Question Period Note: Lapsed Funding

Why is National Defence consistently underspending and lapsing funds when it claims that new funding is needed for the Canadian Armed Forces?

• National Defence is committed to ensuring that the Canadian Armed Forces has the equipment it needs to succeed in operations at home and abroad.To do so, we manage a large budget that requires funding over many years to support our people and deliver on operations as well as major equipment and construction initiatives.
• These funding profiles can be looked at from different perspectives, but National Defence always strives to be transparent and a good steward of public funds.
• That is why we introduced a new funding model in 2017, which allows us to re-allocate money to support priority projects within a given year, or carry it forward to support needs in future years.
• Additionally, in Budget 2022, we set aside $1.4 billion for immediate investments in equipment and technology to increase military capabilities.
• This includes projects related to urgent operational requirements, such as Portable Anti-Material Missile Air Defence, and Counter Uncrewed Air Systems.

If pressed on procurement project delays:

• Defence procurement is a whole-of-government effort, and we continue to work with our key partners to improve the speed at which we deliver capabilities.
• Through the Defence Capability Blueprint we are also ensuring transparency of our upcoming procurements to offer industry the opportunity to properly plan and compete for defence procurement opportunities.
• Further, the Defence Policy Update will seek to build upon ongoing initiatives to enhance and modernize the defence procurement process.

• National Defence introduced a new funding model in 2017 to ensure that projects get the money they need when they need it.
• This means that money can be re-allocated to support priority projects within a given year, or moved forward to support needs in future years.
• The flexibility facilitates the delivery of major projects which require multi-year funding.
• Despite sound long-term planning, most defence procurement projects do not advance exactly as planned—some progress faster, others slower, for a variety of operational, logistical, and program reasons.

• To mitigate lapses in funding authorized by Parliament, National Defence is taking the following actions:

• Improving its capital funding forecast to ensure that the Department does not request more funding authorities from Parliament than required;

• Funding new projects from surplus in-year funding rather than requesting additional funding from Parliament;
• Requesting funding for additional military deployments later in the process to ensure only the required funding authorities are requested (to prevent operating lapse); and

• Monitoring forecasted exchange rates to better forecast their impact on funding estimates (to mitigate grants and contributions lapse).

• Funding not requested is not lost. National Defence has the ability to re-profile funds into future years for major projects, and then access those funds when needed.

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