Auditor General Reports $4.5 Billion in COVID-19 Benefit Write-Offs, Flags Pay and Defence Issues
The Office of the Auditor General of Canada reported that the federal government wrote off $4.5 billion in pandemic benefit repayments in 2025, up sharply from $26 million the previous year. The audit also highlighted increased loss allowances on CEBA loans, persistent Phoenix pay system backlogs, and inventory tracking failures at the Department of National Defence.
OTTAWA — The federal government wrote off $4.5 billion tied to COVID-19 benefits in the last fiscal year, a sharp increase from the $26 million written off the previous year, according to a report by the Office of the Auditor General of Canada. The write-offs have adjusted federal debt ledgers by removing billions in expected repayments.
The audit also examined the Canada Emergency Business Account (CEBA) program. There are currently $7.2 billion in outstanding CEBA loans. The allowance for potential losses on those loans increased to $5.6 billion, up from $5.4 billion previously.
Beyond pandemic-era financial programs, the Auditor General identified ongoing operational challenges within the federal public service. As of March 31, 2026, more than 110,000 Phoenix pay transactions had been awaiting processing for over a year. These delays mean government employees continue to face issues receiving accurate pay due to the persistent backlog in the Phoenix pay system.
To address the long-standing problems with Phoenix, the government plans to transition to a new pay and benefits system called Dayforce beginning in July 2027.
The report further detailed inventory tracking failures at the Department of National Defence. Errors in asset quantities and valuations resulted in a $751 million understatement of the department's deficit for the last fiscal year, leading to inaccurate financial reporting regarding its assets and deficits. A promised bar code system intended to improve inventory management at the Department of National Defence is still five years away.