Quarterly Financial Report (QFR) for the Quarter Ended December 31, 2022

2. Highlights of fiscal-quarter and fiscal-year-to-date results

This section provides financial highlights and explanations for differences between the fiscal-quarter and fiscal-year-to-date results for the quarter ended on December 31, 2022, and the results of the same period last year.

2.1 Statement of authorities

When compared to those of the same quarter of the previous year, the department's year-to-date budgetary authorities available for use have increased by $1,594.9 million. As reflected in Table 1: Statement of authorities, the total budgetary authorities increased from $25,933.0 million in 2021–22 to $27,527.9 million in 2022–23. Major reasons for the changes are outlined below.

Year-to-date variances in authorities available for use (in millions of dollars)
Initiative Operating (Vote 1) Capital (Vote 5) Grants and contributions
(Vote 10)

Payments in respect of the long-term disability and life insurance plan for members of the Canadian Forces

(Vote 15)

Budgetary statutory authorities Total variances*
Contributions to the Ukraine Operation (250.0) n/a 750.0 n/a n/a 500.0
Operation and sustainment (fleet maintenance) of military capabilities and operating requirements 429.0 n/a n/a n/a n/a 429.0
Heyder-Beattie Class Action 295.0 (2.5) n/a n/a 2.4 294.9
Budget 2021 initiatives 165.4 32.5 2.0 n/a 3.6 203.5
Implementation of SSE 98.5 (1.3) (0.2) n/a 13.7 110.7
Major capital equipment and infrastructure projects (94.1) 178.9 n/a n/a 8.5 93.3
Pay administration – Federal public servants and Canadian Armed Forces 25.7 n/a n/a n/a 10.1 35.8
Service Income Security Insurance Plan (SISIP) n/a n/a n/a 23.3 n/a 23.3
Miscellaneous departmental requirements (96.0) 53.1 1.5 n/a 28.0 (13.4)
Travel Reduction (82.2) n/a n/a n/a n/a (82.2)
Cumulative variance in authorities available for use 491.3 260.7 753.3 23.3 66.3 1,594.9

*A positive variance indicates an increase in authorities available for use in Q3 2022–23 compared to Q3 2021–22 and a negative variance indicates a decrease in authorities available for use in Q3 2022–23 compared to Q3 2021–22.

Note: Numbers may not add up due to rounding.

The year-to-date net increase in authorities of $1,594.9 million over the third quarter in 2022–23 can be explained by variances in funding for a number of initiatives.

2.2 Departmental budgetary expenditures by standard object

When compared to those of the same quarter of the previous fiscal year, the department’s year-to-date total net budgetary expenditures have increased by $1,273.4 million. As reflected in Table 2: Departmental budgetary expenditures by standard object, the expenditures increased from $16,069.6 million in 2021–22 to $17,342.9 million in 2022–23.

Year-to-date variances in net budgetary expenditures (presented by standard object)(in millions of dollars)

Standard object


Year-to-date used at quarter-end


Year-to-date used at quarter-end

Year-to-date variance
Transfer payments 653.6 140.8 512.7
Professional, special & other services 3,186.0 2,793.1 392.9
Other subsidies and payments 572.2 396.4 175.8
Transportation and communications 549.8 415.5 134.3
Utilities, materials and supplies 785.1 651.8 133.3
Personnel 8,067.2 8,014.9 52.3
Rentals 445.5 395.9 49.6
Other net minor items 1,070.8 1,065.8 5.0
Acquisition of machinery and equipment 1,899.1 1,985.7 (86.7)
Acquisition of land, buildings and works 317.3 375.2 (57.9)
Revenues netted against expenditures (203.6) (165.6) (38.0)
Total net budgetary expenditures 17,342.9 16,069.6 1,273.4

Note: Numbers may not add up due to rounding.

Year-to-date net increase of $1,273.4 million is attributable mainly to the following:

3. Risks and uncertainties

The department’s financial transactions are exposed to a broad range of external financial and economic risks such as inflation, foreign exchange commodity price fluctuations and global supply chain. Currently we are seeing economic risks give rise to increases in costs of goods and services, labour shortages, and supply chain delays. Depending on how these risks unfold, they could lead to significant fluctuations in anticipated spending.

While the department considers key economic and financial risk factors (including defence- specific inflation and foreign exchange) in developing expenditure strategies, these risks are outside the control of the department.

The department continues to address the financial risks associated with Phoenix pay issues through the implementation of new controls and the strengthening of existing ones. The Civilian Quality Assurance program modified its sampling program and leveraged the use of robotic process automation to provide a better analysis of the current pay environment and lead to timelier corrective actions with the help of compensation advisors. Initiatives like the centralized data entry capability, the data integrity working group and the training working group continue to ensure sustained payment accuracy and iterative training.

The department’s capital acquisition program includes a number of large multi-year acquisition projects, mainly comprising of advanced fighter aircrafts, naval ships and armored vehicles. Delays in contracting and procurement activities or delays in deliveries by suppliers for individual projects can lead to reduced expenditures or budgetary surpluses.

Risks also flow from claims and litigations involving the department’s normal operations. When the department receives a claim or litigation alleging liability in tort or extra contractual responsibility to cover losses, expenditures or damages, it is analyzed and an appropriate position is developed, based on legal advice. Litigation or settlement may be pursued and they are tracked through the department’s reporting.

The pandemic has exacerbated the problem for the CAF to grow its Force, in addition to existing personnel issues and changing demographics. As a result, the CAF is applying reconstitution measures at the tactical, operational, and strategic levels to restore units to an acceptable level of readiness to excel as a modern and combat-ready military force. This is intended to enable the CAF to adapt quickly to action when called for significant unexpected operational demands, which can occur at any time anywhere on the globe.

As Canada is moving towards adapting to a post-pandemic landscape, the Government of Canada suspended its mandatory COVID-19 vaccination policy for federal public servants in June 2022. The Canadian Armed Forces amended the CAF directives on COVID-19 mandatory vaccination effective on 14 October 2022. Vaccine requirements will be driven by operational necessity to maintain domestic and international operational viability, which is essential to the protection of Canadians and defence of Canada. In addition, the department continues its transition to a hybrid workforce, further reinforced by the recent Treasury Board of Canada Secretariat (TBS) direction.

Additionally, significant unforecasted operational demands can occur at any time, requiring the department to respond anywhere on the globe. Depending on the extent of the operational demand, the cost of unforecasted operations would be mitigated either through internal reallocations or by requesting incremental funding from the government.

4. Significant changes in relation to programs, operations and personnel

Of note, the Department has restructured its organization by reallocating human resources to create the Digital Transformation Office and its Chief Information Office.

Since February 2022, Canada has committed $1 billion of military support to Ukraine, which includes procurement of military equipment, artillery, combat support vehicles, satellite communication services, uniforms/gear, and training for Ukrainian troops.

Furthermore, the CAF has reallocated their current forces to continue to support Ukraine, maintain its NATO commitments, increase its presence in the Indo-Pacific, and reduce its presence in the Middle East. These movements will incur additional impacts on transportation, relocation, and overall military salary expenditures.

To address the shortfall and increase the recruitment pool of military personnel, the federal government announced policy changes in December 2022 that will allow permanent residents to join the CAF.

Approved by:

// Original signed by //

Bill Matthews

Deputy Minister of National Defence

// Original signed by //

Cheri Crosby, CPA, CMA

Chief Financial Officer

5. Financial tables

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