Quarterly financial report for the quarter ended September 30, 2025

Table of contents

• Statement outlining results, risks and significant changes in operations, personnel and programs
  • Introduction
  • Basis of presentation
• Highlights of fiscal quarter results
  1. Significant changes to authorities
  2. Significant changes to cumulative budgetary expenditures by standard object and by authorities
  3. Significant changes to quarterly budgetary expenditures by standard object and by authorities
  4. Risks and uncertainties
  5. Significant changes in operations, personnel and programs

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

Introduction

This report for the quarter ended September 30, 2025 has been prepared as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board. The report has not been subject to an external audit or review and should be read in conjunction with Global Affairs Canada’s (GAC) Main Estimates and Supplementary Estimates for the current fiscal year.

Basis of presentation

This quarterly report has been prepared using an expenditure basis of accounting. 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 in the form of statutory spending authority for specific purposes.

The accompanying Statement of Authorities includes GAC's spending authorities granted by Parliament, and those used by GAC, consistent with the Main Estimates and Supplementary Estimates (as applicable) for the current fiscal year. 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.

GAC 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 are on an expenditure basis.

Highlights of fiscal quarter results

1. Significant changes to authorities

The following table shows the total budget available for use by GAC, which includes authorities available for use and granted by Parliament as at September 30.

i. Authorities for operating expenditures

Authorities for operating expenditures increased by $164 million or 7%, which is mainly explained by:

• Increase of $103 million for the funding of the presidency of the 2025 G7 Summit in Canada;
• Increase of $38 million due to multiple compensation adjustments for locally-engaged staff;
• Increase of $31 million related to inflation on overseas operations and foreign service allowance;
• Increase of $12 million in the operating budget, as approval was obtained from Treasury Board during the quarter, for GAC to use eligible lapsed funds from previous fiscal year in the current fiscal year;
• These increases were partly reduced by a $23 million decrease in funding for the management of the Canada-U.S. Softwood Lumber File; and
• Remaining increase of $3 million is due to decreases and increases of smaller value.

ii. Authorities for capital expenditures

Authorities for capital expenditures increased by $69 million or 33%, which is mainly explained by:

• Increased funding to strengthen Canada's diplomatic presence in Central and Eastern Europe and the Caucasus region;
• Increased funding for Canada's Arctic Foreign Policy and to implement Canada's Indo-Pacific Strategy;
• Increased funding for the redevelopment of the Mexico chancery; and
• These increases were off-set by a decrease in the funding for Duty of Care.

iii. Authorities for grants and contributions

Authorities for grants and contributions decreased by $597 million or 10%, which is mainly explained by:

• Decrease of $319 million in Canada's 2021-2026 International Climate Finance Commitment to help developing countries address the impact of climate change;
• Decrease of $169 million for GAC’s International Assistance Innovation Program;
• Decrease of $130 million in funding for Canada's International Biodiversity Program; and
• These decreases were partly offset by a $21 million increase due to increases of smaller value.

iv. Statutory authorities for debt forgiveness to Pakistan

The loan to the Government of Pakistan was fully forgiven in the previous fiscal year.

2. Significant changes to cumulative budgetary expenditures by standard object and by authorities

The following table shows the net budgetary expenditures and authorities used for the first six months of the fiscal year and their comparison for the same period last fiscal year.

i. Operating and acquisition expenditures

Operating and acquisition expenditures increased by $130 million or 10%, which is mainly explained by:

• Increase of $68 million in salaries and employee benefits due to:
  • Regular annual salary increases and changes in position steps of Canada-based staff;
  • Increased overtime related to the 2025 G7 Summit in Canada;
  • Increase in expenditures related to the Foreign Service Directives due to an increase of assignments abroad; and
  • Regular annual salary increases for locally-engaged staff, which are affected by changes to inflation and foreign exchange.
• Increase of $28 million in professional and special services due to:
  • Increase in engineering and construction services for renovations completed in certain missions abroad and for the 2025 G7 Summit in Canada;
  • Increase in hospitality in Canada as part of the 2025 G7 Summit;
  • Increase in protection services at missions abroad; and
  • Increase for specialized legal services due to claims against the Crown.
• Increase of $19 million in rentals mainly due to leasing commercial spaces as part of the 2025 G7 Summit in Canada.
• Increase of $12 million in other expenditures, which is due to:
  • New settlements for damages and other claims against the Crown;
  • Expenditures related to the Great Lakes Fishery Commission.
• The remaining increase of $3 million is due to decreases and increases of smaller value.

ii. Transfer payments

Transfer payments increased by $585 million or 31%, which is mainly explained by:

• Increase of $544 million due to timing differences in payments to the United Nations and related organizations for international development assistance. Especially, for a significant payment to the Global Fund to Fight AIDS, Tuberculosis and Malaria, which occurred in the second quarter of this year compared to the third quarter of last year;
• Increase of $154 million for a new payment to FinDev Canada following the signature of a Memorandum of Understanding for the creation of a new concessional finance facility;
• Increase of $56 million for new projects as well as increased payments for existing projects who reached a growth phase requiring more development assistance funding to Canadian non-governmental organizations;
• These increases were offset by a $148 million decrease in transfer payments to multilateral development banks, which is mainly due to the closure of projects and timing differences; and
• The remaining decrease of $21 million is due to decreases and increases of smaller value.

3. Significant changes to quarterly budgetary expenditures by standard object and by authorities

The following table shows the net budgetary expenditures and authorities used for the quarter ended September 30, 2025 and the comparison for the same period last fiscal year.

i. Operating and acquisition expenditures

Operating and acquisition expenditures increased by $76 million or 11%, which is mainly explained by:

• Increase of $32 million in salaries and employee benefits due to:
  • Regular annual salary increases and changes in position steps of Canada-based staff;
  • Increased overtime related to the 2025 G7 Summit in Canada; and
  • Regular annual salary increases for locally-engaged staff, which are affected by changes to inflation and foreign exchange.
• Increase of $14 million in professional and special services due to:
  • Increase in engineering and construction services for renovations completed in certain missions abroad and for the 2025 G7 Summit in Canada;
  • Increase in hospitality in Canada as part of the 2025 G7 Summit.
• Increase of $14 million in acquisition of land, buildings and works due to:
  • Increase in expenditures for the rehabilitation of the Lester B. Pearson Building;
  • Increase in expenditures for the construction of a new High Commission abroad.
• Increase of $12 million in rentals mainly due to leasing commercial spaces as part of the 2025 G7 Summit in Canada.
• The remaining increase of $4 million is due to decreases and increases of smaller value.

ii. Transfer payments

Transfer payments increased by $168 million or 16%, which is mainly explained by:

• Increase of $229 million due to timing differences in payments to the United Nations and related organizations for international development assistance. Especially, for a significant payment to the Global Fund to Fight AIDS, Tuberculosis and Malaria, which occurred in the second quarter of this year compared to the third quarter of last year;
• Decrease of $36 million due to an unconditionally repayable contribution paid in the second quarter of previous year compared to no new issuance in the current year;
• Decrease of $12 million in payments to international organizations, mostly explained by decreases in the Peace and Stabilization Operations Program; and
• Remaining decrease of $13 million is due to decreases and increases of smaller value.

4. Risks and uncertainties

As a federal department delivering a complex mandate in a rapidly changing international environment, GAC is influenced by many factors. These factors include political and security conditions, economic controls, global inflation, social contexts and shifting global trends, including geopolitical dynamics and climate risks.

At any time, the aforementioned factors could affect GAC’s operations, whether domestically or abroad, with the potential for significant impacts including on the safety and security of its personnel at missions. As such, effective risk management is critical to GAC’s ability to deliver results for Canadians. On the operational level, GAC regularly undertakes reviews to examine operational risks and assess the progress and effectiveness of ongoing responses. Risks are managed diligently by program leads, and an agile approach is used to avoid undue risk to program integrity. On the strategic front, the top risks facing GAC are established bi-annually in the Enterprise Risk Profile (ERP). In lieu of launching a new corporate risk cycle, the current ERP has been exceptionally refreshed and extended by one year. This decision reflects the current context of significant and competing demands, including the ongoing Comprehensive Expenditure Review and efforts to advance mandate letter priorities. GAC also reviews the implementation of responses to the top strategic risks on a semi-annual basis by having risk leads assess progress and report to senior management. In addition, in support of effective risk management, GAC’s internal audit function provides independent assurance and advisory services to assess the adequacy of risk responses and internal controls. These insights help inform senior management’s understanding of key risks and support continuous improvement in risk mitigation strategies.

The GAC Enterprise Risk Management Strategy guides departmental officials in managing risks that affect strategic plans and priorities. With this approach, GAC’s Strategic Risk Landscape and the Enterprise Risk Profile serve to identify unique pressures associated with GAC’s operating environment. The current key strategic risks that are tracked closely by senior management and receive extra support for their mitigation are around: constant change and high workloads; ability to allocate and prioritise resources in the context of increasing financial pressure; staffing, performance management, and training; cyber security demands and resilience of the IT infrastructure at mission and headquarters; and the maintenance and recapitalisation of our real property assets. Work on these risks is also incorporated into GAC’s governance committee agendas to ensure comprehensive, department-wide engagement on key corporate priorities in support of a more agile and responsive department. Furthermore, GAC is implementing the Risk and Compliance Process, which is a new whole-of-government requirement by Treasury Board Secretariat. In addition to its corporate risks, GAC conducts self-assessments of risk across 11 defined Areas of Focus to support deputy heads in identifying where management risks exist as well as mitigation measures to address these risks.

GAC continues to be pragmatic and versatile in its management of risks and uncertainties associated with resources. GAC has a five-year investment and procurement plan, which includes a comprehensive strategy for how risks will be managed throughout the timeframe. GAC is also implementing strategies to manage the financial pressures related to non-discretionary activities and absorb budget reductions announced in the budget 2023, which have an impact on the current year and the coming years.

GAC has applied a range of measures to manage risks associated with fraud, such as training on awareness and detection. The risk of fraud is also considered in all audit engagements. GAC continues to assess, on a risk basis, its internal controls over financial reporting at headquarters and at missions and reports on its internal controls over financial management, as per the requirements of the Treasury Board Policy on financial management. On the transfer payment programming side, GAC considers both fiduciary and non-fiduciary risks to guide the allocation of grants and contributions, as well as its recipient organizations audit planning. Additionally, GAC continues to strengthen the financial management capacity of these organizations.

5. Significant changes in operations, personnel and programs

During the quarter, changes occurred in relation to the following positions:

• Appointment of a new Assistant Deputy Minister of the Americas branch;
• Appointment of a new Assistant Deputy Minister of the International Trade branch.

Approved, as required by the TB Policy on Financial Management:

David Morrison
Deputy Minister of Foreign Affairs

Shirley Carruthers
Assistant Deputy Minister and Chief Financial Officer, Corporate Planning, Finance and Information Technology