Quarterly Financial Report for the quarter ended June 30, 2026

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 for the fiscal year ending March 31, 2027. 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 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.

2.1 Significant changes to authorities

ESDC's total budgetary authorities available for use in the first quarter increased by $5,046 million, from $105,735 million as of June 30, 2025, to $110,781 million as of June 30, 2026.

This increase is primarily associated with statutory items, in particular forecasted OAS pension, Guaranteed Income Supplement (GIS) and Allowance payments representing an increase of $3,848 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 $933 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 the Youth Employment and Skills Strategy as of the first quarter of this fiscal year, compared to the same period last fiscal year
• an increase of $350 million in statutory transfer payments for the Canada Disability Benefit, due to the current fiscal year reflecting a full 12 months of forecast benefit payments compared to 9 months in the previous fiscal year following the program’s launch in July 2025
• an increase of $188 million for the Canada Student Financial Assistance Program and Canada Apprentice Loan, mainly due to the extension of the Budget 2024 measure increasing Canada Student Grants by 40% above pre-pandemic levels
• an increase of $122 million for the Canada Disability Savings Program reflecting updated estimated statutory expenditures for the fiscal year that better align with actual spending patterns observed in the program.

Offsetting these increases are decreases totalling $397 million, mainly related to:

• a decrease of $197 million for write-off of unrecoverable Canada Student Loans and Canada Apprentice Loans (Vote 10) which was exceptionally included in the 2025-26 Main Estimates due to the prorogation of Parliament at the beginning of 2025
• a decrease of $176 million in net voted operating expenditures (Vote 1), mainly attributable to savings achieved through the modernization of government operations, the streamlining of program delivery and the sunsetting of investments to modernize information technology infrastructure supporting benefit delivery related to the OAS migration to the new platform

Other minor changes in budgetary expenditures totalling a net decrease of $22 million also contribute to the variance.

With respect to non-budgetary authorities (see Table 4 for details), the net increase of $528 million from the previous fiscal year is mainly due to higher disbursements of Canada Student Loans, driven by increases in enrolment of eligible students, as well as the extension of the increase to the weekly Canada Student Loan limit from $210 to $300.

On a standard object perspective (see Table 5 for details), planned expenditures related to Transfer Payments (standard object 10) for the quarter ended June 30, 2026, increased by 5,476 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 June 30, 2026, is closely aligned with the usual spending trend reported in the first quarter, with approximatively 23% of the authorities available for use expensed.

Compared to the previous fiscal year, total budgetary expenditures for the first quarter have increased by $792 million from $24,934 million as of June 30, 2025, to $25,726 million as of June 30, 2026.

This 3% variance is mostly explained by the increase of $1,562 million in statutory expenditures, from $22,055 million for the first quarter of last fiscal year to $23,617 million for the same period this fiscal year. This is primarily due to the OAS program, which has increased by $1,226 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 $212 million in statutory transfer payments for the Canada Disability Benefit, attributable to the program’s implementation in July 2025, resulting in no corresponding expenditures in the first quarter of the previous fiscal year
• an increase of $79 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
• an increase of $29 million in expenditures for the Canada Disability Savings Program, which is mainly explained by the increase of the number of beneficiaries resulting from the opening of new Registered Disability Savings Plans by eligible Canadians
• an increase of $13 million for the Canada Education Savings Program, which includes the Canada Education Savings Grant and the Canada Learning Bond, primarily driven by strong financial market performance, enabling families to contribute more to Registered Education Savings Plans

Offsetting these increases are decreases totalling $781 million, mainly related to voted grants and contributions (Vote 5) expenditures, primarily due to fewer Provinces and Territories qualifying for their first payment in the first quarter of the fiscal year 2026 to 2027 compared to previous year, under the Early Learning and Child Care agreements.

Other minor changes in budgetary expenditures totalling a net increase of $14 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 June 30, 2026, decreased by $796 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.