Quarterly Financial Report for the quarter ended December 31, 2025 - Employment and Social Development Canada

Statement outlining results, risks and significant changes in operations, personnel and programs.

On this page

• 1. Introduction
• 2. Highlights of fiscal quarter and fiscal year-to-date results
• 3. Risks and uncertainties
• 4. Significant changes in relation to operations, personnel and programs
• 5. Approval by senior officials
• Table 4: Statement of authorities (unaudited)
• Table 5: Departmental budgetary expenditures by standard object (unaudited)

1. Introduction

This quarterly 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 Treasury Board. This quarterly report has not been subject to an external audit or review and should be read in conjunction with the Main Estimates and Supplementary Estimates (B) for the current year authorities.

The mission of Employment and Social Development Canada (ESDC), including the Labour Program and Service Canada, is to build a stronger and more inclusive Canada, to support Canadians in helping them live productive and rewarding lives and improving Canadians’ quality of life.

ESDC is headed by the Minister of Jobs and Families. Within the minister’s portfolio, three Secretaries of State are providing dedicated leadership on key issues and priorities:

• the Secretary of State (Children and Youth)
• the Secretary of State (Seniors)
• the Secretary of State (Labour)

ESDC delivers programs and services to each and every Canadian throughout their lives in a significant capacity. ESDC fulfills its mission by:

• developing policies that ensure Canadians can use their talents, skills and resources to participate in learning, work and their community
• delivering programs that help Canadians move through life’s transitions, from school to work, from one job to another, from unemployment to employment, from the workforce to retirement
• providing income support to seniors, families with children and those unemployed due to job loss, illness or caregiving responsibilities
• helping Canadians with distinct needs, such as Indigenous people, persons with disabilities, travelers and recent immigrants
• ensuring labour relations stability by providing mediation services
• promoting a fair and healthy workplace by enforcing minimum working conditions, promoting decent work and employment equity, and fostering respect for international labour standards
• delivering programs and services on behalf of other departments and agencies
• supporting the digital delivery of Government of Canada programs and services

Further details on ESDC’s authority, mandate and programs can be found in Part II of the Main Estimates and in the Departmental Plan.

1.1 Basis of presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities (Table 4) includes ESDC’s spending authorities granted by Parliament, and those used by ESDC, consistent with the Main Estimates and Supplementary Estimates (B) for the fiscal year ending March 31, 2026. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before moneys 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 authorities for specific purposes.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes, under certain conditions, the preparation of a special warrants to be signed by the Governor General authorizing payments to be made out of the Consolidated Revenue Fund. Special warrants are deemed to be an appropriation for the fiscal year in which they are issued. Special warrants issued during the first quarter (Q1) of fiscal year 2025 to 2026 were included in the total appropriations in Main Estimates for the fiscal year ending March 31, 2026.

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

1.2 ESDC’s financial structure

ESDC has a complex financial structure, with various funding mechanisms used to deliver its mandate. This includes budgetary authorities, comprised of voted and statutory authorities, as well as non-budgetary authorities.

The voted budgetary authorities include:

• Vote 1 (Operating Expenditures)
• Vote-Netted Revenues
• Vote 5 (Grants and Contributions)
• Vote 10 (Debt write-off – Canada Student Loans and Canada Apprentice Loans)

The statutory authorities are mainly comprised of:

• the Old Age Security (OAS) Program
• the Canada Student Financial Assistance Program and Canada Apprentice Loan
• the Canada Education Savings Program
• the Canada Disability Savings Program
• the Canada Disability Benefit
• the Canada Recovery Benefits
• the Canada Worker Lockdown Benefit
• the Wage Earner Protection Program
• Federal Workers’ Compensation Service
• Employee Benefit Plans

The non-budgetary authorities consist of loans disbursed under the Canada Student Financial Assistance Act and the Apprentice Loans Act.

The department is financed by 4 main sources of funds:

1. appropriated funds from the Consolidated Revenue Fund (CRF)
2. the Employment Insurance (EI) Operating Account
3. the Canada Pension Plan (CPP)
4. other government departments and Crown corporations

EI and CPP benefits and related administrative costs are charged against revenues earmarked in separate specified purpose accounts and not through appropriations from government. The EI Operating Account and the CPP are financed by employers and employees and, in the case of the CPP, income from its investments. Federal administrative costs incurred by departments in the delivery of programs related to EI and CPP are charged to the respective accounts and reported as revenues credited to the vote. While presented in the Departmental Plan, the EI Operating Account and the CPP are excluded from ESDC’s Main and Supplementary Estimates. Accordingly, these accounts are not reflected in Quarterly Financial Reports.

Also, the department has the legislative authority, through the Department of Employment and Social Development Act to deliver services to the public for partners on a cost-recovery basis as well as to deliver select services for the Government of Canada, such as passport services and Canadian Dental Care Plan (CDCP) services.

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

This section highlights the significant items that contributed to the net increase in resources available for the year and the net increase in actual expenditures for the quarter ending December 31, 2025.

ESDC’s total budgetary authorities available in the third quarter of the current fiscal year were $105,866 million, which represents an overall increase of $7,363 million (7%) from the previous fiscal year. Total YTD budgetary authorities used as of the third quarter ending December 31, 2025, were $75,585 million. In comparison, total YTD budgetary authorities used as of the third quarter of the previous fiscal year were $72,762 million, representing a year-over-year increase of $2,823 million (4%).

Further details can be found in the Statement of Authorities (Table 4) and Departmental Budgetary Expenditures by Standard Object (Table 5) at the end of the report.

2.1 Significant changes to authorities

ESDC’s total budgetary authorities available for use in the third quarter increased by $7,363 million, from $98,503 million as of December 31, 2024, to $105,866 million as of December 31, 2025.

This increase is primarily associated with statutory items, in particular forecasted OAS pension, Guaranteed Income Supplement (GIS) and Allowance payments representing an increase of $4,921 million. This can be explained by an expected increase in the number of pensioners due to the aging of the population, and in average monthly payments resulting mainly from the indexation of benefits.

Other factors contributing to the increase include:

• an increase of $1,409 million in voted grants and contributions (Vote 5), mainly attributable to the increases in payments to provinces and territories for Early Learning and Child Care and for the National School Food Program
• an increase of $750 million in statutory transfer payments for the Canada Disability Benefit by providing a payment of up to $200 per recipient per month starting in July 2025
• an increase of $215 million for the Canada Student Financial Assistance Program and Canada Apprentice Loan, mainly due to two Budget 2024 measures: increasing Canada Student Grants by 40% above pre-pandemic levels until July 31, 2025; and expanding the Canada Student Loan Forgiveness benefit to 10 new occupations
• an increase of $197 million to write-off unrecoverable Canada Student Loans and Canada Apprentice Loans (Vote 10), mostly due to reaching the legislated statute of limitation, which occurs after 6 years have elapsed. The write-off represents less than 1% of the total direct loan portfolio

In fiscal year 2024 to 2025, the new National School Food Program (NSFP) received $70 million in statutory authorities through the Budget Implementation Act 2024 as well as $2 million in the third quarter of the fiscal year for the Indigenous Engagement and Capacity Building (IECB) component. For fiscal year 2025 to 2026, the total funding approved for the NSFP is falling under the voted grants and contributions (Vote 5) for a total of $142 million ($140 million for bilateral agreements with provincial and territorial governments transfers to P/Ts and $2 million for the IECB component), which represents an overall increase of $70 million compared to the previous fiscal year, resulting from an increase in the Vote 5 authority netting a decrease in the statutory authority.

Offsetting these increases is a decrease of $59 million in other budgetary authorities items.

With respect to non-budgetary authorities (see Table 4 for details), the net increase of $18 million from the previous fiscal year is mainly due to two Budget 2024 measures: increasing the interest-free Canada Student Loan limit from $210 to $300 per week of study until July 31, 2025; which is partially offset by expanding the Canada Student Loan Forgiveness benefit to 10 new occupations.

On a standard object perspective (see Table 5 for details), planned expenditures related to Transfer Payments (standard object 10) for the quarter ended December 31, 2025, increased by $7,263 million when compared to the previous fiscal year. This is in line with the above explanations for statutory items and voted grants and contributions (Vote 5).

2.2 Significant changes to expenditures

Overall, the proportion of ESDC’s total budgetary expenditures as of December 31, 2025, is closely aligned with the usual spending trend reported in the third quarter, with approximatively 71% of the authorities available for use expensed.

Compared to the previous fiscal year, total budgetary expenditures for the third quarter have increased by $2,823 million from $72,762 million as of December 31, 2024, to $75,585 million as of December 31, 2025.

This 4% variance is mostly explained by the increase of $2,172 million in statutory expenditures, from $66,340 million for the third quarter of last fiscal year to $68,512 million for the same period this fiscal year. This is primarily due to the OAS program, which has increased by $1,895 million. The main factors explaining this increase are the same as mentioned in section 2.1 above, that is the aging population and higher average monthly amounts paid to beneficiaries mainly due to the indexation of benefits.

Other factors contributing to the increase include:

• an increase of $742 million in voted grants and contributions (Vote 5) expenditures, mainly due to higher payments to provinces and territories for Early Learning and Child Care, National School Food Program, Canada Service Corps, Indigenous Early Learning and Child Care, Social Innovation and Social Finance Strategy, and Youth Employment and Skills Strategy as of the third quarter of this fiscal year, compared to the same period last fiscal year
• an increase of $270 million in statutory transfer payments for the Canada Disability Benefit, due to the provision of a payment of up to $200 per recipient per month, which began to be issued in July 2025
• an increase of $195 million for the write-off of unrecoverable Canada Student Loans and Canada Apprentice Loans (Vote 10), mostly due to reaching the legislated statute of limitation, which occurs after 6 years have elapsed
• an increase of $125 million in expenditures for the Canada Student Financial Assistance Program and Canada Apprentice Loan, which is mainly explained by a growing number of Canada Student Grants being disbursed as more eligible students are enrolling in post-secondary education

Offsetting these increases are decreases totalling $404 million, mainly related to:

• a decrease of $286 million in net voted operating expenditures (Vote 1) mainly resulting from increased recoverable expenditures related to the Benefit Delivery Modernization Programme recorded in the Employment Insurance Operating Account
• a decrease of $74 million for the Canada Education Savings Program, which include the Canada Education Savings Grant and the Canada Learning Bond. This decrease reflects the adoption of an enhanced year-end accounting methodology, which resulted in a one-time increase in program-related expenditures for the fiscal year 2024 to 2025. The refined methodology improves the accuracy and timing of expense recognition, providing a clearer financial overview for that fiscal year

Other changes in budgetary expenditures totalling a net decrease of $44 million also contribute to the variance.

On a standard object perspective (see Table 5 for details), the YTD expenditures related to Transfer Payments (standard object 10) for the quarter ended December 31, 2025, increased by $2,917 million when compared to the previous fiscal year, which is in line with explanations provided above regarding the changes in voted grants and contributions (Vote 5) and statutory items expenditures.

3. Risks and uncertainties

Canada is operating in an increasingly complex global and domestic environment. Geopolitical instability, economic transformation, and technological disruption are reshaping the context in which the federal government must deliver on its mandate. 

As the department strives to ensure that Canadians receive high quality and efficient services, it must remain mindful of the changing environment in which it operates as well as the risks that may delay or prevent it from achieving its mission. Across the portfolio, the department uses standard risk management practices, oversight committees, consultation and training to anticipate and mitigate the probability and impact of negative events. The department’s top corporate risks and the efforts to mitigate them are described in the “Overall Risks and Mitigation Strategies” sub-section of ESDC’s Departmental Plan 2025 to 2026.

One of the department’s corporate risks is the potential that resources required for critical departmental initiatives might not be provided or used on a timely basis. To address this, the department has developed resource plans, capacity management strategies and further improved forecasting. Existing governance structures are being leveraged to guide resource allocation, ensuring decisions are strategic, transparent, and aligned with both departmental and government-wide priorities.

Additionally, ESDC continues implementing an important transformation project named the Benefits Delivery Modernization Programme (BDM). This project seeks to transform how the department delivers Old Age Security, Employment Insurance and Canada Pension Plan benefits to Canadians through a more modern and streamlined platforms for benefit processing and call centres. Like any large-scale transformation, there are risks that could impact the timelines and the costs. To address these risks, ESDC is implementing mitigation measures including adopting a phased implementation approach and applying planning and budgetary controls to ensure the department is ready to address potential issues as they may arise.

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

On December 19, 2025, the Prime Minister, Mark Carney, announced the following changes in the senior ranks of the public service, which took effect early in the New Year:

• Rob Wright, at that time Associate Deputy Minister of Crown-Indigenous Relations, became Deputy Minister of Labour and Associate Deputy Minister of Employment and Social Development.

The Prime Minister also congratulated the following individuals on their departure from the public service:

• Sandra Hassan, Deputy Minister of Labour and Associate Deputy Minister of Employment and Social Development, became Senior Advisor at Employment and Social Development Canada, pending her upcoming retirement.
• Kristina Namiesniowski, former Senior Associate Deputy Minister of Employment and Social Development.
• John Ostrander, Business Lead, Benefits Delivery Modernization, Employment and Social Development Canada.

5. Approval by senior officials

Original document was signed in Gatineau, Canada by:

Serena Francis, Chief Financial Officer, on February 17, 2026

Paul Thompson, Deputy Minister, on February 23, 2026

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

(S) = Statutory

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