PracticeAuditIraq war casts doubt over resource accounting

Iraq war casts doubt over resource accounting

The Ministry of Defence has been urged to conduct a review into whether Resource Accounting and Budgeting (RAB) - used to fully cost the war in Iraq - is leading to poor decision making in relation to the holding levels of vital war stocks.

Link: Resource accounting put the armed forces in Iraq at risk

The recommendation follows an in-depth investigation by the all-party Commons Defence Committee into the lessons of the Iraq War and the admission that army units went into action with shortages ranging from body armour and nuclear chemical and radiological defence suits to desert boots and clothing and even ammunition.

Persistent reports at the time were vigorously denied by the MoD and government ministers, who insisted there was sufficient equipment in theatre.

The committee established that serious shortcomings in logistics tracking meant supplies acquired at the last minute from industry under ‘Urgent Operational Requirement’ (UOR) procedures, which reached Kuwait, were ‘lost’ and failed to reach many of the service people for whom they were intended.

Tory shadow defence minister Gerald Howarth warned, as reported by Accountancy Age in January, that the just-in-time supply philosophy underlying commercial accounting principles – which the MoD denied using – had ‘put service people in peril and cost lives’.

The committee’s report described RAB as ‘a complex financial process’ and said the MoD ‘needs to ensure that its staff are appropriately trained in its application’.

The MPs said: ‘We remain concerned that the application of RAB may, perhaps through a misinterpretation of its aim, have lead to stock holdings being reduced too far.’

During the pre-deployment phase, 190 UORs, worth £510m, were issued to fill previously recognised capability gaps which had not been funded earlier ‘for reasons of affordability’.

The Iraq war was the first to be costed under full RAB principles.

MoD finance director Trevor Woolley was cross examined over the effect of this on stockholding.

He told MPs the new system ‘is intended to give visibility to the notional cost of holding assets in the form of stock rather than in the form of cash …’

‘So, yes, it is indeed there, to identify the cost of holding stock.’

But he claimed he was ‘not aware that that in itself has significantly effected decisions about levels of stock holding’.

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