Quarterly Financial Report (QFR) for the quarter ended September 30, 2025 released

Welp. It's that time of the year again.

That’s right, more financial documents. I know how much you guys love to see a bunch of random numbers plastered onto the screen with my back-and-forth about how, for the most part, these reports are primarily for show and oftentimes don't necessarily represent the current reality.

However, I still think they're important. They are still some of the better sources of information out there that the DND publicly provides, and if you look hard enough, you can often find some juicy bits in between the boring and mundane.

There’s also no one else reporting on these things typically, so I feel the need to get them out there. If the information benefits someone, then it was worth it to me to get it out there. Some reports are more substantial than others, and I count the quarterlies among them.

This is the Quarterly Financial Report (QFR) for the quarter ending September 30, 2025. It is arguably the most honest piece of paper DND puts out when it comes to real-time information and numbers that people care about seeing. For those who don't know, the QFR is a mandatory compliance document required by section 65.1 of the Financial Administration Act.

To understand why this particular report matters, and why it’s viewed more highly than others, you have to understand the difference between "Main Estimates" and "Authorities." Main Estimates are something that you might have heard us discuss and publish when they come out. I often make a big show of it.

The Main Estimates are the sticker price that departments ask for at the start of the year. The QFR tracks authorities, which is the actual, legal credit limit Parliament has approved after passing supply bills—in this case, including the massive injections from Supplementary Estimates.

It compares what they are allowed to spend versus expenditures, which is the cash actually leaving the treasury. The QFR includes revenues only when the money is received and expenses only when the money is paid out.

The funding in this QFR is substantial, but not necessarily anything surprising. This report sees a total budgetary authority increase of $13.6 billion compared to this time last year, jumping the department's total available funding from $31.3 billion to $44.9 billion, a 43% increase in available funding year-over-year.

This is broken down into specific "Votes" that tell us exactly where this funding was spent and on what. As an example, Vote 1 (Operating), which covers things like salaries, fuel, and maintenance, saw a massive jump largely due to the previously announced $2 billion injection for recruitment and retention.

Vote 5 (Capital), the money for ships, vehicles, and infrastructure, is up by nearly $3.7 billion. Vote 10 (Grants and Contributions) also surged by over $3.5 billion, primarily for the Military Training and Cooperation Program and industry support.

There’s nothing here that's going to be particularly surprising. A lot of this is coming from previously announced funding laid out through the year, primarily from the $9 billion laid out on the road to reaching 2% GDP by the end of the fiscal year on March 31st.

For the most part, there is nothing in here that should be surprising to you if you follow us regularly. Almost all of these fall into the expected category, things you would assume to be here. Funding tied to the Canadian Multi-Mission Aircraft, Strategic Tanker Transport Capability, or Canadian Surface Combatant projects are all expected expenses that one should always expect to see.

This is especially true as we start to see long-lead items procured and equipment grow closer to coming into service. Ongoing programs like FACT, support for Ukraine, Arctic Over-the-Horizon Radar, and setting up the DIA and Defence Industrial Strategy—all of which had been announced, or in the case of Ukraine, substantially increased in the last year—are also not shocking to see included.

That isn't to say there aren't surprises. The mention of the ongoing Underwater Surveillance System project did catch my surprise, as did the amount of funding funneled this quarter into ongoing maintenance and infrastructure backlog. National Procurement itself got just over a billion-dollar injection—not a small amount by any means.

I don't want to come off as dismissive in any regard. This is a substantial amount, and we get a really good breakdown of where things are being spent. Just because something is expected, and perhaps most of what is included is fairly obvious given previous announcements, these kinds of documents still provide verifiable insight and confirmation of where things are being done.

So I do obviously encourage you to go read the whole report, examine it, ponder it. I encourage you to make a mental note of it, remember the numbers. They will be important over the long term, and will be important especially as we draw closer to the end of March.

I won't ramble anymore, though. I have provided the readout and provided the graphic below for your reading pleasure. Take a look!

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

When compared to those of the same period of the previous year, DND’s year-to-date budgetary authorities available for use have increased by $13,646.7 million. As reflected in Table 1: Statement of authorities, the total budgetary authorities increased from $31,322.0 million in 2024–25 to $44,968.7 million in 2025–26. As part of Canada’s commitment to increase and accelerate its investments in defence to reach 2% of gross domestic product (GDP), there were increases in appropriations for various initiatives accessed through the 2025–26 Supplementary Estimates (A). Additional reasons for the changes are outlined below.

The year-to-date net increase in authorities of $13,646.7 million over the second quarter in 2024–25 can be explained by variances in funding for a number of initiatives:

Capital equipment and infrastructure projects (increase of $3,676.5 million)

The net increase in funding is due to modifications to the multi-year spending profile of capital equipment and infrastructure projects. These adjustments serve to align financial resources with project acquisition timelines. The increase is mainly related to the Canadian Multi-Mission Aircraft project, the Joint Support Ship project, the River-Class Destroyer project, and the Future Fighter Capability project. This increase is partially offset by decreases related to the Hornet Extension project and the Strategic Tanker Transport Capability project.

Funding for recruitment, retention and support programs for the Canadian Armed Forces (increase of $2,543.8 million)

Investments in recruitment and retention efforts to ensure that the CAF has the personnel it needs to be ready to respond effectively to threats at home and engage meaningfully abroad.

Contributions in Support of the Military Training and Cooperation Program (increase of $2,115.9 million)

The net increase is largely related to increased funding to support Ukraine in its efforts to defend its sovereignty from the Russian invasion.

Funding for defence research and development and support for the Canadian defence industry (increase of $2,062.4 million)

This funding is aimed at strengthening the Government’s relationship with Canada’s defence industry to lay the groundwork for a comprehensive Defence Industrial Strategy. These actions focus on immediate needs like reducing obstacles that currently limit industry’s ability to provide critical equipment and support to the CAF.

National Procurement Program (increase of $1,087.9 million)

Funding to support increased levels of activity within the National Procurement (NP) Program. NP is responsible for maintaining the operational readiness of approximately 100 existing CAF fleets, including aircraft, ships, tanks, and other military equipment. The increase includes incremental funding approved in Budget 2024 and accessed in the 2025–26 Main Estimates as well as additional funding accessed through Supplementary Estimates (A).

Future Aircrew Training Program (increase of $399.2 million)

Funding for the delivery of flight training for current and future Royal Canadian Air Force aircrew and for the procurement of training aircraft and associated ground-based training systems.

Halifax-Class Life Sustainment (increase of $337.9 million)

This funding was approved in Budget 2024 for the continued sustained maintenance of the Halifax-class frigates until the delivery of their replacement—the River-class destroyers. The increase is mainly due to receiving funding earlier in the year via the 2025–26 Main Estimates whereas, in 2024–25, funding was requested later in the year through Supplementary Estimates (B).

Operation and sustainment (fleet maintenance) of military capabilities and operating requirements (increase of $321.6 million)

In order to provide ongoing support for operating and capital requirements, DND received additional funding to offset sustainment growth and the inflationary impact on the defence budget.

North American Aerospace Defense Command Modernization – Science and Technology Initiatives (increase of $276.0 million)

This funding will support the deepening of expertise and knowledge to inform the development of future capabilities to defend Canada and North America and will be used to fund a suite of science and technology initiatives for the modernization of the North American Aerospace Defense Command (NORAD). The increase is partially due to receiving funding earlier in the year via the 2025–26 Main Estimates whereas, in 2024–25, funding was requested later in the year through Supplementary Estimates (B).

Infrastructure Maintenance, Repair and Sustainment (increase of $220.7 million)

Funding for the repair and sustainment of existing DND/CAF infrastructure in order to maximize operational readiness and support CAF members. This includes funding approved in Budget 2024 and accessed in the 2025–26 Main Estimates to mitigate impacts of infrastructure deterioration and a backlog of deferred maintenance across DND’s real property portfolio.

Underwater Surveillance System (increase of $206.6 million)

Funding to contribute to the defence of Canadian maritime approaches, including undersea monitoring and surveillance of the North Atlantic.

Funding for digital tools and capabilities (increase of $187.9 million)

This funding will strengthen DND/CAF’s digital foundations to ensure that the Defence Team is a relevant and modern workforce in today’s technological era. It will enable DND/CAF to be more resilient to cyber threats and leverage data strategically to improve decision making, while keeping defence information safe and secure.

Arctic Over-the-Horizon Radar (increase of $155.3 million)

Funding for advancing a national radar system capability in coordination with the United States’ solutions, which will make a significant contribution to NORAD modernization, providing enhanced radar coverage of Canada’s northern and northeastern approaches, which will cover approaches to both Canadian and American national capital regions.

Advanced Short-Range Missiles and Medium-Range Air-to-Air Missiles (increase of $142.6 million)

Funding for the procurement of advanced short-range missiles and medium-range air-to-air missiles, including spare parts, training, software, and technical support. The increase is mainly due to receiving funding earlier in the year via the 2025–26 Main Estimates whereas, in 2024–25, funding was requested later in the year through Supplementary Estimates (B).

Funding for Identification and Options Analysis (increase of $130.8 million)

Funding for projects in the pre-definition phase—that is at the stage of conducting identification and options analysis (ID/OA). This includes an increase in ID/OA funding for initiatives approved in Budget 2024, for example Airborne Early Warning and Control as well as Northern Operational Support Hub initiatives, partially offset by a decrease in ID/OA funding approved in Budget 2022 for NORAD modernization initiatives.

Heyder-Beattie Class Action (decrease of $62.1 million)

The Heyder-Beattie class action sought damages related to gender-based discrimination, sexual assault and sexual harassment. The funding decrease is due to reduced settlement payments to claimants.

Miscellaneous departmental requirements (decrease of $156.4 million)

The net decrease is due to lower operating budget carry forward in 2025–26 compared to 2024–25.

The year-to-date net increase of $1,857.1 million is attributable mainly to the following:

Acquisition of machinery and equipment (increase of $1,314.9 million)

The increase in spending is primarily due to the timing of payments for the Canadian Multi-Mission Aircraft Foreign Military Sales case, and the Future Fighter Capability program. Additional increases are due to engine acquisitions under the Strategic Tanker Transport Capability project, as well as expenditures related to the River-Class Destroyer project.

Personnel (increase of $211.9 million)

The increase in spending is mainly attributed to civilian pay raises following the ratification of several collective agreements, resulting in higher personnel costs. Additionally, a greater number of CAF members were serving compared to the same quarter last year and pay increases for CAF legal officers further raised military pay. Lastly, spending on foreign service allowances and benefits increased, reflecting a higher number of CAF personnel serving outside Canada.

Transfer payments (increase of $105.2 million)

The increase in spending is primarily driven by support to Ukraine, including funding for military aid packages and initiatives in response to the ongoing instability. Expenditures also increased due to higher contributions to North Atlantic Treaty Organization (NATO) and NORAD programs, such as the NATO Security Investment program and the NORAD Modernization Science and Technology program.

Repairs and maintenance (increase of $104.3 million)

The increase in spending is primarily due to In-Service Support activities, as well as aircraft repairs and maintenance costs associated with the CH148 Cyclone and CH149 Cormorant fleets. Additional increases are related to the maintenance of the Leopard 2 fleet.

Professional and special services (increase of $87.4 million)

Engineering, research and development services largely contributed to the increase in spending, primarily driven by NORAD modernization and continental defence initiatives led by Defence Research and Development Canada, along with expenditures related to Operation REASSURANCE (Central and Eastern Europe) and the Future Aircrew Training Program. Additional increases stem from the contaminated sites remediation program, facility maintenance activities, and a payment made under the Memorandum of Understanding on Data Protection between Canada and the United Kingdom.

Acquisition of land, buildings and works (increase of $40.6 million)

The increase in spending is primarily driven by the Joint Task Force 2 infrastructure project and engineering works in support of the Strategic Tanker Transport Capability project, the construction of both a Military Family Resource Centre in Petawawa and a multi-purpose building in Yellowknife, as well as the rehabilitation of the 15 Wing Moose Jaw’s runway. The construction work on the NORAD Quick Reaction Alert facility in Bagotville also contributed to higher expenditures.

Utilities, materials and supplies (increase of $21.4 million)

The increase in spending is primarily due to an increase in personnel and assets deployed in operations, requiring an increase in material and supplies such as electricity, fuel, food, and medical products.

Risks and uncertainties

DND’s financial transactions are exposed to a broad range of external financial, geopolitical and economic risks such as inflation, foreign exchange commodity price fluctuations, tariffs and global supply chain. Currently, DND is seeing economic risks give rise to increases in costs of goods and services, labour shortages, and supply chain delays. Depending on how these risks unfold, they could lead to significant fluctuations in anticipated spending.

While DND considers key economic and financial risk factors (including defence-specific inflation and foreign exchange) in developing expenditure strategies, these risks are outside the control of DND.

DND continues to address the financial risks associated with Phoenix pay issues through the implementation of new controls as required and the strengthening of existing ones. The Civilian Quality Assurance program continues to leverage the use of robotic process automation to analyze the current pay environment and lead to more timely corrective actions with the help of compensation agents. Initiatives such as the centralized data entry capability continue to ensure sustained payment accuracy.

DND’s capital acquisition program includes a number of large multi-year acquisition projects, mainly comprising of advanced fighter aircrafts, naval ships and armored vehicles. Delays in contracting and procurement activities or delays in deliveries by suppliers for individual projects can reduce the CAF’s operational capability and lead to reduced expenditures or budgetary surpluses.

Risks also flow from claims and litigations involving DND’s normal operations. When DND receives a claim or litigation alleging liability in tort or extra contractual responsibility to cover losses, expenditures or damages, it is analyzed and an appropriate position is developed based on legal advice. Litigation or settlement may be pursued and these are tracked through DND’s reporting mechanisms.

The CAF is applying reconstitution measures at the tactical, operational, and strategic levels to restore units to an acceptable level of readiness to excel as a modern and combat-ready military force. This is intended to enable the CAF to adapt quickly to action when called for significant unexpected operational demands, which can occur at any time anywhere around the globe.

Additionally, significant unforecasted operational demands can occur at any time, requiring DND to respond anywhere in the world. Depending on the extent of the operational demand, the cost of unforecasted operations would be mitigated either through internal reallocations or by requesting incremental funding from the Government.

Significant changes in relation to programs, operations and personnel

On July 8, 2025, the federal government launched the Comprehensive Expenditure Review exercise to continue its commitment to responsible and cost-effective spending. All departments were asked to bring forward savings proposals. DND has a savings target of 2% starting in the 2026–27 fiscal year. This target does not impact the funding received following the Prime Minister’s announcement in June 2025 of new investments in the CAF.

On August 8, 2025, as part of the strategic investments to meet NATO’s 2% defence spending target, the Prime Minister’s Office announced an increase in pay and incentives for CAF members, to revitalize and transform recruitment and retention efforts, bolster force readiness, and ensure that members in uniform have the confidence and certainty they need to serve.

On September 2, 2025, Fisheries and Oceans Canada (DFO) transferred the control and supervision of the Canadian Coast Guard (CCG) to DND. For this quarter’s report only, figures related to CCG are included in DFO’s financial information.