APPENDIX 1
Supplementary Memorandum submitted by
the Permanent Under-Secretary of State of the
Ministry of Defence
MINISTRY OF DEFENCE APPROPRIATION ACCOUNTS
1996-97 PAC 97-98/253
QUESTION 100
When were Ministers informed of the Excess Votes?
1. The present Secretary of State was first
informed, orally, that the Department had overspent the cash limit
for 1996-97 in mid-May 1997, shortly after his arrival in office.
Although the Department became aware that it had overspent the
cash limit at the very end of the 1996-97 financial year, the
full extent of the overspend did not emerge until mid-May. This
was because, in line with normal practice, it took some weeks
to clear balances from Suspense and Imprest accounts. The total
value of such transactions had varied widely over the last few
years and it was difficult to make a firm estimate of the likely
final outturn ahead of mid-May. Following a detailed investigation
of the causes of the overspend, I made a detailed written report
to the Secretary of State on 1 July 1997.
QUESTION 106
Names of the Top Level Budget (TLB) holders on
Votes 1, 2 and 3
2. The names of the TLB holders between March
1996 and April 1997 are as follows:
VOTE 1
Commander-in-Chief Fleet: Admiral Sir
Peter Abbott KCB
General Officer Commanding (Northern Ireland):
Lt General Sir Rupert Smith KCB DSO OBE QGM
Commander-in-Chief Land Command: General
Sir Roger Wheeler GCB CBE ADC Gen (to January 1997)
General Sir Michael Walker KCB CMG CBE ADC Gen
(from January 1997)
Air Officer Commanding-in-Chief RAF Strike
Command: Air Chief Marshal Sir William Wratten KCB CB AFC
ADC CIMGT FRAeS RAF
Second Sea Lord/Commander-in-Chief Naval
Home Command: Admiral Sir Michael Boyce KCB OBE ADC
Adjutant General (Personnel and Training
Command): General Sir Michael Rose KCB CBE DSO QGM ADC Gen
Air Officer Commanding-in-Chief RAF Personnel
and Training Command: Air Chief Marshal Sir David Cousins
KCB AFC BA
Second Permanent Under Secretary of State:
Sir Moray Stewart KCB DLitt (to September 1996) Mr R T Jackling
CB CBE (from October 1996)
Vice Chief of the Defence Staff: Air
Chief Marshal Sir John Willis CBE KCB FRAeS RAF
VOTE 2
Chief of Fleet Support: Vice Admiral
Sir Toby Frere KCB
Quarter Master General: Lt General Sir
Samuel Cowan KCB CBE (from May 1996)
Air Officer Commanding-in-Chief RAF Logistics
Command: Air Chief Marshal Sir John Allison KCB ADC CBE FRAes
VOTE 3
Chief of Defence Procurement: Sir Robert
Walmsley KCB (from May 1996)
In addition to the above, the Chief Scientific
Adviser, Professor Sir David Davies CBE FRS F Eng, was responsible
for the scrutiny of the Main Customers' Research Budgets within
Vote 3.
QUESTIONS 6, 167
AND 188
Waltham Abbey
3. I agreed to provide further advice on why
Treasury approval was not sought for the expenditure on the works
connected with the decontamination project at the Waltham Abbey
Royal Gunpowder Mills Site beyond the Department's delegated authority
and who was responsible for handling the question of the need
for delegated authority.
4. Within the MoD the project sponsor was the
Defence Land Service (DLS). The way the work was contracted and
managed was based upon arrangements that were put in place by
the original project manager—the Property Services Agency
Specialist Services—who managed the project until August
1993. W S Atkins were appointed project manager from August 1993.
5. From late 1993 onwards action was set in
hand by the Deputy Head of Defence Lands Service to put the project
on a proper financial footing. The development of more realistic
estimates of the cost of decontamination work overlapped with
increases in the level of MoD delegations from the Treasury.
6. In January 1994 the decontamination project
was estimated to cost £8.4 million, in excess of the then
MoD delegation from the Treasury for capital works projects of
£7 million. This delegation was increased to £10 million
in March 1994. By March 1994 the project manager was estimating
a cost for completion which implied a total project cost of £16.75
million. The Department's view was that this was overstated. In
December 1994 in an internal submission the Department was predicting
a total cost of £12 million. In November 1994 there had been
a further increase in the delegation to MoD to £50 million.
The final cost of the work was £15.97 million.
7. In January 1994 the Deputy Head of the Defence
Lands Service asked the Head of Finance in the DLS whether the
Treasury should be advised of the position. The finance staff
involved at the time recall informal contact being made with HM
Treasury in early 1994 to consider the question of whether approval
was needed. The finance staff recall informal advice from the
Treasury that, since the works delegations were soon to be increased
to £10 million, there was little point in making a formal
approach at that time. HM Treasury have no record or recollection
of this informal exchange. Although there is no documentary evidence
of the exchanges, the finance staff believe this advice was relayed
to senior DLS management. While this may throw light on why no
submission was made in early 1994, a submission to the Treasury
should have been triggered by the March 1994 estimate. By the
time of the internal submission on the project in December 1994,
the Treasury works delegation to MoD had been increased to £50
million.
8. While the Committee may find this further
background helpful, the procedures adopted, including the absence
of a proper documentary record on the question fo Treasury approval,
were clearly inadequate.
PAC HEARING ON
APPROPRIATION ACCOUNTS
Q2.
The report by the Comptroller and Auditor General
says:
". . . the Department do not at present
have sufficiently robust financial control mechanisms in place
to enable a more accurate level of forecasting than that achieved
in 1996-97." (paragraph 16); and
". . . some budget holders lack management
information at a sufficient level of detail and timeliness in
the final weeks of the financial year to enable them to relate
planned expenditure sufficiently closely to that incurred."
(paragraph 17).
Permanent Under-Secretary of State
Ministry of Defence
17 April 1998
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