Rob Moore, the minister of state responsible for both Crown agencies, said the changes will be made through legislation this spring.
Moore said all employees of the development corporation in Cape Breton will keep their jobs at the agency's Sydney office while maintaining the same rate of pay. He also said plans are in the works to employ staff again at an office in Port Hawkesbury.
Ottawa will maintain the level of economic development funding delivered through the Cape Breton agency, he added.
"Let me be clear: this decision in no way impacts the level and quality of service that business owners and community leaders in Cape Breton expect and are accustomed to receiving," Moore said in the statement.
Meanwhile, the agency's property holdings and its continued work on the Sydney tar ponds cleanup project will be transferred to Public Works and Government Services Canada.
"As ECBC's role in mine remediation in Cape Breton winds down, there is an opportunity to align economic development activities throughout Atlantic Canada," Moore said.
The agency has spent more than $105 million supporting more than 700 economic development projects in Cape Breton since 2006, Moore said.
Some of that funding included $900,000 for the Celtic Colours Festival, $1 million for the Membertou Business Centre in Sydney, and more than $5 million for the Destination Cape Breton Association to promote tourism.
In an email, a spokeswoman for the Atlantic Canada Opportunities Agency said while ECBC's budget had declined between 2012 and 2013, 90 per cent of that drop — or about $18 million — was related to the completion of the mine site remediation program.
Mayor Cecil Clarke of the Cape Breton Regional Municipality said the change isn't a blow for economic development in the area.
"The fact that the budgets are being maintained and the staffing levels are being maintained while the governance process has changed, I don't see that as a negative thing," said Clarke.
Clarke said he met with Moore and the president of ACOA and received assurances that there would be no cuts to current funding levels.
"I will take them at their word," he said, adding that the move would also provide stability because it provides for direct authority and accountability to the minister.
Clarke said the changes announced by the federal government are partly the result of uncertainty that was created by public and media scrutiny over the agency's management.
Liberal MP Gerry Byrne raised questions last year about the agency's hiring practices, which led to an investigation by Mario Dion, the federal public sector integrity commissioner.
NDP ACOA critic Ryan Cleary said he believes the change will hurt development because ECBC was focused solely on Cape Breton.
He also questioned the timing of the announcement, given the ongoing investigation. Cleary wondered whether the government is trying to get ahead of potential bad news.
"I can't help but be cynical and say 'OK, this decision has been made in advance of that report so what could that mean?'", Cleary said.Suggest a correction