PracticeConsultingMOD slated for overspend

MOD slated for overspend

National Audit Office qualified armed forces' accounts and found financial control mechanisms 'insufficiently robust'. Jonah Bloom reports.

A #235m overspend at the Ministry of Defence has raised questions about the department’s financial controls and its ability to comply with new resource accounting rules.

Last week, the Natio-nal Audit Office qualified the MOD’s appropriation accounts because expendit-ure exceeded the amounts authorised by parliament by #235.1m.

The department attributed the overspend to #45m extra costs incurred in ground operations in Bosnia, and the early payment of #134m in bills which had been budgeted for the next financial year.

But although he acknowledged the difficulties involved in precise prediction of spending, comptroller and auditor general Sir John Bourn said the senior officials should be able to forecast expenditure more accurately. He singled out senior officials who had overspent their budgets by more than #40m.

Sir John said the MOD does not have ‘sufficiently robust financial control mechanisms and procedures’, although the department has assured the audit office that it is taking measures to improve the accuracy of its forecasts.

The department must also submit its first set of resource accounts by April. Although insiders say they are working hard to meet the deadline, this latest set of accounts show how difficult it will be for the MOD to come up with accurate accounts.

Ken Wild, head of technical accounting at Deloitte & Touche and a member of the advisory panel which helped devise the resource accounting manual, said: ‘I don’t know how one government department will find it (resource accounting) compared to another department. But it is fair to say that resource accounting will require extra work, because it adds a whole dimension which is absent from appropriation accounts.’

The NAO’s report indicates the MOD will find it hard to move across to the new resource accounting standard.

Putting a value on assets such as tanks and missiles could pose problems because there is no known metho-dology for depreciation of such items, and the balance sheet can change dramatically during a war.

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