Ministry of Defence annual report and Accounts 2010-11 : For the year ended 31 March 2011

This Defence Committee report into the MoD's Annual Report and Accounts 2010-11 focuses on the resource accounts, the MoD's performance, and personnel matters. The Armed Forces redundancy programme is expected to deliver up to 11,000 redundancies across the three Services. Civil servant redundancies have a target of 15,000. The Committee is disturbed that 40 per cent of planned military redundancies are to be compulsory while the MoD's current civilian redundancies will be entirely voluntary. The Permanent Under Secretary told the Committee that civilians are flexibly employable whereas the military are not. This runs contrary to the Committee's experience of the breadth of the military training and the skills shown by personnel as witnessed on operations. For the fifth successive year, the MoD's Annual Accounts have been qualified. In 2010-11, the MoD did not comply with international financial reporting as laid down by the Treasury and has no plans to do so for the foreseeable future. The MoD could also not provide adequate audit evidence for over £5.2 billion worth of certain inventory and capital spares. These problems are likely to persist until, at the very earliest, 2014-15. The Committee is concerned that the level of theft and fraud in the MoD appear generally to be increasing year on year. The MoD need to clarify the roles of the various police and security forces dealing with fraud and theft and provide further information on how the problems of prevention, detection and recovery are being managed.

Response to HC 1635, session 2010-12 (ISBN 9780215040749)

For the sixth successive year, the Ministry of Defence Accounts were qualified. The Qualifications covered non-compliance with international reporting standards on the treatment of some contracts; lack of audit evidence on the valuation of inventory (worth some £3 billion) and of capital spares (worth some £7 billion); and on the regularity of the Accounts because of the failure to obtain approval for the remuneration package of the Chief of Defence Materiel. The MoD was also five months late in submitting its audited accounts to Parliament. The National Audit Office had found errors in its sample examination of accruals and so the MoD decided to resolve these problems before submitting the accounts. The MoD said they did not have the necessary expertise to manage the financial complexity that featured in the implementation of the Strategic Defence and Security Review so sought assistance. The MoD should ensure its people have the right skills to deal with all financial problems so that they do not need to bring in expensive external accountants. There is also concern about the MoD's reluctance to estimate the full costs of its operations in Afghanistan, Iraq and Libya. The NAO did not consider that the MoD has adequate information, especially with respect to recording the cost of its activities and outputs, to run its business effectively. The MoD should set out its commitment to improving its management information. It is also vital that defence spending remains at more than 2 per cent of GDP in line with the UK's NATO commitment.

Response to HC 52 (ISBN 9780215544063)

Ministry of Defence Police and Guarding Agency annual report and Accounts 2010-2011

This report analyses the Annual Report and Accounts 2006-07 of the Ministry of Defence (MoD) (published as HC 697, session 2006-07, ISBN 9780102946369). The MoD's assessment of its expected achievements against its six Public Service Agreement (PSA) targets, which run until the end of March 2008, has deteriorated since the previous year's Annual Report and Accounts. At the end of 2007, the MoD did not expect to meet the target relating to generating forces and expects "only partly" to meet targets relating to recruitment and retention, and defence equipment procurement. The failure to meet the target for generating forces is a consequence of the continuing high levels of deployment of the Armed Forces. The Committee is concerned that the Armed Forces have been operating at or above the level of concurrent operations they are resourced and structured to deliver for seven of the last eight years, and for every year since 2002. Achieving manning balance in all three Service continues to be a challenge. Shortages remain within many specialist trades in all three Armed Services, but especially in the Army Medical Service. The report notes the failure to meet harmony guidelines in the Army and the Royal Air Force - another indicator of the pressure on the Armed Forces from the continuing high level of operations - and another target missed by all three services is for ethnic minority recruitment. The MoD continues to experience substantial forecast cost increases on equipment programmes, and the report notes delays in delivering equipment programmes to the planned in-service dates. The MoD faces difficult choices in the face of expected cuts in the defence programme and the management of a streamlining exercise to reduce civilian posts in the headquarters.