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Section III: Supplementary Information

3.1 Performance Measures Summary

3.2 Financial Information

Table 8: Comparison of Planned Spending and Full-time Equivalents

Table 9: Voted and Statutory Items

Table 10: Sources of Non-Respendable Revenue

3.3 External Fees and Service Standards

Table 11: Energy Regulation and Advice – National Energy Board Act

Table 12: Energy Regulation and Advice – Canada Oil and Gas Operations Act

Table 13: Service Standard for Access to Information Act

For supplementary information on the department’s User Fees, please visit: http://www.tbs-sct.gc.ca/dpr-rmr/st-ts-eng.asp.

3.4 Financial Statements

Statement of Management Responsibility

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended 31 March 2008 and all information contained in these statements rests with departmental management. These financial statements have been prepared by management in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management's best estimates and judgment and gives due consideration to materiality. To fulfil its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the department's financial transactions. Financial information submitted to the Public Accounts of Canada and included in the department's Departmental Performance Report is consistent with these financial statements.

Management maintains a system of financial management and internal control designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are in accordance with the Financial Administration Act, are executed in accordance with prescribed regulations, within Parliamentary authorities, and are properly recorded to maintain accountability of Government funds. Management also seeks to ensure the objectivity and integrity of data in its financial statements by careful selection, training and development of qualified staff; by organizational arrangements that provide appropriate divisions of responsibility; and, by communication programs aimed at ensuring that regulations, policies, standards and managerial authorities are understood throughout the department.

The financial statements of the department have not been audited for the 31 March 2008 fiscal year. However, the National Energy Board also produces financial statements on a calendar year basis that are audited by the Office of the Auditor General.

Notes to Financial Statements

1. Authority and Objectives

The National Energy Board (NEB) is an independent regulatory agency, established in 1959 under the National Energy Board Act and is designated as a department and named under Schedule I.1 of the Financial Administration Act, reporting to Parliament through the Minister of Natural Resources.

The NEB regulates the following specific aspects of the energy industry:

• the construction and operation of international and interprovincial pipelines;
• the construction and operation of international and designated interprovincial power lines;
• traffic, tolls and tariffs of international and interprovincial pipelines;
• exports of oil, gas and electricity and imports of gas and oil; and
• oil and gas activities on Frontier lands not subject to a federal/provincial accord.

Other responsibilities of the NEB include providing advice to the Minister of Natural Resources Canada on the development and use of energy resources.

NEB’s corporate purpose is to promote safety, environmental protection and economic efficiency in the Canadian public interest within the mandate set by Parliament in the regulation of pipelines, energy development and trade. This principle guides the NEB in carrying out and interpreting its regulatory responsibilities. The companies that are regulated by the Board create wealth for Canadians through the transport of oil, natural gas and natural gas liquids, and through the export of hydrocarbons and electricity. As a regulatory agency, the Board’s role is to help create a framework which allows these economic activities to occur when they are in the public interest.

The NEB operates in a manner similar to a civil court. For major applications and inquiries, the Board holds public hearings at which applicants and interested parties have full rights of participation.

The NEB has the authority to charge those companies it regulates, in accordance with sub-section 24.1(1) of the NEB Act, the total costs attributable to the NEB's operations in carrying out its related responsibilities.

Under the National Energy Board Cost Recovery Regulations (the Regulations) approved by the Treasury Board, the National Energy Board recovers from the companies it regulates the cost of its operations, effective 1 January 1991. It has the delegated authority to determine what costs will be excluded from program expenditures for cost recovery purposes.

The NEB operates within the Consolidated Revenue Fund (CRF). The CRF is administered by the Receiver General for Canada. All cash received by the NEB is deposited to the CRF and all cash disbursements made by the NEB are paid from the CRF.

2. Summary of Significant Accounting Policies

The financial statements have been prepared in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

Significant accounting policies are as follows:

a) Parliamentary appropriations – the Department is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to the department 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 statement of operations and the statement of financial position are not necessarily the same as those provided through appropriations from Parliament. Note 3 provides a high-level reconciliation between the bases of reporting.

b) Net Cash Provided by Government – The department operates within the CRF, which is administered by the Receiver General for Canada. All cash received by the department is deposited to the CRF and all cash disbursements made by the department are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the federal government.

c) Change in net position in the CRF is the difference between the net cash provided by Government and appropriations used in a year, excluding the amount of non respendable revenue recorded by the department. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.

d) Revenues:

• Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
• Other revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues.

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 by other government departments for accommodation, the employer's contribution to the health and dental insurance plans and legal services are recorded as operating expenses at their estimated cost.

f) Employee future benefits

g) Accounts receivables are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain.

h) Contingent liabilities – Contingent liabilities are potential liabilities that may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

i) Foreign currency transactions – Transactions involving foreign currencies are translated into Canadian dollar equivalents using rates of exchange in effect at the time of those transactions. Monetary assets and liabilities denominated in a foreign currency are translated into Canadian dollars using the rate of exchange in effect on 31 March 2008.

j) Tangible capital assets – All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. The department does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections.

Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

k) Measurement uncertainty – The preparation of these financial statements in accordance with Treasury Board accounting policies, which are consistent with Canadian generally accepted accounting principles for the public sector, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are contingent liabilities, the liability for employee severance benefits and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

3. Parliamentary Appropriations

The Department receives most of its funding through annual Parliamentary appropriations. Items recognized in the statement of operations and the statement of financial position in one year may be funded through Parliamentary appropriations in prior, current or future years. Accordingly, the Department 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:  

4. Accounts Receivable and Advances

The following table presents details of accounts receivable and advances:

5. Tangible Capital Assets

6. Employee Benefits 

a) Pension benefits: The department's employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plans benefits and they are indexed to inflation.

Both the employees and the department contribute to the cost of the Plan. The 2007-08 expense amounts to $3,420,242.68 ($3,477,642 in 2006-07), which represents approximately 2.2 times the contributions by employees.

The department's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.

b) Severance benefits: The department provides severance benefits to its employees based on eligibility, years of service and final salary. These severance benefits are not pre-funded. Benefits will be paid from future appropriations. Information about the severance benefits, measured as at March 31, is as follows:

7. Contingent Liabilities

Claims and Litigation

Claims have been made against the department in the normal course of operations. Legal proceedings for claims totalling approximately $831,000 ($60,000 in 2007) were still pending at March 31, 2008. Some of these potential liabilities may become actual liabilities when one or more future events occur or fail to occur. The likelihood of these claims being realized cannot be determined so no amount has been accrued in the financial statements.

8. Contractual Obligations

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

9. Related-party transactions

The department is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. The department enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year, the department received services which were obtained without charge from other Government departments as presented in part (a).

a) Services provided without charge:

During the year the department received without charge from other departments, accommodation and the employer's contribution to the health and dental insurance plans. These services without charge have been recognized in the department's Statement of Operations as follows:

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 and audit services provided by the Office of the Auditor General, are not included as an expense in the department's Statement of Operations.

b) Payables and receivables outstanding at year-end with related parties:

c) Administration of programs on behalf of other government departments

The NEB administers the Northern Gas Project Secretariat (NGPS) and Environmental Studies Research Funds (ESRF). NGPS expenses are part of the NEB’s appropriation whereas ESRF expenses are not.

The concept of the Northern Gas Project Secretariat was first unveiled in the Cooperation Plan, a document produced by the Northern Pipeline Environmental Impact Assessment and Regulatory Chairs' Committee in June 2002.

This Plan describes the framework that the authorities with environmental impact assessment and regulatory mandates, called the Agencies, will follow to implement coordinated environmental impact assessment and regulatory processes for a proposed major northern gas pipeline project and associated developments. It outlines methods of cooperation between the Agencies that will avoid duplication of effort and provides clarity and certainty of process for the public, companies and other stakeholders.

The environmental review process commenced with the filing of the Preliminary Information Package in June 2003. The regulatory processes commenced with the filing of the five applications for the construction and operation of the Mackenzie Gas Project in October 2004.

The Northern Gas Project Secretariat office was officially opened in December 2003. With offices in Yellowknife and Inuvik, staff at the Project Secretariat will help northerners and interested public effectively participate in the environmental review and regulatory processes.

According to the Treasury Board submission approved on 1 December 2003, the operating costs of NGPS incurred by NEB are recoverable under the National Energy Board Act because the Secretariat functions are classified as part of the application process of the Act.

The NEB administers the Environmental Studies Research Funds. These funds are provided by INAC and NRCan. None of the NEB’s appropriation is included in these funds. Any unused balances in the ESRF accounts are transferred to the partner departments at year end. ESRF expenses are reflected in the financial statements of INAC and NRCan.

10. Comparative information

Comparative figures have been reclassified to conform to the current year's presentation.

3.5 Regulatory Reporting

The following table presents a summary of NEB Public Hearings from 1 April 2007 to 31 March 2008.

3.6 Parliamentary Committee Recommendations

There were no parliamentary committee reports issued concerning the NEB during the reporting period.

3.7 Evaluations and Reviews

There were no evaluations and reviews conducted under the auspices of the NEB Audit and Evaluation Committee in 2007-2008. An active audit and evaluation program is in effect for fiscal year 2008-2009.

3.8 Travel Policies

The NEB became a separate employer under the Public Service Staff Relations Act, effective 31 December 1992 under Order in Council (OIC) (P.C. 1992-2595). Through the OIC, personnel management, as defined by the Financial Administration Act, was delegated to the Chair of the NEB. For unionized employees, the NEB has agreed to adopt the policies of the National Joint Council, as amended from time to time, as part of the conditions of employment.

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