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 September 30, 2010 and reflect the plans described in the Report on Plans and Priorities.

The Future-oriented Statement of Operations has not been audited.

Serge P. Dupont Commissioner Date signed Ottawa, Canada

Christopher Cuddy Assistant Commissioner Date signed Ottawa, Canada

 

Northern Pipeline Agency

Future-oriented Future-oriented Statement of Operations (Unaudited)
For the year ended March 31

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Future-oriented Statement of Operations (Unaudited) For the year ended March 31

	Estimated Results 2011		Forecast 2012
Expenses
Oversee the planning and construction of the Canadian portion of the Alaska Highway Gas Pipeline
	$1,174,906		$1,387,285
Total Recoverable Expenses	1,174,906		1,387,285
Revenue
Regulatory revenue	1,174,906		1,387,285
Non-Recoverable Services Received Without Charge (Note 7)	86,641		58,556
Net Cost Of Operations	$86,641		$58,556

Information for the year ended March 31, 2011 includes actual amounts from April 1, 2010 to September 30, 2010.

Segmented information (Note 9)

The accompanying notes form an integral part of the Future-oriented Statement of Operations.

1. Authority, Objectives and Operations

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 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. Currently, Foothills Pipe Lines Limited (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 the government priorities and the plans of the Agency as described in the Report on Plans and Priorities.
The main assumptions are as follows:

• The Agency's activities will remain substantially the same as for the previous year.
• Expenses and revenues, including the determination of amounts internal and external to the government, are not based on historical experience.
• Estimated year end information for 2010-11 is used as the opening position for the 2011-12 forecasts.

These assumptions are adopted as at September 30, 2010

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to accurately forecast final results for the remainder of 2010-11 and for 2011-12 the actual results achieved for both years are likely to vary from the forecast information presented; this variation could be material.

In preparing these financial statements the Agency has made estimates and assumptions concerning the future. These estimates and judgements may differ from the subsequent actual results. Estimates and judgements are continually evaluated and expectations of future events are 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 historical 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.

4. Summary of Significant Accounting Policies

The future-oriented financial statements have been prepared in accordance with the Treasury Board accounting policies stated below, which 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 appropriations. Appropriations 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 are not necessarily the same as those provided through appropriations from Parliament. Note 5 provides 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 between the Agency and departments of the federal government.

c) Due from the Consolidated Revenue Fund:

Due from the Consolidated Revenue Fund (CRF) represents the amount of cash that the Agency is entitled to draw from the Consolidated Revenue Fund without further appropriations, in order 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.

e) Expenses:

Expenses are recorded on the accrual basis.

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) Accounts receivable:

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

g) 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.

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:

Office furniture and equipment	10 years
Informatics hardware	4 years

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 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) Authorities requested

		Estimated 2011		Forecast 2012
Authorities requested
	Vote 30 - Program expenditures	$1,203,000		$1,263,150
	Vote 30b - Transfer from Vote 25	12,200
	Statutory Amounts	118,150		125,100
Forecast authorities available		$1,333,350		$1,388,250

Forecast authorities requested for the year ending March 31, 2012 are the planned spending amounts presented in the 2010-11 Report on Plans and Priorities. Estimated authorities requested for the year ending March 31, 2011 include amounts presented in the 2010-11 Main Estimates and amounts allocated from Treasury Board.

b) Reconciliation of net cost of operations to requested authorities:

	Estimated 2011		Forecast 2012
Net cost of operations	$86,641		$58,556
Adjustments for items affecting net cost of operations but not affecting appropriations:
Services received without charge	(86,641)		(58,556)
Amortization of tangible capital assets	(1,935)		(3,035)
Revenue not available for spending	1,174,906		1,387,285
Adjustments for items not affecting net cost of operations but affecting appropriations:
Acquisitions of tangible capital assets	4,000		4,000
Forecast current year lapse	156,379		-
Forecast authorities available	$1,333,350		$1,388,250

6. 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:

	2011	2012	Total
Operating Leases	$ 18,406	20,247	$ 38,653

7. 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 2011		Forecast 2012
Audit services provided by the Office of the Auditor General of Canada	$78,285		$50,200
Management services provided by Natural Resources Canada	8,356		8,356
Total	$86,641		$58,556

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.

8. 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. This fee is not accounted for in these financial statements.

9. Segmented information

	Estimated Results 2011		Forecast 2012
Operating Expenses
Salaries and employee benefits	$612,000		$829,288
Professional and special services	367,000		341,075
Transportation and communication	141,000		158 075
Rentals	44,971		46 812
Small Equipment	2,000		2,000
Utilities, Materials, Supplies	4,000		4,000
Information	2,000		2,000
Amortization	1,935		3,035
Other			1,000
Total Recoverable Expenses	1,174,906		1,387,285
Revenue
Regulatory revenue	1,174,906		1,387,285
Non-Recoverable Services Received Without Charge	86,641		58,556
Net Cost Of Operations	$86,641		58,556