Quarterly Financial Report Outlining Results, Risks and Significant Changes in Operations, Personnel and Programs — For the Quarter Ended June 30, 2025

1. Introduction

This Quarterly Financial Report (QFR) has been prepared by management as required by section 65.1 of the Financial Administration Act, in the form and manner prescribed by the Treasury Board. This document should be read in conjunction with the Main Estimates and Supplementary Estimates for fiscal year 2025–26.

1.1 Our organization

Innovation, Science and Economic Development Canada (ISED) works with Canadians in all areas of the economy and in all parts of the country to improve conditions for investment; enhance Canada's innovation performance; increase Canada's share of global trade; and build a fair, efficient and competitive marketplace.

ISED helps Canadian businesses grow, innovate and expand so that they can create good quality jobs and wealth for Canadians. It also supports science research and the integration of scientific considerations into investment and policy choices. The Department helps small businesses grow through trade and innovation and promotes increased tourism in Canada. The Department also works to position Canada as a global centre for innovation where investments support clean and inclusive growth, the middle class prospers through more job opportunities and companies become global leaders.

ISED's efforts focus on improving conditions for investment, supporting science, helping small- and medium-sized businesses grow, building capacity for clean and sustainable technologies and processes, increasing Canada's share of global trade, promoting tourism, and building an efficient and competitive marketplace.

A summary description of ISED's core responsibilities can be found in the 2025–26 Departmental Plan.

1.2 Basis of presentation

The authority of Parliament is required before money can be spent by the government. Approvals are given in the form of annually approved limits through appropriation acts or through legislation for specific purposes. 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 (as applicable) for the 2025–26 fiscal year. This 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.

As part of the departmental performance reporting process, ISED prepares its annual departmental financial statements on a full-accrual basis in accordance with Treasury Board accounting policies, which are based on Canadian Generally Accepted Accounting Principles for the public sector. The spending authorities are voted by Parliament on an expenditure basis. Therefore, management has prepared this report using an expenditure basis of accounting.

This report has not been subject to an external audit or review. However, it has been reviewed by ISED's Departmental Audit Committee (DAC) in accordance with Treasury Board guidance. No material misstatements or omissions have been identified.

1.3. General descriptions

The following descriptions are referred to throughout the report:

  • Authority: Approvals from Parliament to spend up to a specific amount.
  • Operating (Vote 1): Amount approved for the fiscal year for the Department to spend on salary and operating expenditures.
  • Capital (Vote 5): Amount approved for the fiscal year for the Department to spend on capital purchases or for the construction of assets.
  • Grants and Contributions (Vote 10 and Statutory):
    • Vote 10: Amount approved for the fiscal year for the Department to provide Grants and Contributions (G&C) funding to prospective recipients.
    • Statutory: Amount approved through an existing Act of Parliament where additional annual approvals are not required by the Department to access G&C funding for recipients.
  • Operating and Capital Carry Forward: Eligible funds lapsed in the previous fiscal year brought forward to the following year.
  • Employee Benefit Plan (EBP): The Department's contribution to public service employee benefit plans.
  • Vote Netted Revenue (VNR): Authority to apply revenues earned by the organization to cover costs incurred for specific activities by that organization.
  • Standard Object (SO): Classification or coding of transactions to permit the reporting of information about the nature of transactions in the Estimates and Public Accounts (i.e., personnel, professional and special services, and transfer payments).

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

ISED's authorities available for use in 2025–26 increased by $2.5 billion compared with 2024–25, mostly in the Grants and Contributions authorities. This is attributable to increased funding for Electric Vehicle Battery Manufacturers ($1.9 billion), the Universal Broadband Fund ($489 million), Strategic Innovation Fund ($327 million), and Artificial Intelligence Programs ($139 million). These amounts are offset by reduced funding for programs such as the Canada Digital Adoption Program ($346 million), the Canada Foundation for Sustainable Development Technology ($158 million) and the Digital Research Infrastructure Strategy ($151 million). The capital vote remains consistent with the prior year planned spending levels.

ISED's net operating expenditures authority increased by $10.6 million reflecting increased funding for several Grants and Contributions programs. The increases were offset by reductions to expenditure categories such as Professional Services. Other authorities reduced by $5.5 million which is a combination of an increase to Employee Benefit Plan funding ($9.9 million) and a net decrease in planned spending for the department's revolving fund, CIPO ($15.3 million).

Variances in Q1 authorities used (a decrease of $27.3 million) are mainly attributable to the timing of payments made for Grants and Contributions between fiscal years and reductions in expenditure categories such as Professional Services.

2.1 Authorities available for use for the fiscal year and planned expenditures

ISED's current total authorities available for use of $8.6 billion in 2025–26 is $2.5 billion higher than the same period in 2024–25. This is illustrated in Graph 1 below, in the Statement of Authorities and in the Departmental Budgetary Expenditures by Standard Object.

Graph 1: Comparison of total net budgetary authorities available for use as at June 30, 2025, and June 30, 2024

Comparison of total net budgetary authorities available for use as at June 30, 2025, and June 30, 2024
Total net budgetary authorities available for use
  2025–26 2024–25
G&CFootnote * 7,795,803,000 5,349,946,000
Operating 628,663,000 618,058,000
OtherFootnote ** 85,169,000 90,716,000
Capital 81,803,000 76,407,000
Total Budget 8,591,438,000 6,135,127,000

The overall increase in total net budgetary authorities available for use includes:

  • Grants and Contributions (Vote 10 and Statutory): $2,445.8 million increase
  • Net Operating Expenditures (Vote 1): $10.6 million increase
  • Capital Expenditures (Vote 5): $5.3 million increase
  • Other: $5.5 million decrease
    • Employee Benefit Plan (EBP): $9.9 million increase
    • Canadian Intellectual Property Office Revolving Fund: $15.3 million decrease
    • Other: $0.1 million decrease

Variances for each type of appropriation are explained in detail in the tables below.

2.1.1 Highlights of changes in authorities available for use (2025–26 compared with 2024–25)

The following tables highlight the larger changes in authorities available for use, as reported in the Statement of Authorities (unaudited).

Grants and Contributions (Vote 10 and Statutory)
  Increase/ (Decrease) in millions of dollars
Additional funding generated by recent Budget decisions
Strategic Innovation Fund 219.7
Artificial Intelligence Compute Infrastructure Program / Compute Access Fund Program 139.4
Global Innovation Clusters 85.9
Horizon Europe 34.5
CanCode Program 32.6
Black Entrepreneurship Program 15.0
National Artificial Intelligence Institutes 12.0
Futurpreneur 12.0
Patent Collective Pilot Program 7.5
Canadian Institute for Advanced Research – Canadian Artificial Intelligence Safety Institute 6.0
Life Sciences Fund 3.0
Business Data Lab 2.4
Funding changes for existing programs
Electric Vehicle Battery Manufacturers 1,899.7
Universal Broadband Fund 489.3
Strategic Innovation Fund 107.5
Strategic Science Fund – Science Research and Talent Development 84.8
Global Innovation Superclusters 78.8
Genome 16.0
Coordinated Accessible National Health Network negative (5.0)
Canada Foundation for Innovation negative (6.4)
CANARIE Inc. negative (8.4)
ElevateIP Program negative (11.0)
Telesat Low Earth Orbit Satellite Capacity negative (15.0)
Mitacs negative (45.0)
Digital Research Infrastructure Strategy negative (151.5)
Canada Foundation for Sustainable Development Technology negative (157.6)
Programs for which funding has ended in 2024–25Footnote *
Diverse and Inclusive Economy Program negative (6.9)
Digital Literacy Exchange negative (7.0)
Indigenous Tourism Fund negative (12.5)
Connect to Innovate negative (38.3)
Canada Digital Adoption Program negative (346.5)
Other minor items, net negative (3.8)
Total Change in Vote 10 Authority 2,431.2
Statutory Authorities
Program changes based on cash flow requirements
Canada Small Business Financing Act 19.9
Programs for which funding has ended in 2024–25Footnote *
Pan-Canadian Artificial Intelligence Strategy negative (5.3)
Total Change in Statutory Authorities 14.6
Total Change in Grants and Contributions (Vote 10 and Statutory) 2,445.8
Footnote 1 

Programs for which funding has ended but in certain cases may be renewed.

Return to footnote *

Net Operating Expenditures Authority (Vote 1)
  Increase/ (Decrease) in millions of dollars
Additional funding generated by Budget decisions
Health Emergency Readiness Canada and Life Sciences Fund 17.4
Canadian Artificial Intelligence Sovereign Compute Strategy 4.8
Canadian Artificial Intelligence Safety Institute 3.5
Clean Technology Data Strategy Initiative and Clean Growth Hub Initiative 3.3
Black Entrepreneurship Program 1.2
Women's Entrepreneurship Strategy 1.1
Budget 2023 – Refocusing Government Spending Reductions negative (6.5)
Funding changes based on cash flow requirements of existing programs & previous budgets
Strategic Innovation Fund 6.0
Universal Broadband Fund negative (1.7)
Beneficial Ownership Registry negative (4.1)
Funding which has ended in 2024-25
Upskilling for Industry negative (1.6)
Canada Digital Adoption Program negative (15.1)
Other minor items, net 2.3
Total Change in Net Operating Expenditures Authority (Vote 1) 10.6
Capital Expenditures Authority (Vote 5)
  Increase/ (Decrease) in millions of dollars
Funding changes
New Generation of Wireless Technology 5G 5.6
Other minor items, net negative (0.3)
Total Change in Capital Expenditures Authority (Vote 5) 5.3
Other
  Increase/ (Decrease) in millions of dollars
Employee Benefit Plans – the increase is due to the use of a higher EBP percentage in 2025–26 to calculate its value compared to the one used in 2024–25 as well as for funding received for various Budget measures and new initiatives. 9.9
CIPO's Revolving Fund Net expenditures – the variance is due to an increase in Patent Maintenance fees and Trademark planned revenues offset by a combination of reduced costs related to the end of the Next Generation Project and an increase in salary costs. negative (15.3)
Other minor items, net negative (0.1)
Total Change in Other Authorities negative (5.5)

2.1.2 Highlights of changes in planned expenditures (2025–26 compared with 2024–25)

The Departmental Budgetary Expenditures by Standard Object shows initial planned expenditure plans. These plans are subject to change during the fiscal year. The annual variances in planned expenditures are primarily due to the following:

Spending Category Explanation of Significant Changes (2025–26 compared with 2024–25) Planned Increase/ (Decrease) in millions of dollars
Standard Object
Personnel Salary increases are primarily attributed to additional funding received in 2025-26 and the impact of the use of a higher EBP percentage in 2025-26 to calculate its value compared to the one used in 2024-25. 29.0
Professional Services Decrease in professional services is primarily attributed to the Budget 2023 Refocusing Government Spending. negative (5.3)
Utilities, Materials and Supplies Decrease is mostly attributable to a realignment between Standard Object – Utilities, materials and supplies and Acquisition of machinery and equipment in 2025-26. negative (19.4)
Acquisition of machinery and equipment Increase is mostly attributable to a realignment between Standard Object – Utilities, materials and supplies and Acquisition of machinery and equipment in 2025–26 and to additional funding accessed for the New Generation of Wireless Technology – 5G initiative. 30.6
Transfer Payments Significant changes have been explained in Section 2.1.1. 2,445.8
Other minor items, net negative (1.3)
Less changes in revenues netted against program expenditures
Revenues netted against expenditures The increase is mainly due to planned higher CIPO's revenues following a change in Patent Maintenance fees and Trademark revenues. 23.1
Total Change in Planned Expenditures 2,456.3

2.2 Authorities used to date and actual expenditures

Authorities used and actual expenditures for the first quarter of 2025–26 decreased by $27.3 million when compared with the first quarter of 2024–25. (See Graph 2 below, the Statement of Authorities, and the Departmental Budgetary Expenditures by Standard Object.) The differences occurred primarily in Grants and Contributions payments and are largely attributable to recipients' cash flow requirements and the timing variances of payments. Additionally, spending on professional services has decreased year-over-year.

Graph 2: Comparison of net first-quarter authorities used and expended as of June 30, 2025 and June 30, 2024

Comparison of net first-quarter authorities used and expended as of June 30, 2025 and June 30, 2024
Net first-quarter authorities used and expended
  2025–26 2024–25
G&CFootnote * 650,394,000 664,270,000
Operating 138,099,000 145,270,000
OtherFootnote ** 18,365,000 24,607,000
Total 806,858,000 834,147,000

By category, the authorities used and expended in the first quarter compared with the same time last year have changed as follows:

  • Grants and Contributions (Vote 10 and Statutory) – $13.9 million decrease
  • Net Operating Expenditures (Vote 1) – $7.2 million decrease
  • Other
    • CIPO Revolving Fund – $8.3 million decrease
    • Other minor items, including capital expenditures (Vote 5) and EBP – $2.1 million increase

Section 2.2.1 provides a detailed breakdown of the changes in authorities used for the first quarter.

2.2.1 Highlights of changes in authorities used for the first quarter

The following tables highlight, by authority, the larger changes in authorities used, as reported in the Statement of Authorities.

Grants and Contributions Authorities Used (Vote 10 and Statutory)
  Increase/ (Decrease) in millions of dollars Q1
New/additional program spending
Horizon Europe 34.9
AI Compute Infrastructure Program 6.6
Variance due to timing of payments and/or cash flow requirements
Canada Foundation for Innovation 51.1
Strategic Science Fund 30.1
Global Innovation Clusters 21.4
Futurpreneur Canada 9.0
Canadian Institute for Advance Research 7.1
CANARIE Inc 6.3
WES Ecosystem Fund negative (5.3)
ElevateIP negative (13.3)
Digital Research Infrastructure Strategy negative (59.6)
Programs for which funding has ended in 2024–25
AdMare Bioinnovations negative (6.7)
Canada Digital Adoption Program negative (94.4)
Other minor items, net negative (1.1)
Total Change in Grants and Contributions Authorities Used (Vote 10 and Statutory) negative (13.9)
Net Operating Expenditures Authorities Used (Vote 1)
  Increase/ (Decrease) in millions of dollars Q1
Net Operating expenditures:
The decrease is primarily due to reductions in professional service expenditures.
negative (7.2)
Total Change in Net Operating Expenditures Authorities Used (Vote 1) negative (7.2)
Capital Expenditures Authorities Used (Vote 5)
  Increase/ (Decrease) in millions of dollars Q1
Other minor items, net negative (0.4)
Total Change in Capital Expenditures Authorities Used (Vote 5) negative (0.4)
Other Authorities Used
  Increase/ (Decrease) in millions of dollars Q1
Revolving Fund Net expenditures – the variance is mainly due to higher revenues from patent maintenance fees and trademark application filings, largely driven by increased volumes and the CPI adjustment of January 2025. Operating expenses were also lower year-over-year, mostly due to decreases in professional services for the implementation of the New Generation Patent system, which was deployed in July 2024. These savings were partially offset by increases to salaries, in particular, for patent examiners who signed a new collective agreement. negative (8.3)
Other minor items, net 2.5
Total Change in Other Authorities Used negative (5.8)

2.2.2 Highlights of changes in actual expenditures (2025–26 compared with 2024–25)

Variances in actual expenditures by standard object (Departmental Budgetary Expenditures by Standard Object) are primarily due to the following:

Spending Category Explanation of significant changes (2025–26 compared to 2024–25) Increase/ (Decrease) in millions of dollars
Q1
Standard Object
Personnel Salary Increases can be attributed primarily to funding received for collective agreement increases, such as for the patent examiners in CIPO, as well as additional funding for various new programs. 8.2
Professional and Special Services Decreases are mostly attributable to reductions related to CIPO, who completed production of a new patent system. Other amounts relate to timing differences between fiscal years for legal services received from Justice Canada as well as for increased spending for the Innovative Solutions Canada program. negative (12.9)
Transfer Payments Significant changes have been explained in Section 2.2.1. negative (13.9)
Other minor items, net negative (2.7)
Less revenues netted against expenditures
Revolving Fund Revenues Revolving fund revenue increases were from patent maintenance fees and trademark application filings, largely driven by increased volumes and the CPI adjustment of January 2025 6.0
Total Change in Budgetary expenditures negative (27.3)

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

Several changes have occurred since the last published quarterly report (February 28, 2025). The following are the more significant changes related to personnel and programs:

  • On April 7 Kendal Hembroff took on the role of Associate Assistant Deputy Minister (ADM) of the Industry Sector. Kendal had served as ADM of the Strategic Communications and Marketing Sector (SCMS), where Jean-Philippe Lapointe, Director General of the Digital Technologies and Investment Branch, will act until a replacement is found.
  • At the end of May, Andrea Johnston, ADM of Innovation Canada, retired. Stephanie Tanton, ADM responsible for the Strategic Innovation Fund, replaces Andrea, and will at the same time, lead Innovation Canada.
  • Effective June 5, Laurie-Eve Bergeron joined the department as head of Human Resources.
  • Effective July 7, the department took on the responsibility for the AI Secretariat from the Privy Council Office. Continuing his work as Deputy Secretary, Mark Schaan returns to ISED to support the mandate of Honourable Evan Solomon, Minister of Artificial Intelligence and Digital Innovation.

4. Financial risks and uncertainties

Innovation continues to drive ISED's mandate, fostering the growth of critical sectors in Canada's economy. Between Q3 2024–25 and Q1 2025–26, focus on expanding targeted investments in green technologies and digital transformation initiatives continued, along with efforts to enhance Canada's integrated EV battery supply chain. Recent federal commitments aimed at attracting global talent and private sector collaboration have strengthened Canada's leadership in artificial intelligence (AI). These initiatives are designed to address immediate economic pressures while laying the groundwork for long-term competitiveness.

ISED has made significant strides in domestic manufacturing, particularly in EV battery production, through regional partnerships and strategic investments. Recent collaborations with international automakers, such as those in the Indo-Pacific region, have reinforced Canada's supply chain resilience and reduced dependency on overseas suppliers. As part of the Pan-Canadian Artificial Intelligence Strategy, ISED has effectively aligned funding approaches with private-sector priorities, resulting in notable growth in industry partnerships. This includes the new Canadian Sovereign AI Compute Strategy, which is a program specifically designed to mobilize private sector investment, support businesses, and provide access to necessary AI compute capacity. Furthermore, ISED continues its robust support for midstream processing under the Canadian Critical Minerals Strategy, enhancing value-added production within Canada.

In Q1 2025–26, the Department continues to experience fiscal pressures influenced by persistent inflationary trends, elevated interest rates, and geopolitical tensions that are contributing to uncertainty in international trade and supply chains. To manage these challenges, ISED is streamlining its financial management practices by implementing scenario planning and the proactive reallocation of resources to ensure the ongoing delivery of program objectives. Finally, contribution agreements are currently under review with the aim of incorporating more flexible risk-sharing measures. This approach has enabled ISED to successfully navigate current economic volatility while upholding its strategic priorities.

The government's Refocusing Government Spending (RGS) initiative, introduced in Budget 2023, continues to influence departmental efficiency. Continued adherence to spending limits and an enhanced focus on operational efficiencies will compel ISED to adopt additional cost-management strategies (caps on professional services and travel remain in effect). To support these efforts, enhanced reporting through Monthly Financial Status Reports will include forward-looking indicators to provide comprehensive insight into expenditure trends and potential risks.

To further address financial risks, ISED has strengthened its risk management framework by:

  • Establishing a standardized departmental approach to risk management implementation for ISED's grant and contribution (G&C) programs to enhance consistency and support informed decision-making;
  • Pursuing the implementation of Phase 3 of the Financial Management Modernization Initiative, with a focus on integrating real-time financial data into decision-making processes; and
  • Reinforcing accountabilities under the CFO model through additional clarity in roles and financial oversight functions.

Looking ahead, evolving economic and geopolitical landscapes continue to necessitate vigilant resource management. In Q1 2025–26, renewed uncertainties caused by global trade disruptions and technological dependencies are driving strategic realignments of departmental priorities. ISED remains committed to aligning its support and investments with broader Government of Canada priorities, notably the RGS initiative. This strategic alignment underscores ongoing efforts to effectively address fiscal uncertainties and promote resilient economic growth.

Approved by:

Philip Jennings
Deputy Minister

Date: August 25, 2025

Douglas McConnachie
Chief Financial Officer

Date: August 19, 2025

Statement of Authorities (unaudited) (in thousands of dollars)

  Fiscal Year 2025–26 Fiscal Year 2024–25
Total available for use for the year ending March 31, 2026Footnote 1 Used during the quarter ended June 30, 2025 Year to date used at quarter-end Total available for use for the year ending March 31, 2025Footnote 1 Used during the quarter ended June 30, 2024 Year to date used at quarter-end
Vote 1 – Operating expenditures 763,070 163,893 163,893 748,171 170,714 170,714
Vote 1 – Revenue credited to the Vote negative (134,407) negative (25,794) negative (25,794) negative (130,113) negative (25,444) negative (25,444)
Vote 1 – Net operating expenditures 628,663 138,099 138,099 618,058 145,270 145,270
Vote 5 – Capital expenditures 81,803 452 452 76,407 870 870
Vote 10 – Grants and contributions 7,675,234 649,822 649,822 5,243,951 663,117 663,117
Total voted authorities 8,385,700 788,373 788,373 5,938,416 809,257 809,257
Revolving Fund gross expenditures 263,133 58,273 58,273 259,602 60,532 60,532
Revolving Fund revenues negative (263,133) negative (61,838) negative (61,838) negative (244,278) negative (55,810) negative (55,810)
Revolving Fund net expenditures - negative (3,565) negative (3,565) 15,324 4,722 4,722
Liabilities under the Canada Small Business Financing Act & the Small Business Loans Act 120,569 572 572 100,657 1,153 1,153
CIFAR – Pan-Canadian Artificial Intelligence - - - 5,338 - -
Total statutory grants and contributions 120,569 572 572 105,995 1,153 1,153
Employee Benefit Plans 84,960 21,240 21,240 75,069 18,767 18,767
Refunds of previous years' revenue - 213 213 - 222 222
Proceeds for Crown asset disposals - - - 122 - -
Ministers' salary and motor car allowance 209 25 25 201 26 26
Total budgetary statutory authorities 205,738 18,485 18,485 196,711 24,890 24,890
Total budgetary authorities 8,591,438 806,858 806,858 6,135,127 834,147 834,147
Non-budgetary authorities 800 - - 800 - -
Total authorities 8,592,238 806,858 806,858 6,135,927 834,147 834,147
Footnote 1 

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

Return to footnote 1

Departmental Budgetary Expenditures by Standard Object (unaudited) (in thousands of dollars)

  Fiscal Year 2025–26 Fiscal Year 2024–25
Planned expenditures for the year ending March 31, 2026Footnote 1 Expended during the quarter ended June 30, 2025 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2025Footnote 1 Expended during the quarter ended June 30, 2024 Year to date used at quarter-end
Expenditures
Personnel 819,781 205,076 205,076 790,817 196,896 196,896
Transportation and communications 10,374 1,650 1,650 7,001 2,068 2,068
Information 17,066 1,842 1,842 16,253 2,134 2,134
Professional and special services 206,158 24,735 24,735 211,481 37,629 37,629
Rentals 31,559 7,780 7,780 37,611 5,709 5,709
Repair and maintenance 10,853 246 246 10,106 561 561
Utilities, materials and supplies 4,091 445 445 23,535 545 545
Acquisition of land, buildings and works - 17 17 - - -
Acquisition of machinery and equipment 93,293 1,853 1,853 62,646 3,153 3,153
Transfer payments 7,795,803 650,394 650,394 5,349,946 664,270 664,270
Other subsidies and payments - 452 452 122 2,436 2,436
Total gross budgetary expenditures 8,988,978 894,490 894,490 6,509,518 915,401 915,401
Less revenues netted against expenditures
Revolving Fund revenues 263,133 61,838 61,838 244,278 55,810 55,810
Sales of services and other revenue 134,407 25,794 25,794 130,113 25,444 25,444
Total revenues netted against expenditures 397,540 87,632 87,632 374,391 81,254 81,254
Total net budgetary expenditures 8,591,438 806,858 806,858 6,135,127 834,147 834,147
Footnote 1 

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

Return to footnote 1