Department of Finance Canada Quarterly Financial Report for the quarter ended December 31, 2025 (unaudited)

1. Introduction

This Quarterly Financial Report has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Directive on Accounting Standards, GC 4400 Departmental Quarterly Financial Reports. This Quarterly Financial Report should be read in conjunction with the 2025-26 Main Estimates and Supplementary Estimates of the Department of Finance Canada.

This Quarterly Financial Report has not been subject to an external audit or review.

1.1 Authority, Mandate and Program Activities

The Department of Finance Canada (the Department) helps the Government of Canada (the government) develop and implement strong and sustainable economic, fiscal, tax, social, security, international and financial sector policies and programs. It plays an important central agency role, working with other departments to ensure that the government's agenda is carried out and that ministers are supported with high-quality analysis and advice.

The Department's responsibilities include the following:

• Preparing the federal budget and updates of economic and fiscal projections;
• Preparing the Annual Financial Report of the Government of Canada and, in cooperation with the Treasury Board of Canada Secretariat and the Receiver General for Canada, the Public Accounts of Canada;
• Developing tax and tariff policy and legislation;
• Managing federal borrowing on financial markets;
• Designing and administering major transfers of federal funds to the provinces and territories;
• Developing financial sector policy and legislation; and
• Representing Canada in various international financial institutions and groups.

The description of the program activities for the Department can be found in Part II of the Main Estimates and the Departmental Plan.

1.2 Basis of Presentation

This Quarterly Financial Report has been prepared by management using an expenditure basis of accounting, and a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities. The accompanying Statement of Authorities includes the Department's spending authorities granted by Parliament and those used by the Department, consistent with the Main Estimates and Supplementary Estimates for both fiscal years (2024-25 and 2025-26) as well as transfers from Treasury Board central votes that are approved by the end of the quarter.

The authority of Parliament is required before monies can be spent by the government. Approvals are given in the form of annually approved limits through appropriation acts or through legislation in the form of statutory spending authority for specific purposes.

The Department uses the accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental performance reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

1.3 Department of Finance Canada – Financial Structure

The Department has three major categories of expenditure authority. These categories are:

• Voted budgetary authorities: Included in this category are the operational expenditures of the Department itself as well as authorized expenditures under grant and contribution programs. These expenditures must be specifically approved by Parliament through an appropriation act.
• Statutory budgetary authorities: Included in this category are expenditure authorities that are granted through an existing Act of Parliament. Further parliamentary approval is not required for expenditures related to statutory amounts and it is within the normal course of business that statutory expenditures may in some cases exceed planned spending estimates.
• Non-budgetary authorities: Included in this category are disbursements made by the Department that do not have a direct budgetary impact on the government. This includes the value of loans initially disbursed to Crown corporations participating in the Crown Borrowing Program.

2. Highlights of Fiscal Quarter Results

The following section highlights the financial results and provides explanations for the fiscal quarter ended December 31, 2025 as compared to the same period last year.

2.1 Statement of Authorities

As per Table 1 – Statement of Authorities (unaudited), the total authorities available for use increased by $5,331 million, as compared to the same quarter in 2024-25, from $146,901 million to $152,232 million.

The following table provides a detailed explanation of the significant changes in the authorities available for use:

2.2 Statement of Departmental Budgetary Expenditures by Standard Object

As per Table 2 – Departmental budgetary expenditures by Standard Object (unaudited), the total net budgetary expenditures in the third quarter of 2025-26 increased by $1.1 billion, as compared to the same quarter in 2024-25 largely due to the following:                             

• Expenditures related to Transfer payments increased by $1,045.1 million, primarily due to increases in major transfer payments to the provinces and territories ($1,074.3 million) and a payment to Newfoundland and Labrador for the Hibernia Dividend Backed Annuity Agreement ($35.1 million). These increases are partially offset by an increase in recoveries for the Alternative Payments for Standing Programs ($65.1 million).
• Expenditures related to Public debt charges increased by $448 million, primarily due to an increase in the stock of unmatured debt of approximately $121 billion and an increase in the Consumer Price Index over the same quarter of the previous year. These increases were partially offset by a decrease in interest rates.
• Expenditures related to Other subsidies and payments decreased by $418.3 million primarily due to decreased payments to the Canada Infrastructure Bank over the same quarter of the previous year ($591.2 million). This decrease was partially offset by increased losses in the revaluation of IMF related accounts ($166.5 million) and foreign exchange on sovereign loans ($26.5 million).

2.3 Non-Budgetary Expenditures

Total net non-budgetary expenditures in the third quarter of 2025-26 increased by $1.6 billion, as compared to the same quarter in 2024-25. This is largely due to an increase in the value of loans disbursed to Crown corporations participating in the Crown Borrowing Program ($921.7 million), payments to acquire shares in the Canada Growth Fund ($800 million) and Canada Enterprise Emergency Funding Corporation ($300 million). These increases were partially offset by a decrease in financial assistance provided to Ukraine through IMF Administered Account ($400 million).

3. Risks and Uncertainties

In the third quarter of 2025-26, the principal risk continued to be interest rate risk on the Public debt – that is the risk that debt servicing costs will fluctuate due to changes in market interest rates. Public debt charges increased by approximately $448 million compared to the same quarter last year, mainly due to an increase in the stock of unmatured debt of approximately $121 billion and a higher Consumer Price Index over the same period. These pressures on debt servicing costs were partially offset by lower interest rates. The Department continues to manage this risk through its Debt Management Strategy, which was developed in consultation with market participants, and promotes a prudent and balanced approach to Public debt management. Interest rate risk and other financial risks are discussed further in the notes to the Department of Finance Canada's Annual Financial Statements.

The Department remained prepared for potential operational disruptions through its updated Business Continuity Plan and Business Impact Analysis. These tools strengthen the Department's security posture and help ensure the continuity of critical functions during disruptions.

The Department has intensified its monitoring of global and domestic economic conditions in response to heightened economic uncertainty and increased volatility in international markets. This has led to expanded cooperation and sharing of expertise and best practices with federal partners, provinces and territories, stakeholders, and international counterparts. These efforts support the Department's role as a central, knowledge-based policy agency and help mitigate risks to the government's ability to advance Canada's fiscal, economic, and social policy interests in a rapidly evolving global environment.

4. Significant Changes in Relation to Operations, Personnel and Programs

Steven Kuhn vacated the position of Associate Assistant Deputy Minister, International Trade and Finance, on November 5, 2025. Tasha Hanes was appointed Associate Assistant Deputy Minister, International Trade and Finance, effective January 19, 2026.

On December 19, 2025, Prime Minister Carney announced changes in the senior ranks of the public service resulting in the following changes:

• Effective January 11, 2026, Chris Forbes vacated the position of Deputy Minister of Finance. Nick Leswick was appointed Deputy Minister of Finance effective January 12, 2026.
• Effective January 14, 2026, Alison O'Leary vacated the position of Associate Deputy Minister of Finance.

5. Approval by Senior Officials

Approved by:

Nick Leswick, Deputy Minister
Ottawa, Canada
February 27, 2026

Christopher Veilleux CPA, CMA, PMP
Chief Financial Officer
Ottawa, Canada
February 27, 2026