John Wiersema's report says the practice of awarding in-service maintenance contacts to defence manufacturers is eroding the military's ability to care for its own gear — and creating a dependence that can be costly.
His report has implications for some major purchases, including the F-35 stealth fighter, which has become a lightning rod for opposition criticism.
Whenever the military buys new aircraft and even armoured vehicles, it usually awards the manufacturer a long-term service contract, which can run up to 20 years and be worth billions of dollars.
Wiersema's report says the Defence Department has identified "significant risks in this approach."
The audit also found defence bureaucrats don't believe enough money has been set aside in future budgets to properly maintain the roughly $60 billion in new planes, ships and vehicles that the Harper government intends to buy over the next two decades.
"There is a significant gap between the demand for maintenance and repair services and the funds available," said the report.
Up to $140 billion has been budgeted for spare parts, maintenance and training over the next two decades.
Despite the large figure, "National Defence has indicated it is likely that its long-term investment plan for new equipment has allocated insufficient funds for equipment life-cycle costs."
The auditor urged the government and the department to pay close attention.
"The department is well aware of this risk," Wiersema said following the release of the report.
"I think there are other risks as well with respect to moving forward with these strategies. We encourage the department to ensure the necessary resources are there to identify those risks."
Liberal defence critic John McKay took aim at the anticipated gap.
"The government's failure to allocate the necessary funds for the maintenance of our current and future equipment will jeopardize the ability of our men and women in uniform to protect themselves and Canadians at home and abroad," McKay said in a statement.
"It is irresponsible to purchase equipment without accounting for the lifetime cost of its maintenance. How will the Conservatives pay for the future costly maintenance of the F-35s if they are already struggling with the current maintenance costs?"
The concern about repairs echoes the parliamentary budget officer's criticism of the F-35 purchase, which the Harper government insists will cost no more than $16 billion, including 20 years of maintenance.
Kevin Page's report last March, which caused a firestorm in the House of Commons before the last federal election, called into question whether the overall figures, including maintenance, were accurate.
Defence experts have said it is tough to know how much it will cost to keep the stealth jet flying since it is a developmental aircraft with no repair history.
The military's records say it spends $2 billion a year on all repairs, but the auditor's report says the figure is likely higher.
The Defence Department, in a statement, said it accepts the auditor's findings and that planning is underway to address each of the five recommendations.
The auditor's warning comes at time the navy is preparing to contract out more of its support to the private sector.
Maintenance on the Harper government's Arctic patrol ship fleet is expected to be in private hands, with civilian contractors even accompanying the ships on deployment, according to access-to-information documents obtained by The Canadian Press.
The latest audit also raised concern about the government's ability to track the costs associated with military repairs, and complains the Defence Department was warned about the same problem a decade ago.
"There are long-standing deficiencies in information management systems used to support decision-making for maintenance and repair activities, first raised by us in a 2001 audit," said the report.
"As a result, National Defence lacks complete, reliable and integrated information on the total cost of maintenance and repair because some of the costs — salaries and infrastructure — are not captured in its asset management information systems."
Both the NDP and the Liberals zeroed in on that point.
Peter Julian, the New Democrat finance critic, said it's unacceptable that an asset management plan will have to wait until 2013, when it was initially promised in 2004.