Atlantic Canada Opportunities Agency – Quarterly Financial Report for the quarter ending June 30, 2020

Statement Outlining Results, Risks and Significant Changes in Operations, Personnel and Programs

Introduction

This quarterly financial report should be read in conjunction with the Main Estimates. It has been prepared by management as required by section 65.1 of the Financial Administration Act (FAA) and in the form and manner prescribed by the Treasury Board. This quarterly report has not been subjected to an external audit or review.

A summary description of the Atlantic Canada Opportunities Agency (ACOA) program activities can be found in the 2020-2021 Part II of the Main Estimates.

Basis of Presentation

This quarterly financial report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities is consistent with the Main Estimates for the 2020-2021 fiscal year and includes ACOA’s total authorities available for use as granted by Parliament and those used by the Agency during this quarter. Authorities available for use are given in the form of annually approved limits through appropriation acts or through legislation in the form of statutory authorities for specific purposes.

The authority of Parliament is required before monies can be spent by the Government.

When Parliament is dissolved for the purposes of a general election, section 30 of the FAA authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

As part of the departmental results reporting process, the Agency prepares its annual departmental financial statements on a full accrual basis in accordance with Treasury Board accounting policies. However, the spending authorities voted by Parliament remain on an expenditure basis of accounting.

ACOA Financial Structure

ACOA manages its expenditures under two votes:

Vote 1 – Net operating expenditures includes the Agency’s authorities related to personnel costs (e.g. salaries) and operation and maintenance expenditures (e.g. travel).
Vote 5 – Grants and contributions includes all authorities related to transfer payments.

Costs under Statutory Authorities, which represent payments made under legislation approved previously by Parliament and which are not part of the annual appropriation bills, include such items as the employer’s share of the employee benefits plan and other minor items.

Highlights of Fiscal Quarter and Fiscal Year-to-Date Results

This section highlights significant changes to the fiscal quarter results as of June 30, 2020.

Statement of Authorities: Vote 1 – Net Operating Expenditures

Total authorities available for fiscal year 2020-2021 are $51.8 million compared to $66.0 million as of June 30, 2019. The decrease of $14.2 million, or 21.5%, is explained by:

A total decrease of $17.1 million in Vote 1 authorities available for use related to the reduced supply, which represents 9/12th of the Main Estimates. ACOA is expected to receive full supply for the 2020-2021 Main Estimates in December 2020. Due to the COVID-19 pandemic and limited sessions in the spring for Parliament to study supply, the Standing Orders of the House of Commons were amended to extend the study period to the fall.

The decrease is offset by a total increase of $2.9 million in Vote 1 authorities available for use related to:

a $2.1 million increase in compensation allocations resulting from revised collective agreements;
a $0.5 million increase as a result of the Regional Relief and Recovery Fund to support small and medium-sized businesses; and

a $0.3 million increase in various other adjustments.

Vote 1 authorities used year-to-date have decreased from $15.9 million at the end of the first quarter in 2019-2020 to $14.8 million this fiscal year. This $1.1 million decrease in authorities used, or 6.7%, is mainly due to the significant impact the COVID-19 pandemic has had on travel expenses.

Graph 1 illustrates the total authorities available for use for the year as well as the amount used year-to-date at quarter-end.

Graph 1: Comparison of Net Budgetary Authorities and Expenditures for Vote 1 as of June 30, 2019-2020 and 2020-2021.

(in thousands of dollars)

Long description - Graph 1

For the year ending March 31, 2020, total authorities available for use for Vote 1 is $65,988 in thousands of dollars, while year to date authorities used for Vote 1 is $15,880 in thousands of dollars.

For the year ending March 31, 2021, total authorities available for use for Vote 1 is $51,795 in thousands of dollars, while year to date authorities used for Vote 1 is $14,816 in thousands of dollars.

Statement of Authorities: Vote 5 – Grants and Contributions

Total authorities available for use for the year ending March 31, 2021, amount to $237.4 million, a decrease of $30.6 million compared to the $268.0 million available for use as of June 30, 2019. The decrease of $30.6 million, or 11.4%, is explained by:

A total decrease of $102.7 million in Vote 5 authorities available for use related to:

a $56.0 million decrease related to the reduced supply, which represents 9/12th of the Main Estimates. ACOA is expected to receive full supply for the 2020-2021 Main Estimates in December 2020. Due to the COVID-19 pandemic and limited sessions in the spring for Parliament to study supply, the Standing Orders of the House of Commons were amended to extend the study period to the fall;
a $24.9 million decrease in temporary funding announced in Budget 2019 to provide Increased Funding for the Regional Development Agencies;
a $12.5 million decrease related to a reprofile of funds as a result of project/ contracting delays;
a $6.8 million decrease in temporary funding for the Regional Economic Growth through Innovation (REGI) program – Supporting small and medium-sized enterprise users of steel and aluminum initiative; and
a $2.5 million decrease in temporary funding announced in Budget 2018 (resulting in a transfer of funds to Natural Resources Canada) related to Protecting Jobs in Eastern Canada’s Forestry Sector.

This decrease is offset by a total increase of $72.1 million in Vote 5 authorities available for use related to:

a $35.1 million increase for the Regional Relief and Recovery Fund, to support small and medium-sized businesses;
a $34.3 million increase for the Regional Relief and Recovery Fund, to support the Community Futures Network;
a $2.5 million increase in temporary funding announced in Budget 2019 for launching a federal strategy on jobs and tourism; and

a $0.2 million increase in various other adjustments.

Vote 5 authorities used have increased from $33.3 million last fiscal year to $52.4 million this fiscal year. This $19.1 million increase in authorities used, or 57.3%, is due to the amount of contribution payments expended with regards to the Regional Relief and Recovery Fund.

Graph 2 illustrates the total authorities available for use for the year as well as the amount used year-to-date at quarter-end.

Graph 2: Comparison of Net Budgetary Authorities and Expenditures for Vote 5 as of June 30, 2019-2020 and 2020-2021.

(in thousands of dollars)

Long description - Graph 2

For the year ending March 31, 2020, total authorities available for use for Vote 5 is $268,045 in thousands of dollars, while year to date authorities used for Vote 5 is $33,284 in thousands of dollars.

For the year ending March 31, 2021, total authorities available for use for Vote 5 is $237,377 in thousands of dollars, while year to date authorities used for Vote 5 is $52,369 in thousands of dollars.

Statement of Authorities: Budgetary Statutory Authorities

Budgetary statutory authorities available for use for the year ending March 31, 2021, have increased by $78.3 million, or 913.6%, to $86.9 million compared to the previous fiscal year at the same time. The increase is explained by funding received to provide financing support pursuant to the Public Health Events of National Concern Payments Act. These authorities were provided via statutory authorities to ACOA. This amount can be broken down as follows:

a $38.1 million increase for the Canadian Seafood Stabilization Fund;
a $31.0 million increase for the Regional Relief and Recovery Fund, to support small and medium-sized businesses;
a $9.0 million increase for the Regional Relief and Recovery Fund, to support the Community Futures Network; and

a $0.2 million increase in various other adjustments.

Statutory authorities used have increased from $2.1 million last fiscal year to $21.3 million this fiscal year. This $19.2 million increase in authorities used, or 897.1%, is due to the amount of contribution payments expended with regards to the Regional Relief and Recovery Fund.

Graph 3 illustrates the total authorities available for use for the year as well as the amount used year-to-date at quarter-end.

Graph 3: Comparison of Net Budgetary Authorities and Expenditures for Statutory Authorities as of June 30, 2019-2020 and 2020-2021.

(in thousands of dollars)

Long description - Graph 3

For the year ending March 31, 2020, total authorities available for use for Statutory authorities is $8,573 in thousands of dollars, while year to date authorities used for Statutory authorities is $2,137 in thousands of dollars.

For the year ending March 31, 2021, total authorities available for use for Statutory authorities is $86,892 in thousands of dollars, while year to date authorities used for Statutory authorities is $21,308 in thousands of dollars.

Statement of the Agency’s Budgetary Expenditures by Standard Object

The Agency’s budgetary expenditures by Standard Object for the quarter ended June 30, 2020, were $88.5 million, which reflects an increase of $37.2 million, or 72.5%, from the $51.3 million in overall expenditures for the quarter ended June 30, 2019. The variance by Standard Object relates mainly to transfer payments. The variance is explained in the Statement of Authorities: Vote 5 – Grants and Contributions and in the Statement of Authorities: Budgetary Statutory Authorities.

Risks and Uncertainties

ACOA conducts an annual risk assessment process to update its overarching corporate risk profile. The key corporate risks being used for 2020-2021 were established prior to the COVID-19 pandemic. Despite this, it is plausible that the eventual review of internal corporate risks may have an impact on certain operational aspects of the Agency, while not necessarily having a direct impact on financial reporting, as ACOA manages financial risks through a set of appropriate mitigation measures. The financial risks are mitigated in large part by the implementation of strong internal controls over financial reporting. These include the periodic assessment of entity-level controls, general computer controls and controls in ACOA’s key business processes such as payments on grants and contributions, regular operating expenses and accounts receivable.

Furthermore, ACOA manages its budgetary and allocation processes through a well-defined framework supported by a series of automated financial controls. Periodic forecasts are required and analyses are done regularly to ensure that funds are properly managed.

Significant changes in relation to operations, personnel and programs

In March 2020, the World Health Organization declared a global pandemic following the outbreak of a novel strain of the coronavirus (COVID-19). For the protection of personnel and that of communities right across the country, efforts were made to take all public health precautions to prevent the further spread of COVID-19. As a result of COVID-19, the following significant changes occurred in relation to operations, personnel and programs during the first quarter:

In line with the Government of Canada’s Chief Human Resources Officer’s recommendation and to ensure the Agency was adhering to federal and provincial public safety requirements, employees were asked to work from home as of March 16, 2020.
While offices remained open, most employees worked from home whenever and wherever possible to comply with the health measures for physical distancing to keep employees and Canadians safe.
The Agency triggered its Business Continuity Plan and was able to remain fully operational from the outset, with senior management providing regular updates on COVID-19 in order to keep employees informed.
International travel was banned, and all but essential domestic travel was deferred. As such, the Agency encouraged the use of technology (e.g. virtual meeting applications) to replace in-person meetings with clients and other stakeholders, and as a means of communication within and among teams at ACOA.
ACOA worked with its clients to mitigate the impacts of the pandemic, applying a deferral of six months on all client payments due to the Government as of April 1, 2020, as announced by the Government of Canada.
The Agency worked in collaboration with Central Agencies to devise a response to the COVID-19 pandemic for Atlantic Canada, receiving additional Transfer Payment funding. To date:
- ACOA and the Atlantic Association of Community Business Development Corporations delivered the Regional Relief and Recovery Fund in Atlantic Canada, a $110 million fund created by the Government of Canada to address gaps left by other support measures in response to the COVID-19 pandemic.
- ACOA also began preparing to deliver the Canadian Seafood Stabilization Fund, a $62.5 million fund that was created by the Government of Canada to help fish and seafood processors in Atlantic Canada, Quebec and Western Canada get through the crisis and prepare for economic recovery. ACOA is slated to delivery $38.1 million of the total $62.5 million envelope for this fund.

Approval by Senior Officials

Approved by:

Francis P. McGuire
Deputy Head
Moncton, Canada

Date : July 27, 2020

Stéphane Lagacé, CPA-CMA
Chief Financial Officer
Moncton, Canada

Date : July 24, 2020

Statement of Authorities (unaudited)

Fiscal year 2020-2021 (in thousands of dollars)

Authorities	Total available for use for the year ending March 31, 2021*	Used during the quarter ended June 30, 2020	Year-to-date used at quarter-end
Vote 1 - Net operating expenditures	51,795	14,816	14,816
Vote 5 - Grants and contributions	237,377	52,369	52,369
Budgetary statutory authorities	86,892	21,308	21,308
Total authorities	376,064	88,493	88,493

Fiscal year 2019-2020 (in thousands of dollars)

Authorities	Total available for use for the year ending March 31, 2020*	Used during the quarter ended June 30, 2019	Year-to-date used at quarter-end
Vote 1 - Net operating expenditures	65,988	15,880	15,880
Vote 5 - Grants and contributions	268,045	33,284	33,284
Budgetary statutory authorities	8,573	2,137	2,137
Total authorities	342,606	51,301	51,301

*Includes only Authorities available for use and granted by Parliament at quarter-end.

Agency's budgetary expenditures by Standard Object (unaudited)