Battle of the audits

The Ministry of Defence has just been through another ritual bashing over the state of its accounts. The man in charge of finance, Jon Thompson, will have to soak up the blows again and move on with improvements.

What’s happened?

MPs on the Commons Defence Committee last week turned on the MoD’s accounting, describing errors they found as unacceptable. In their sights was pay for specialists and the accounting for the new battlefield Bowman radio system.

Mistakes over pay totalled £280m, while £155m worth of radio equipment was unaccounted for. Committee chairman James Artbuthnot said: “The security implications associated with losing equipment such as this are significant; having an effective audit trail is not the only way to ensure that all equipment is accounted for.”

Of course, comments like that make it seem like the accountants are to blame. In another sense they laud the fact that, under Thompson, the accountants have told it like it is – equipment goes missing in war.

Besides, losing them is not an issue for internal audit – it’s an issue for the soldiers on the ground. The remarks don’t take account of the fact that MoD systems do not account for items in transit – which is clearly a system failure, though.

The more difficult problem for Thompson is over pay. The errors are significant and they will bring attention to the finance department and its efforts to ensure systems do not allow such mistakes. Not least because they contributed to the department having its accounts qualified for the third year in a row.

What happens next?

Thompson, who took over at the MoD in January last year, will have to dig in and see if he can work things out. He has received some praise for his work. Sir Bill Jeffrey, permanent secretary and nominally the accounting officer at the MoD, told MPs in November that there was “a lot of effort” from the FD focused on trying to iron out the problems.

Thompson comes to the MoD not without controversy himself. He was FD of the Department for Schools and Families and is still head of the government accounting profession. Some civil servants saw that as spreading himself too thinly.

But Thompson (diagnosed with with synaesthesia as a child – the condition which means his senses mingle so that he also understands numbers as colours) also has an advantage.

The accounts under scrutiny closed in March last year, only shortly after he joined. Thompson’s big test is the next set 2009/10. It’s in those that he will want to make his mark and improve the department’s accounting.

It being the Defence Department means accounting for all its equipment will always be somewhat flawed. After all, bullets and missiles are fired, kit lost in the heat of battle. Thompson’s challenge is to ensure the inaccuracies are not material. In peacetime that would be difficult. When a country’s at war? Well, maybe he’ll have to start dropping auditors into warzones if the MPs are to be appeased.