100	-	-	3,125	19	19
Professional and special services	285,400	248	248	365,830	18,176	18,176
Rentals	35,525	2,368	2,368	68,982	2,821	2,821
Repair and maintenance	100	-	-	2,388	-	-
Utilities, materials and supplies	5,285	117	117	10,314	539	539
Acquisition of machinery and equipment	8,990	-	-	17,323	-	-
Transfer Payments	10,000	-	-	1,620,000	-	-
Other subsidies and payments	-	(310)**	(310)**	76,726	-	-
Total net budgetary expenditures	750,000	92,138	92,138	3,123,930	307,274	307,274

* 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.