Part 9: Funding distributed to the Air Force, Army, and Navy

9.1
In this Part, we discuss how much of the Defence Funding Package's extra operating funding NZDF distributed to the Air Force, Army, and Navy.

NZDF distributed about $169 million to the Air Force, about $178 million to the Army, and about $104 million to the Navy. The Army's share of the funding was less than Cabinet intended, mostly because some capital acquisitions were delayed.

9.2
The Cabinet paper approving the Defence Funding Package listed some funding against individual output classes. Other increases were listed for individual items (such as pay increases) and this made it difficult to:

• calculate the exact share of the extra funding that Cabinet intended to distribute to the Air Force, Army, and Navy; and
• make a straightforward comparison between Cabinet's intentions and NZDF's actual expenditure for each output class.

9.3
However, after making the necessary detailed adjustments, NZDF calculated an estimated share of funding for the Air Force, Army, and Navy that reflected Cabinet's intentions for the foundations phase.

9.4
Figure 2 compares expenditure for the Air Force, Army, and Navy compared with the estimates of Cabinet's intentions. We excluded Project Protector's operating funds from our comparison because we deal with these funds in Part 8.

Figure 2
Funding distributed to the Air Force, Army, and Navy during the foundations phase

Source: NZDF.
Note: We rounded amounts to two decimal places.

9.5
Before the Initiative, the Army experienced more under-investment and over-deployment than the Air Force and Navy. Therefore, we asked NZDF to explain why the Army got about $64 million (about 27%) less funding than Cabinet intended.

9.6
The Army's share was less because some capital equipment acquisitions ran late, which meant that $50 million in depreciation was not needed. Other reasons for lower-than-intended expenditure included:

• reduced training costs because of higher-than-planned deployments; and
• the transfer of personnel and their associated operating budgets to the new centralised group providing corporate services for the Air Force, Army, and Navy (see paragraph 10.4).

9.7
NZDF approves funding proposals from the Air Force, Army, and Navy for the next financial year based on the contribution each proposal would make to achieve strategic priorities and operational commitments. This includes making progress towards the Initiative's goals. By this process, some of the funding the Army did not need during the foundations phase was distributed to the Air Force and Navy.