Northern Pipeline Agency Quarterly Financial Report (unaudited) For the Quarter Ended December 31, 2018

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 and any Supplementary Estimates approved in a given year by the date of this report, as well as Canada’s Budget 2018. 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 (Agency) was established by the Northern Pipeline Act (Act) in 1978 and, in the context of the 1977 Agreement between Canada and the United States of America on Principles Applicable to a Northern Natural Gas Pipeline. The Agency has a mandate to carry out federal responsibilities in respect of the planning and construction of the Canadian portion of the Alaska Highway Gas Pipeline (AHGP). The Agency plays a key role in supporting efficient and expeditious regulatory approval while ensuring environmental protection and social and economic benefits for Canada.

Further details on the Agency’s authority, mandate and programs are available in Part II of the 2018-2019 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 those used by the Agency are consistent with the Main Estimates and Supplementary Estimates (A) for the 2018-2019 fiscal year. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before money 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.

The Agency uses the full accrual method of accounting to prepare and present its annual unaudited departmental financial statements that are part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

2. Highlights of the Third Fiscal Quarter and Comparative Results

This Quarterly Financial Report reflects the results as at December 31, 2018, including Main Estimates and Supplementary Estimates (A), and the details presented in this report focus on and compare the third quarter results of 2018-2019 with those of 2017-2018.

2.1 Authorities Available for Use and Planned Spending for the Year

As at December 31, 2018, the Agency has $493,880 in authorities available for use in 2018-2019 compared to $494,830 in 2017-2018, representing a slight decrease of $950 due to lower employee benefit plan costs.

2.2 Authorities Used and Amounts Expended during the Third Quarter

During the third quarter of 2018-2019, the Agency spent $42,673 or 9% of the total funding available, compared to $38,572 or 8% of the total funding available the same period in 2017-2018, for a net increase of $4,101. The key differences are as follows:

• Personnel expenditures increased by $1,439 between the third quarter of 2018-2019 and third quarter of 2017-2018, due to salary wage increases as per the collective bargaining settlements, offset by the decreased cost of the employee benefit plans.
• Professional and special services expenditures increased by $988 between the third quarter of 2018-2019 and the third quarter of 2017-2018, due to the increased need for special services compared to the third quarter last year.
• Rental expenditures increased by $4,736 between the third quarter of 2018-2019 and third quarter of 2017-2018, due to the timing of invoicing for certain ongoing rental services incurred compared to the third quarter last year, and as noted in the previous 2018-19 second quarter report.
• Utilities, materials and supplies increased by $103 between the third quarter of 2018-19 and the third quarter of 2017-18, due to the need for additional office supplies.
• Other subsidies and payments decreased by $3,165 between the third quarter of 2018-19 and the third quarter of 2017-18, as there was no inadvertent coding errors as was in the case of 2017-18.
• No contribution funds were issued in the third quarter of 2018-2019, nor were there funds issued in the third quarter of 2017-2018. Given the status of the project, there is no need for Crown consultation at this time.

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 TransCanada PipeLines Limited (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 third quarter of 2018-2019.

Original signed by:

Christyne Tremblay Commissioner February 28, 2019 Ottawa, Canada

Wayne Marshall Director of Operations February 11, 2019 Calgary, Canada

Table 1: Statement of Authorities ( unaudited) (in dollars)

	Fiscal year 2018-2019			Fiscal year 2017-2018
	Total available for use for the year ending March 31, 2019 *	Used during the quarter ended December 31, 2018	Year-to-date used at quarter-end	Total available for use for the year ending March 31, 2018 **	Used during the quarter ended December 31, 2017	Year-to-date used at quarter-end
Budgetary Authorities
Net Operating expenditures - Vote 1	465,000	35,453	47,374	465,000	31,115	45,927
Statutory Authority - Employee Benefit Plans	28,880	7,220	21,660	29,830	7,457	22,372
Total Budgetary Authorities	493,880	42,673	69,034	494,830	38,572	68,299

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

Table 2: Budgetary Expenditures by Standard Object (unaudited) (in dollars)

	Fiscal year 2018-2019			Fiscal year 2017-2018
	Planned expenditures for the year ending March 31, 2019 *	Expended during the quarter ended December 31, 2018	Year-to-date used at quarter-end	Planned expenditures for the year ending March 31, 2018 **	Expended during the quarter ended December 31, 2017	Year-to-date used at quarter-end
Expenditures:
Personnel	218,880	14,210	40,571	219,830	12,771	37,105
Transportation and communications	5,000	-	-	5,000	-	-
Information	500	-	-	500	-	-
Professional and special services	247,000	21,000	21,000	248,000	20,012	20,669
Rentals	11,000	7,103	7,103	10,000	2,367	7,103
Repair and maintenance	500	-	-	500	-	-
Utilities, materials and supplies	500	360	360	500	257	257
Acquisition of machinery and equipment	500	-	-	500	-	-
Transfer Payments	10,000	-	-	10,000	-	-
Other subsidies and payments	-	-	-	-	3,165	3,165
Total net budgetary expenditures	493,880	42,673	69,034	494,830	38,572	68,299

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