Lapsed federal spending $2B higher than expected last year

National Defence, Aboriginal Affairs and other departments returned a total of $9.4 billion in unspent funds during the 2014-2015 fiscal year, $2 billion more than previously projected, as the federal government sought to balance its books, newly released figures show.

The lapsed spending figures are contained in the public accounts, an annual record of how federal departments spend money released this week.

• Spin Cycle: The contribution of lapsed spending to deficit slaying

The funds, budgeted for programs and capital spending, were returned to the government's consolidated revenue fund at the end of the fiscal year, and therefore contributed to the $1.9-billion surplus the Conservatives posted for the year.

The former Conservative government came in for harsh criticism for using unspent money in departments like National Defence and Veterans Affairs to bring down the deficit so it could offer tax breaks heading into an election. The size of the final surplus was confirmed in September, during the recent election campaign.

"The pressures were probably on (departments) to get back to balance," former parliamentary budget officer Kevin Page told CBC News. "And that's the reason why ... (the Conservatives) wanted to get the annual financial report during the campaign to get that information out, because for them it was political."

Lapsed spending is often due to delays in capital projects or procurement and program rollouts, and the money is often rolled forward to the next year.

But Page, who analysed spending at National Defence for CBC News Network's Power & Politics, said delays in spending mean costs only increase. "One thing we've learned through history is that when you delay procurement, your prices are going up."

However, Page stressed that previous Liberal governments also used lapsed spending in similar ways to help generate large surpluses.

"Unspent money is a natural consequence of the federal government's budgeting process," a recent Parliamentary Budget Office report called "Why Does the Government Lapse Money and Why Does it Matter?" noted.

$1.9B unspent at National Defence

According to a CBC analysis of the public accounts, National Defence allowed about $1.9 billion to go unspent, eclipsed only by the Treasury Board at $2 billion.

"The main reason for the unused budget was for $1.3 billion in adjustments to spending on major capital equipment and infrastructure projects, such as the Maritime Helicopter Project, the Arctic/Offshore Patrol Ships and the Medium Support Vehicle Systems," spokesperson Daniel Le Bouthillier wrote in an email to CBC News.

Aboriginal Affairs and Northern Development, now called Indigenous and Northern Affairs, was next with just over $1 billion in unspent funding.

"While the department did not spend slightly over a billion dollars in funding that was allocated to it for the 2014-15 fiscal year, about $1 billion of this amount will be moved into future fiscal years to ensure the department has adequate measures to meet its funding obligations,"Valerie Hache wrote in an email to CBC News.

Specifically, Hache said this money will eventually be spent on programs, including the Specific Claims Settlement Fund, Indian Residential Schools Settlement Agreement and the Federal Contaminated Sites Action plan.

However, there is no guarantee departments' future budgets will see all the money that goes unspent. They are allowed to use a certain amount of the freed-up cash in the following year, but most of it goes to pay down the deficit.

The Parliamentary Budget Office report on lapsed spending concluded that "on balance, lapse rates are likely to remain stable or increase over the medium term," especially since a lot of the new spending by the Liberal government will be on infrastructure projects where the money may not get spent as soon as the politicians would like.