Ottawa leaves $9.5 billion in approved funds unspent
OTTAWA • The federal government sat on close to $9.5 billion in approved expenditures last fiscal year, including $2 billion in unspent funding for the Department of National Defence, as it tried to balance the books during an election year.
Billions of dollars more went unspent at Treasury Board; Aboriginal Affairs; Public Safety and Emergency Preparedness; Veterans Affairs; and Foreign Affairs, Trade and Development, according to Public Accounts tabled this week in the House of Commons.
Some degree of underspending is expected each year. But the 2014-15 lapse, as unspent federal funds are called, far exceeded the $7.2 billion projected in the federal government’s budget plan in April. It also brings the total of unspent funding over the last three years to nearly $28 billion.
The numbers were tabled the same week the current Liberal government faces scrutiny over its own plans for the budget: In its case, it plans to run deficits, whereas the Tories looked for all means available to ensure the budget would balance.
Several departments insisted this week that much of the unspent money remains available for future use. Aboriginal Affairs, for example, said $664 million of the $1 billion it lapsed last year will still be available to settle First Nations land claims. Public Safety, which lapsed $510 million, says $450 million will be available for large-scale disasters.
But even in cases where money is being carried forward, the fact it wasn’t spent will have an impact. That is particularly the case with the nearly $1.5 billion that National Defence failed to spend on new equipment and infrastructure, said defence analyst David Perry of the Canadian Global Affairs Institute.
Perry said last year’s lapse in capital funds at National Defence was the largest in the department’s history, both in terms of absolute value and as a percentage of total approved capital spending. And while most of the money will be available later, the result will be further delays in various procurement projects.
The reason for the lapse was because National Defence wasn’t allowed to move forward any major projects until Treasury Board approved its master procurement plan. Perry said that didn’t happen until June 2014. “So they lost three months of the year, essentially — in addition to all the other problems with procurement.”
A defence official confirmed a large number of projects were affected by the delay, with funds ending up unspent. Those included the purchase of new maritime helicopters to replace the aging Sea Kings, as well as new army trucks and Arctic patrol ships.
“Those projects are all slipping further,” Perry said.
The Parliamentary Budget Office noted in a report last month that “there has been a steady upward trend in the rate at which funding lapses,” particularly in the last decade. For example, lapsed funding across government was $5.2 billion in 2004-05.
Treasury Board spokesperson Kelly James said in an email that the government “is committed to address lapsing funds.
“Changing how the government approves the budget, allocates the funds to departments, and reports on their use will help minimize lapsing of funds,” she said. “Improving capacity in departments to do costing, forecasting, and program design will also help to reduce lapses.”
James said more than half of the nearly $9.5 billion in governmentwide lapsed funds will be available in future years. Roughly $1.2 billion unspent in 2014-15 can be carried forward into 201516 operating and capital budgets, she said, while $3.8 billion can be “reprofiled” into future years.
Treasury Board, which manages billions of dollars available for transfers and spending by other departments, had more than $2 billion in unspent funds. Those included government contingencies, as well as governmentwide initiatives and money carried forward from last year.
Some other departments that allowed large sums to lapse:
Public Safety and Emergency Preparedness, which is responsible for the RCMP, Canadian Security Intelligence Service, and Canada Border Services Agency, saw approximately $822 million in approved parliamentary funding go unspent. Hundred of millions of the unspent dollars appear to be from emergency management, including prevention/ mitigation, preparedness, response and recovery.
Infrastructure Canada, which doles out funding for provincial and municipal capital projects such as transit and bridges, had approximately $805 million in lapsed funding last fiscal year. Hundreds of millions of the lapsed funding appears to be for investments in “large-scale” projects, national infrastructure priorities and investments in smaller communities.
Veterans Affairs, which closed nine regional offices under the former Conservative government, had about $228 million in lapsed funds. Most of that money appears to be due to lower-than-expected demand for services from vets.
Foreign Affairs, Development and Trade lapsed more than $250 million. Of that, about $23 million was intended for the world’s poor while another $20 million was to bolster Canada’s reputation abroad.
THERE HAS BEEN A STEADY UPWARD TREND IN THE RATE AT WHICH FUNDING LAPSES. — A REPORT FROM THE PARLIAMENTARY BUDGET OFFICE