Examination of Witnesses (Questions 20
- 39)
WEDNESDAY 8 DECEMBER 1999
AIR VICE-MARSHAL
JOE FRENCH,
GROUP CAPTAIN
STEPHEN LLOYD
AND BRIGADIER
PHILIP WILDMAN
20. So now that is going to be unified?
(Air Vice-Marshal French) Yes.
(Brigadier Wildman) That is correct.
21. Air Vice-Marshal, this is one really for
you because, sitting as you do within the Vice Chief of Defence
Staff organisation, do you feel that the budget and target-setting
processes for the two agencies within that overall budget area
sufficiently recognise the importance of these areas of intelligence
activity?
(Air Vice-Marshal French) I think if you ask any military
man whether he would like more resources, the answer is yes, but
within the process obviously there is a balancing to be done in
terms of overall outputs. Certainly we are bidding for extra resources
within the short-term programme that is actually coming up in
the process of actually being basket woven, (as we put it) at
the moment, but whether we meet every aspiration, we certainly
never have in my own experience but nor do I put that in any pejorative
sense.
22. No, but in trying to save money the workload
is going to rise, is it not?
(Air Vice-Marshal French) Yes, it inevitably will,
the workload in certain areas, and obviously it is for us to moderate
that. Inevitably there is pressure on resources. We have to prioritise
our work but that is done both with the policy staffs and also
with the commitments and operational staffs and we have mechanisms
which actually set our agency. We have an overview paper which
comes from the policy area each year and have an operational tasking
group which allows us to moderate those priorities depending on
changes which actually take place within the year.
23. You mentioned the tasking group but in your
report, at least the report of JARIC, under the Customer Survey"
section on page 21 it says that the level of dissatisfaction with
the tasking process, which is outside JARIC's control, is high.
Would you like to comment on that?
(Air Vice-Marshal French) Could I ask the date of
that report?
24. This is 1997-98.
(Air Vice-Marshal French) We were in a transitional
period there in terms of how we acquired the primary source that
JARIC deals with. Those who actually visited will see that there
has been a step change in the speed and timeliness with which
we can actually receive that information now. In that transition
phase our customers suddenly realised that they could get the
products much faster, therefore demand almost rose exponentially
and we had to find mechanisms, as I have talked about already,
to get them to understand the changes in product and how we would
need to prioritise that. We have done quite a detailed exercise
over the last year or so since that report. I would not say that
all our customers are always totally satisfied. I would be disappointed
if they were. It is just not the nature of it. There is always
this thirst for information, but the understanding of our resource
and what we can actually output and how we prioritise it now is
very much an inclusive exercise and that customer relationship
has improved significantly.
Mr Hancock
25. In the same report your colleague Group
Captain Lloyd made the statement that you were attempting to upgrade
IT equipment and to get other services in better shape within
the organisation but it appears it was dependent on capital. Did
that come forth? Did you achieve the goals you set to upgrade
your own kit?
(Group Captain Lloyd) If I can speak to the equipment
issue, yes, the first phase of the major equipment upgrade has
occurred. Moneys were found for that particular staff requirement
and it is now in the process of progressing to its second stage
and that is the capability that has significantly enhanced our
support operations delivery over the last year. If I may come
back to the tasking issue for you, tasking is an issue that is
outside my agency control. It is part of the total intelligence
tasking process and, therefore, I am a customer of that process.
The recent customer survey that has been conducted has actually
delivered to us—and these are provisional figures at the
moment—a 78% customer satisfaction in the tasking sub-component.
Mr Colvin
26. Which year is that? That is the current
year?
(Group Captain Lloyd) That is the year we have just
completed.
27. So it is 78% over the year?
(Group Captain Lloyd) We have brought that up. It
is not as high as I would like yet and next year's annual report—this
year's is about to be published, it is at the printers at the
moment—should reflect a major change that we have been undertaking
in the tasking procedures over this particular year, and I am
hopeful I have now got the agreement from all the customers in
the methodology of that tasking process. So I hope as they subscribed
to the tasking mechanism they should be satisfied that it is delivered.
Mr Hancock
28. Could I come back to my question about the
money, the resources. Was that new money that came from within
the MoD's budget or did you have to find it within your own agency's
budget?
(Group Captain Lloyd) Historically, my agency purchased
its own equipment. We have now joined in a sense the normal Defence
Procurement Agency process. This was a staff requirement raised
for, at the time, the operational requirement staff in the normal
Ministry of Defence system, so it was done through the normal
procurement and acquisition means. That money came out of central
funds and not out of my agency itself.
Mr Brazier
29. In the process of the introduction of the
new arrangements how much has the number of people, civilians,
and in one or two cases military, directly involved in accounting
and budgeting increased?
(Brigadier Wildman) The agency has been in existence
for many years, I cannot say what it was before. I would say that
the accounting procedures have so changed since 1990, which is
the last year the organisation was not an agency, I am not honestly
sure I can make a comparison for you.
30. Another way of phrasing it is, roughly what
proportion of your costs at the moment are tied up in paying for
people whose time is spent on accounting?
(Brigadier Wildman) I have 13[1]
people, from a director of finances down to the people who enter
data and manipulate the accounting systems.
31. Out of how many people in total?
(Brigadier Wildman) Approximately 1,200.
32. Only 1%, that is quite good.
(Group Captain Lloyd) My situation is probably where
the greatest change has occurred because we were relatively new
as an agency and had to come up with business methodology, if
you like, from a different direction. Historically, I basically
had one person who looked after the books, in a sense, in a very
primitive manner. The end result at the moment is there are about
six people sitting in a budget office now handling it. That is
six against a staff of 500.
Mr Brazier: Roughly 1% of the people
budget, in round terms, has moved over to accounting. That is
not necessarily a bad thing if you are getting better value out
of the other 99 but it is a significant increase in costs.
Chairman: We have some questions from
our resident accountant, Mr Harry Cohen
Mr Cohen
33. I know you have undergone considerable administrative
change and, of course, transformation in the accounting system
is very much underway. It looks to me, looking at your latest
report, that certainly your accounting system has been in a mess.
I want to check whether it is still in a mess. Firstly, the JARIC
report, admittedly 97/98 with Captain Lloyd, as the Chief Executive
talks about: "delay in the production of the agency's accounts
for the financial year 1997/98." He attributes that to his
predecessor. I say quite straightforwardly, were they in a mess
when he inherited it? What is the situation now? Also, it looks
like JARIC has yet to receive an accounts direction. Can you explain
why that is so? What are you arguing for in relation to that accounts
direction? The third point, the initial set of questions on the
accounts, because of the problems with the accounting the new
defence geographic and imagery agencies accounts may not be auditable.
The Ministry of Defence said that was being looked at last month,
apparently by the National Audit Office. Is it likely that they
will be auditable?
(Group Captain Lloyd) In relation to the JARIC accounts,
in fairness to my predecessor and myself "mess" is a
little bit of an emotional word here. There was no requirement
to run the accounts in the style in which they are now run. Therefore,
the initial task of the new agency was to establish a baseline
and put all the strings, as it were, to all the various organisations
to which activities were out-sourced. JARIC has a lot of its activities
in the support context out-sourced. That is a result of the parenting
arrangements, of the way, in essence, sitting as a lodger on a
Royal Air Force station worked, et cetera. It was a much more
onerous task than had ever been envisaged in identifying those
particular strings, who was at the end of them and the state of
their particular accounts. At the end of the day, we worked very
strongly in partnership with the NAO and indeed the defence internal
audit team on looking at our books. It has been a partnership
we worked through to overcome the particular problems of these
issues. We are a long way on from where we started, however we
certainly have not reached the end of that particular road. The
situation we are in at the moment is that we still have a continuing
difficulty over communicative costs from the Royal Air Force,
Brampton, and Headquarters Logistic Commands, as it was. Their
books have been taken over by Headquarters Personnel Training
Command, which is a slight complication on top of it. The main
sticking point over an accounts direction being given remains
with this issue of communicative costs. The NAO has not been able
to be satisfied by those who deliver services to me that the figures
are resilient enough to give me that direction. They are now more
than content but, of course, there will always be some very minor
points at which we are working together. They are more than content
with the work that has gone on within the control of the agency.
We are now in line with their requirements and we have produced
appropriate information to support that. It is the external problem
that remains, the net result. In consort with the NAO and with
Mr Daynes, the Director from there, we discussed whether it was
pertinent to continue with seeking an accounts directive historically,
in essence, for JARIC or whether it was better to focus our attentions
on the new agency. That was passed to the owner and a decision
was made to go in the direction of the new agency.
34. Will you have an accounts directive for
a new agency?
(Air Vice-Marshal French) That is what we are working
to. The difficulty we have is costs. With the budget stance we
had and with the stance also within the NAO, the questions they
were under for various other activities, we agreed that it would
be wiser to sort out the communicative costs issue now, rather
than chasing an accounts directive for the sake of it, so we can
get the books in order for the converged agency from 1 April next
year. We are optimistic, at the moment, we can get to that situation.
35. I appreciate that. It is a little worrying
you cannot get to an accounts directive. The Ministry of Defence
in answer to some questions that we put to them on this talked
about a more refined output costing procedure, trying to arrive
at that in the changeover. I see from the latest Military Survey
Defence Agency report they talk about costed output being excluded
from planned product programmes. Also, when it talks about project
CAPITAL in cost accounting and the budgeting process it says:
"there remains a significant risk that full compliance will
not be achieved." That is what that last report says on page
10 of the Military Survey Defence Agency report. Admittedly, that
is the report covering the accounts for 1997-98. Can you say what
the latest position is on both of those? Will it be in the planned
production programme or will full compliance be achieved?
(Brigadier Wildman) May I ask you to refer me to the
precise point?
36. Page 10 of the Military Survey Defence Agency
annual report and accounts. The two points it talks about are
costed output being excluded from planned programmes.
(Brigadier Wildman) I am just trying to find that
statement. I find myself surprised at the interpretation. Work
to present the whole of the LTC 1999 period is now complete, together
with an initial costing of those requirements placed on the agency
but currently excluded from the planned production programmes."
37. Will they now be in the planned production
programmes?
(Brigadier Wildman) I can see this could be clearer.
We have a large number of requirements placed upon the agency
for geographic support, maps, charts and computer readable equipment
on a worldwide basis. We could not possibly accomplish this alone
as the United Kingdom. It would not be affordable and not very
sensible in the light of NATO alliances and so on. We entered
into a number of agreements with our NATO partners that we will
divide up the common task between us. So a large number of our
requirements are not part of the production programme but are
part of our arrangements by which we exchange material with our
allies. What we are having to show here—and this is most
important—is that, while we want to show what is the cost
of the production element, we also wish to make it quite clear
to our customers what is also arriving in United Kingdom depots
and libraries but for which there has been no production expenditure
outlay and that is the nature of that reference there rather than
stating that an element of the operation is not within the costs.
I apologise if it is not clear enough to you.
38. Okay. What about the other point about whether
full compliance will be achieved on project CAPITAL?
(Brigadier Wildman) Again I wonder if you might be
very kind and refer me to the specific section?
39. Under that section. If you look under that
blue-purple wheel on the right-hand side it says "... and
there would remain a significant risk ... "?
(Brigadier Wildman) Yes. At that time we were uncertain
whether to adapt the systems that we already had in place for
resource accounting or whether to adopt the CAPITAL approach.
Once we were further down the road of analysing the systems and
development implications, we concluded that we could not, without
too much risk, take the approach of adapting our own systems,
so we took the CAPITAL route and we are now well on track within
the Department's programme and I do not anticipate any future
problems.
1 Military Survey has 11 staff carrying out accounting
work within the Headquarters, two additional staff are employed
within the Business Units and are responsible for budgeting. Back
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