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ATLANTIC CANADA OPPORTUNITIES AGENCY
Statement of Management Responsibility, Including Internal Control Over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2024, and all information contained in these financial statements rests with the management of the Atlantic Canada Opportunities Agency. These financial statements have been prepared by management using the Government of Canada's accounting policies, which are based on Canadian public-sector accounting standards.

Some of the information in the financial statements is based on management's best estimates and judgment and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the Agency’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Agency’s Departmental Results Report, is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded, and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.

Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards and managerial authorities are understood throughout the Agency;and by conducting an annual risk-based assessment of the effectiveness of the system of ICFR.

The system of ICFR is designed to mitigate risks to a reasonable level based on an ongoing process to identify key risks, to assess the effectiveness of associated key controls, and to make any necessary adjustments.

The Agency is subject to periodic Core Control Audits performed by the Office of the Comptroller General of Canada (OCG) and will use the results of such audits to comply with the Treasury Board Policy on Financial Management.  The Agency is also undertaking a risk-based assessment of the system of ICFR for the year ended March 31, 2024, in accordance with the Treasury Board Policy on Financial Management, and the results and action plan are summarized in the annex.

The financial statements of the Agency have not been audited.

Approved by Senior Officials
Approved by:

Laura Lee Langley
Deputy Head
Moncton, Canada
Date:

Kurt Chin Quee, CPA
Chief Financial Officer
Ottawa, Canada
Date:

Atlantic Canada Opportunities Agency

Annex to the Statement of Management Responsibility, Including Internal Control Over Financial Reporting

1. Introduction

In support of an effective system of internal control, the Agency conducted assessments of key control areas that were identified to be evaluated in the 2023-2024 fiscal year. A summary of the assessment results and action plan is provided in section 2.

The Agency will assess all key control areas over a five-year period. The assessment plan is provided in section 3.

2. Assessment results for the 2023-2024 fiscal year

The Agency completed the assessment of key control areas as indicated in the following table. A summary of the results, action plans, and additional details are also provided.

With respect to the key control areas of the delegation of spending and financial authorities, for the most part, controls related to spending and financial authorities were functioning well and form an adequate basis for the department’s system of internal control. Some issues related to the required training were identified and addressed during the fiscal year.

3. Assessment plan

The Agency will assess the performance of its system of internal control by focusing on key control areas over a cycle of years as shown in the following table.

Atlantic Canada Opportunities Agency
Statement of Financial Position (Unaudited)
As at March 31 (in thousands of dollars)

For information on contractual obligations, see note 11.

The accompanying notes form an integral part of these financial statements.

Approved by Senior Officials
Approved by:

Laura Lee Langley
Deputy Head
Moncton, Canada
Date:

Kurt Chin Quee, CPA
Chief Financial Officer
Ottawa, Canada
Date:

Atlantic Canada Opportunities Agency
Statement of Operations and Departmental Net Financial Position (Unaudited)
For the Year Ended March 31 (in thousands of dollars)

For an explanation of segmented information, see note 13.

The accompanying notes form an integral part of these financial statements.

Atlantic Canada Opportunities Agency
Statement of Change in Departmental Net Debt (Unaudited)
For the Year Ended March 31 (in thousands of dollars)

The accompanying notes form an integral part of these financial statements.

Atlantic Canada Opportunities Agency
Statement of Cash Flows (Unaudited)
For the Year Ended March 31 (in thousands of dollars)

The accompanying notes form an integral part of these financial statements.

Atlantic Canada Opportunities Agency
Notes to the Financial Statements (Unaudited)
For the Year Ended March 31

1. Authority and Objectives

The Atlantic Canada Opportunities Agency (ACOA) operates under the authority of the Atlantic Canada Opportunities Agency Act, R.S.C., 1985, c. 41, 4th Supp.

The Agency works to create opportunities for economic growth in Atlantic Canada by helping businesses become more competitive, innovative and productive; by working with diverse communities to develop and diversify local economies; and by championing the strengths of the region. The Agency’s key priorities and its Minister’s mandate letter commitments are guiding principles in the achievement of its core responsibilities through the three departmental results below.
ACOA invests in the innovation and growth of Atlantic Canadian businesses to:

• support the development and marketing of new products and services, the adoption and adaptation of advanced technology to increase productivity, and the acquisition of skills and market knowledge, with a strong focus on key sectors such as oceans, food, aquaculture, clean technology and tourism
• leverage company-oriented growth plans under the Accelerated Growth Service, an initiative managed by Innovation Canada
• position Atlantic Canadian companies to decarbonize their operations to remain competitive in domestic and international supply chains

ACOA supports business investments in the development and commercialization of innovative technologies in Atlantic Canada through:

• support that enables businesses to invest in new technologies, including clean technologies and products, to grow and become more efficient, productive and competitive
• partnerships and collaborations between the private sector and research and business support organizations as well as with higher education institutions
• the creation, growth and nurturing of inclusive regional ecosystems that support business needs and foster an entrepreneurial environment conducive to innovation, growth and competitiveness by convening innovation ecosystem stakeholders

ACOA invests in the economic diversification of communities to:

• promote diversity and inclusion to enhance SME competitiveness by delivering support for under-represented entrepreneurs and addressing gaps in the ecosystem to help them grow their businesses and pursue new opportunities
• support local and regional economic diversification in communities, including those affected by the transition to a net-zero economy
• help non-profit, third-party organizations such as Community Business Development Corporations support SMEs in small, rural and remote communities
• ensure that communities have the capacity to plan, attract, hire and retain skilled talent to support a clean and sustainable economy.

2. Summary of Significant Accounting Policies

These financial statements have been prepared using the Government’s accounting policies, stated below, which are based on Canadian public-sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public-sector accounting standards.

Significant accounting policies are as follows:

(a) Parliamentary authorities – The Agency is financed by the Government of Canada through parliamentary authorities. Financial reporting of authorities provided to the Agency do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash-flow requirements. Consequently, items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results in the Statement of Operations are the amounts reported in the future-oriented financial statements included in the 2022-2023 Departmental Plan.

(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 Government is the difference between all cash receipts and all cash disbursements, including transactions between departments of the Government.

(c) Amounts due from the CRF – These amounts are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the Agency is entitled to draw from the CRF without further authorities to discharge its liabilities.

(d) Revenues – Revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues, except for interest income on overdue loans, which is only recognized when received due to the uncertainty as to its ultimate collection.

The majority of the revenues results from the recognition of the amortization of discount on assistance loans.

With the exception of gain on disposal of tangible capital assets, revenues are earned on behalf of Government and are not available to discharge the Agency’s liabilities. While the Deputy Head (DH) is expected to maintain accounting control, she has no authority regarding the disposition of these revenues. Therefore, they are presented in reduction of the entity’s gross revenues.

(e) Expenses – Expenses are recorded on an accrual basis:

Transfer payments such as grants, conditionally repayable contributions and non-repayable contributions are recorded as expenses when authorization for the payment is approved as a legitimate expense under the applicable transfer payment program. Transfer payments that become repayable as a result of conditions specified in the contribution agreement are recorded as a reduction in transfer payment expense and are reclassified as a receivable.

Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.

Services provided without charge by other government departments for accommodations, employer contributions to the health and dental insurance plans, legal services and workers’ compensation are recorded as operating expenses at their estimated cost.

Expenses related to the loan and accounts receivable portfolio are expenses incurred on behalf of the Government. While the DH is expected to maintain accounting control over loans and accounts receivable, she has no authority regarding their disposition; therefore, related expenses are presented in reduction of the entity’s gross expenses.

(f) Employee future benefits

i) Pension benefits – Eligible employees participate in the Public Service Pension Plan, a multi-employer plan administered by the Government of Canada. The Agency’s contributions to the plan are charged to expenses in the year incurred and represent the total Agency obligation to the plan. The Agency’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.

(ii) Severance benefits – The accumulation of severance benefits for voluntary departures ceased for applicable employee groups. The remaining obligation for employees who did not withdraw benefits is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

(g) Accounts and loans receivable – These are stated at the lower of cost and net recoverable value. A valuation allowance is recorded for accounts and loans receivable where recovery is considered appropriate and uncertain.

(i) Unconditionally repayable contributions – Transfer payments that are unconditionally repayable are recognized as loans receivable. These contributions must be repaid without condition, and the loans have significant concessionary terms as they include a no-interest clause. Furthermore, they have various repayment terms. The modified effective rate method is used to discount the loans receivable.

(ii) Conditionally repayable contributions – Transfer payments that are conditionally repayable are reclassified as accounts receivable when conditions specified in the contribution agreement come into effect or in the event of default.

(h) Allowance for impaired loans and accounts receivable – Loans and accounts receivable are classified as impaired when, in the opinion of management, there is reasonable doubt as to the timely collection of the full amount of principal and, where applicable, interest. A specific allowance is established to reduce the recorded value of the loan to its estimated net realizable value. The long-term impact of COVID-19 has been considered in the valuation of allowances against outstanding loans.

(i) 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.

(j) Tangible capital assets – All tangible capital assets having an initial cost of $10,000 or more are recorded at their acquisition cost. The Agency does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indigenous communities, 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 requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements and accompanying notes as at March 31. The estimates are based on facts and circumstances, historical experience and general economic conditions, and reflect the Government’s best estimate of the related amount at the end of the reporting period. The most significant items for which estimates are used are the allowance for doubtful accounts, the unamortized discount on assistance loans, 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 Authorities

The Agency receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position in one year may be funded through parliamentary authorities 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) Reconciliation of net cost of operations to current year authorities used

(in thousands of dollars)

(b) Authorities provided and used

(in thousands of dollars)

4. Accounts Payable and Accrued Liabilities

The following table presents details of the Agency’s accounts payable and accrued liabilities.

(in thousands of dollars)

Accrued liabilities associated with the loans receivable are considered accrued liabilities held on behalf of the Government. While the DH is expected to maintain accounting control over loans receivable, she has no authority regarding their disposition; therefore, liabilities related to the loans receivable are presented in reduction of the entity’s gross accounts payable and accrued liabilities.

5. Other Liabilities

The Agency enters into agreements with provincial governments to fund various transfer payment projects. The Agency records deposits from these provincial governments for their share of costs under various projects. Monies are distributed on behalf of contributors as projects are undertaken. Unused funds are returned to the provincial governments. Activity during the year is as follows:

(in thousands of dollars)

6. Employee Future Benefits

(a) Pension benefits – The Agency’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/Quebec Pension Plan benefits and are indexed to inflation.

Both the employees and the Agency contribute to the cost of the plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Canada’s Economic Action Plan 2012, employee contributors have been divided into two groups – Group 1 consists of existing plan members as of December 31, 2012, and Group 2 consists of members who joined the plan as of January 1, 2013. Each group has a distinct contribution rate.

The 2023-2024 expense amounts to $5,612,551 ($6,052,330 in 2022-2023). For Group 1 members, the expense represents approximately 1.02 times (same as in 2022-2023) the employee contributions and, for Group 2 members, approximately 1.00 times (same as in 2022-2023) the employee contributions.

The Agency’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 Agency provides severance benefits to its employees based on eligibility, years of service and salary at termination of employment. These severance benefits are not prefunded. Benefits will be paid from future authorities. Information about the severance benefits, measured as at March 31, is as follows:

(in thousands of dollars)

7. Accounts Receivable and Advances

The following table presents details of the Agency’s accounts receivable and advances balances.

(in thousands of dollars)

Conditionally repayable contributions – These contributions relate to ones made to outside parties, all or part of which become repayable if conditions specified in the contribution agreement come into effect. In 2023-2024, an allowance of $23,914,156 ($9,988,789 in 2022-2023) relating to these loans was recorded.

In 2023-2024, collections on conditionally repayable contributions amounted to $9,470,505 ($11,381,025 in 2022-2023).

In 2023-2024, the Agency’s writeoffs were $832,742 ($3,817,263 in 2022-2023) for accounts (including defaulted non-repayable contributions) deemed uncollectible and where all possible avenues of collection had been exhausted. The writeoff of a Crown debt is a bookkeeping action only and does not eliminate the obligation of a debtor to make payment, nor does it affect the right of the Crown to enforce collections. Payments received on accounts receivable that were written off were $0 for fiscal year 2023-2024 ($0 in 2022-2023).

Accounts receivable are considered financial assets held on behalf of the Government and are not available to discharge the department’s liabilities. While the DH is expected to maintain accounting control, she has no authority regarding the disposition of repayments received. Therefore, accounts receivable and advances are presented as a reduction to the entity’s gross accounts receivable.

8. Loans Receivable

The following table presents details of the Agency’s loans balances.

(in thousands of dollars)

These loans relate to unconditionally repayable contributions made to outside parties that must be repaid without qualification. An allowance of $117,149,577 ($108,936,342 in 2022-2023) relating to these loans was recorded.

The loans receivable portfolio consists of approximately 3,100 non-interest-bearing unconditionally repayable contributions issued, for the most part, from 2014 to 2023 with prescribed annual repayment terms. The loans are recorded at their discounted net present value using market interest rates at the time of the loans.

In 2023-2024, collections on unconditionally repayable contributions amounted to $94,164,576 ($74,132,280 in 2022-2023). The Agency’s writeoffs were $3,976,006 ($6,063,729 in 2022-2023) for accounts deemed uncollectible and where all possible avenues of collection had been exhausted. The writeoff of a Crown debt is a bookkeeping action only and does not eliminate the obligation of a debtor to make payment, nor does it affect the right of the Crown to enforce collections. Payments received on loans receivable that were written off were $1,859 in 2023-2024 ($3,212 in 2022-2023).

Loans receivable are considered a financial asset held on behalf of the Government and are not available to discharge the department’s liabilities. While the DH is expected to maintain accounting control, she has no authority regarding the disposition of repayments received. Therefore, loans receivable are presented as a reduction to the entity’s gross loans receivable.

9. Investments

The following table presents details of the Agency’s investment balances.

(in thousands of dollars)

In order to help fulfill its mandate to promote economic development in the Cape Breton region of Nova Scotia, the former Enterprise Cape Breton Corporation (ECBC) had taken equity interests in several companies in an effort to help firms to expand or innovate.

10. Tangible Capital Assets

(in thousands of dollars)

11. Contractual obligations

The nature of the Agency’s activities results in multi-year contracts whereby the Agency is obligated to make future payments in order to carry out its transfer payment programs or when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

(in thousands of dollars)

12.  Related-party transactions

The Agency is related as a result of common ownership to all government departments, agencies and Crown corporations. The Agency enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the Agency received common services, which were obtained without charge, from other government departments, as disclosed below.

(a) Common services provided without charge by other government departments

During the year, the Agency received services without charge from certain common service organizations related to accommodations, legal services, the employer’s contribution to the health and dental insurance plans, and workers’ compensation coverage. These services, provided without charge, have been recorded in the Agency’s Statement of Operations and Departmental Net Financial Position as follows:

(in thousands of dollars)

The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common-service organizations so that one department performs services for all departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provided by Public Services and Procurement Canada and audit services provided by the Office of the Auditor General, are not included as an expense in the Agency’s Statement of Operations and Departmental Net Financial Position.

13.  Segmented Information

Presentation by segment is based on the Agency’s departmental results framework and on the same accounting policies as described in Note 2, Summary of Significant Accounting Policies. The following table presents the expenses incurred and revenues generated for the main programs, by major object of expense and by major type of revenue. The segmented results for the period are as follows:

(in thousands of dollars)