Quarterly Financial Report Outlining Results, Risks and Significant Changes in Operations, Personnel and Programs — For the Quarter Ended September 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 planned spending levels have increased by about $6 million for anticipated investments in 5G wireless technology.

ISED's net operating expenditures authority increased by $6.5 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 $5.3 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 Q2 authorities used (a decrease of $53.7 million quarterly and $80.9 million year-to-date) are mainly attributable to the timing of payments made for Grants and Contributions between fiscal years.

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 September 30, 2025, and September 30, 2024

Comparison of total net budgetary authorities available for use as at September 30, 2025, and September 30, 2024
Comparison of total net budgetary authorities available for use as at September 30, 2025, and September 30, 2024
  2025-26 2024–25
G&CFootnote * $7,795,803,000 $5,349,945,000
Operating $661,138,000 $654,646,000
OtherFootnote ** $85,480,000 $90,737,000
Capital $86,619,000 $80,567,000
Total Budget $8,629,040,000 $6,175,895,000

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

  • Grants and Contributions (Vote 10 and Statutory): $2,445.9 million increase
  • Net Operating Expenditures (Vote 1): $6.5 million increase
  • Capital Expenditures (Vote 5): $6.1 million increase
  • Other: $5.3 million decrease
    • Employee Benefit Plan (EBP): $9.9 million increase
    • Canadian Intellectual Property Office Revolving Fund: $15.3 million decrease
    • Other: $0.1 million increase

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 (3.7)
Total Change in Vote 10 Authority 2,431.3
Statutory Authorities - Program changes based on cash flow requirements:
Canada Small Business Financing Act 19.9
Statutory Authorities - 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) 2,445.9
Footnote *

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

Return to footnote * referrer

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
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
Beneficial Ownership Registry negative (4.1)
Funding which has ended in 2024-25
Canada Digital Adoption Program negative (15.1)
Operating Carry-forward negative (4.1)
Other minor items, net 1.3
Total Change in Net Operating Expenditures Authority (Vote 1) 6.5
Capital Expenditures Authority (Vote 5)
  Increase/ (Decrease) in millions of dollars
Funding changes:
New Generation of Wireless Technology 5G 5.6
Operating Carry-forward 0.7
Other minor items, net negative (0.2)
Total Change in Capital Expenditures Authority (Vote 5) 6.1
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. 10.0
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)
Total Change in Other Authorities negative (5.3)

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. 23.3
Professional Services Decrease in professional services is primarily attributed to the Budget 2023 Refocusing Government Spending. negative (5.9)
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. 34.0
Transfer Payments Significant changes have been explained in Section 2.1.1. 2,445.9
Other minor items, net negative (1.7)
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 2,453.1

2.2 Authorities used to date and actual expenditures

Authorities used and actual expenditures for the second quarter of 2025–26 decreased by $53.7 million when compared with the second quarter of 2024–25, while the year-to-date authorities used and actual expenditures also decreased by a similar margin ($80.9 million) when compared to the same period last year (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 second quarter authorities used and expended as of September 30, 2025, and September 30, 2024
Comparison of net second quarter authorities used and expended as of September 30, 2025, and September 30, 2024
Comparison of net second quarter authorities used and expended as of September 30, 2025, and September 30, 2024
  Second quarter Year to date
2025–26 2024–25 2025–26 2024–25
G&CFootnote * 383,675,000 431,751,000 1,034,069,000 1,096,022,000
Operating 140,970,000 146,720,000 279,069,000 291,990,000
OtherFootnote ** 21,918,000 21,755,000 40,282,000 46,361,000
Total 546,563,000 600,226,000 1,353,420,000 1,434,373,000

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

  • Grants and Contributions (Vote 10 and Statutory)
    • Q2 – $48.1 million decrease
    • YTD – $62.0 million decrease
  • Net Operating Expenditures (Vote 1)
    • Q2 – $5.8 million decrease
    • YTD – $12.9 million decrease
  • Other
    • CIPO Revolving Fund
      • Q2 – $0.5 million decrease
      • YTD – $8.8 million decrease
    • Other minor items, including capital expenditures (Vote 5) and EBP
      • Q2 – $0.7 million increase
      • YTD – $2.7 million increase

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

2.2.1 Highlights of changes in authorities used for the second 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
Q2 YTD
New/additional program spending:
AI Compute Infrastructure Program 45.8 52.4
Variance due to timing of payments and/or cash flow requirements:
Canada Foundation for Innovation 141.9 193.0
Strategic Science Fund 1.4 31.6
Horizon Europe negative (24.7) 10.2
Global Innovation Clusters negative (24.7) negative (3.4)
CANARIE Inc negative (10.9) negative (4.6)
Stem Cell Network negative (11.3) negative (15.0)
Strategic Innovation Fund negative (27.8) negative (29.6)
Digital Research Infrastructure Strategy 9.5 negative (50.1)
Mitacs Inc. negative (67.5) negative (69.1)
Programs for which funding has ended in 2024–25
AdMare Bioinnovations negative (20.2) negative (27.0)
Canada Digital Adoption Program negative (60.2) negative (154.6)
Other minor items, net 0.6 4.2
Total Change in Grants and Contributions Authorities Used (Vote 10 and Statutory) negative (48.1) negative (62.0)
Net Operating Authorities Used (Vote 1)
  Increase/ (Decrease) in millions of dollars
Q2 YTD
Net Operating expenditures: The decrease is primarily due to an increase in revenue for the quarter, and to reductions in professional services. negative (5.8) negative (12.9)
Total Change in Net Operating Expenditures Authorities Used (Vote 1) negative (5.8) negative (12.9)
Capital Expenditures Authorities Used (Vote 5)
  Increase/ (Decrease) in millions of dollars
Q2 YTD
Other minor items, net negative(0.4) negative(0.8)
Total Change in Capital Expenditures Authorities Used (Vote 5) negative (0.4) negative (0.8)
Other Authorities Used
  Increase/ (Decrease) in millions of dollars
Q2 YTD
Revolving Fund Net expenditures – The Q2 and YTD increases in patent and trademark revenue was offset by increased overall salary expenses as well as timing differences for IT service billing related to the support of CIPO's systems. negative (0.5) negative (8.8)
Other minor items, net 1.1 3.5
Total Change in Other Authorities Used 0.6 negative (5.3)

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
Q2 YTD
Standard Object:
Personnel Q2 salary expense increases are mostly attributed to CIPO. The year-to-date increase is attributed to collective agreement increases affecting salaries and employer contributions to benefits. 8.5 16.7
Professional and Special Services Q2 increases in professional services are mostly attributable to the timing differences for legal services received from Justice Canada. The year-to-date decrease is primarily due to the Refocusing Government Spending Initiative. 7.4 negative (5.5)
Repairs and maintenance Decreases in repairs and maintenance are mostly attributable to the multi-floor ISED building repairs and maintenance services of Q2 2024–25 under GC Workplace. negative (4.0) negative (4.2)
Transfer Payments Significant changes have been explained in Section 2.2.1. negative (48.1) negative (62.0)
Other minor items, net negative (3.0) negative (5.0)
Less revenues netted against expenditures:
Revolving Fund Revenues The increases are primarily attributable to higher revenues from patent maintenance fees and trademark application filings, largely driven by increased volumes and the CPI adjustment implemented in January 2025 5.3 11.4
Sales of services The variance is mostly attributable to the increase of regulatory nature revenue from Corporations Canada and the Office of the Superintendent of Bankruptcy in the quarter. 9.2 9.6
Total Change in Budgetary expenditures negative (53.7) negative (81.0)

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

On October 7, Mark Schaan was officially appointed Associate Deputy Minister at ISED. He will work with departmental sectors to support the Government's agenda and advance Minister Solomon's mandate as Minister of Artificial Intelligence and Digital Innovation.

4. Financial risks and uncertainties

As of Q2 2025–26, ISED continues to advance priorities that support productivity and long-term competitiveness, including clean growth, critical minerals, and responsible AI. Current conditions include persistent inflationary pressures, borrowing costs that remain higher than in recent years, and a more uncertain geopolitical and trade-policy environment. In particular, recent tariff changes and resulting shifts of manufacturing to the United States are a major driver affecting international supply chains, investment decisions, and partner capacity, which could impact delivery timelines and the uptake of programs, especially those with large Grants and Contributions commitments.

ISED has advanced domestic manufacturing, with EV-battery and critical-minerals strategies supporting major private-sector investment and strengthening supply-chain resilience. Large multi-year projects also carry delivery risks, including permitting, cost escalation, supply-chain constraints, financing conditions, and market demand. Together, these factors reflect both progress and execution risk across the ecosystem.

The Government’s Canadian Critical Minerals Strategy and its 2024 Annual Report highlight the importance – and remaining gaps – in refining and processing capacity to fully capture value from upstream extraction and supply planned battery manufacturing capacity. Program flexibilities and partnerships remain important to mitigate schedule and cost risks as projects move from announcement to operation.

Furthermore, and following Budget 2024, the Government launched the Canadian Sovereign AI Compute Strategy to expand domestic AI compute capacity and access. This builds on the Pan-Canadian AI Strategy (phase two, 2021-22 to 2025-26). The scale and timing of third-party infrastructure and procurement present delivery and sequencing risks that ISED is monitoring through departmental oversight mechanisms.

In July 2025, the Government launched a Comprehensive Expenditure Review (CER) to assess program spending and operations, with a focus on value for money and service improvement. ISED is incorporating CER planning assumptions into scenario analysis and monthly financial status reporting and will adjust resource plans once government decisions are finalized.

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

  • Standardizing risk management practices for grants and contributions (G&Cs) to promote consistent risk assessments and decision-making across programs;
  • Advancing financial management modernization to improve the timeliness and integration of financial and non-financial data to support decision-making; and
  • Reinforcing CFO model accountabilities by clarifying roles and oversight for resource management.

Through the remainder of 2025-26, evolving global conditions (trade frictions, supply-chain adjustments, technology-market shifts) may influence partner delivery schedules and cost profiles. ISED will continue to align investments with Government-wide priorities while using internal financial status reporting, scenario planning, and targeted reallocations to protect core program outcomes and manage emerging pressures.

Approved by:

Philip Jennings
Deputy Minister

Date: November 21, 2025

Douglas McConnachie
Chief Financial Officer

Date: November 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 September 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 September 30, 2024 Year to date used at quarter-end
Vote 1 – Operating expenditures 795,546 180,124 344,017 784,758 176,658 347,372
Vote 1 – Revenue Credited to the Vote negative (134,407) negative (39,154) negative (64,948) negative (130,112) negative (29,938) negative (55,382)
Vote 1 – Net Operating Expenditures 661,139 140,970 279,069 654,646 146,720 291,990
Vote 5 – Capital expenditures 86,620 1,505 1,957 80,567 1,888 2,758
Vote 10 – Grants and contributions 7,675,234 372,394 1,022,215 5,243,950 430,571 1,093,688
Total voted authorities 8,422,993 514,869 1,303,241 5,979,163 579,179 1,388,436
Revolving Fund Gross expenditures 263,133 62,502 120,775 259,603 57,719 118,251
Revolving Fund Revenues negative (263,133) negative (63,610) negative (125,448) negative (244,278) negative (58,282) negative (114,092)
Revolving Fund Net expenditures - negative (1,108) negative (4,673) 15,325 negative (563) 4,159
Liabilities under the Canada Small Business Financing Act & the Small Business Loans Act 120,567 11,282 11,854 100,657 1,180 2,334
CIFAR – Pan-Canadian Artificial Intelligence - - - 5,338 - -
Total Statutory Grants and Contributions 120,567 11,282 11,854 105,995 1,180 2,334
Employee Benefit Plans 84,960 21,240 42,480 75,069 18,767 37,534
Refunds of Previous Years Revenue - 248 461 - 1,636 1,858
Proceeds for Crown Asset Disposals 310 6 6 142 1 1
Ministers' Salary and Motor Car Allowance 210 26 51 201 26 51
Total budgetary statutory authorities 206,047 31,694 50,179 196,732 21,047 45,937
Total Budgetary authorities 8,629,040 546,563 1,353,420 6,175,895 600,226 1,434,373
Non-budgetary authorities 800 - - 800 - -
Total authorities 8,629,840 546,563 1,353,420 6,176,695 600,226 1,434,373
Footnote 1

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

Return to footnote 1 referrer

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
September 30, 2025
Year to date used at quarter-end Planned expenditures for the year ending March 31, 2025Footnote 1 Expended during the quarter ended September 30, 2024 Year to date used at quarter-end
Expenditures
Personnel 827,288 207,762 412,838 803,955 199,282 396,177
Transportation and communications 10,374 2,582 4,231 7,001 2,672 4,740
Information 17,066 2,188 4,030 16,253 2,626 4,760
Professional and special services 220,595 40,982 65,717 226,537 33,632 71,262
Rentals 34,054 5,387 13,167 40,692 5,757 11,466
Repair and maintenance 10,853 1,303 1,549 10,106 5,229 5,790
Utilities, materials and supplies 4,091 803 1,248 23,535 827 1,371
Acquisition of land, buildings and works - - 17 - - -
Acquisition of machinery and equipment 106,146 2,742 4,595 72,118 3,588 6,741
Transfer payments 7,795,803 383,675 1,034,069 5,349,946 431,751 1,096,022
Other subsidies and payments 310 1,903 2,355 142 3,083 5,518
Total gross budgetary expenditures 9,026,580 649,327 1,543,816 6,550,285 688,447 1,603,847
Less Revenues netted against expenditures
Revolving Fund Revenues 263,133 63,610 125,448 244,278 58,283 114,092
Sales of Services and Other Revenue 134,407 39,154 64,948 130,112 29,938 55,382
Total Revenues netted against expenditures 397,540 102,764 190,396 374,390 88,221 169,474
Total net budgetary expenditures 8,629,040 546,563 1,353,420 6,175,895 600,226 1,434,373
Footnote 1 

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

Return to footnote 1 referrer