Annex A
CAPTURING AND REPORTING THE RESOURCE COSTS
OF OPERATIONS
1. Actual and forecast costs of operations
are to be reported in the format shown at Appendix 1. Figures
must be entered in £million to ensure consistency. More detailed
records (down to the lowest level necessary to maintain adequate
audit trails and including appropriate documentation where relevant)
will need to be retained by TLBs.
2. At the start of the year (or operation)
forecast figures should be entered, and subsequently over-written
with actual figures.
3. Reports (actuals and forecasts) are required
at AP3, AP6 and AP9. If there are variations to the AP9 forecasts,
updates will be required at AP10, AP11 and AP12/13. Nil returns
will also be required. Significant variations from previous forecasts,
whether positive or negative, should be explained in a brief commentary.
Significance is to be determined through consideration of either
or both of the following:
(a) The cause of the variance (new operation
versus increase in costs without a corresponding increase in level
of activity).
(b) The magnitude of the variance (will the
TLB be able to absorb the increase within its main budget if relief
is not available from the pool, the rest of the Defence Budget
or the Treasury?)
4. Data to be captured will include Resource
DEL, Capital DEL and AME. The basis upon which resource consumption
will be claimable will broadly mirror that under the cash regime
which means only the additional costs of operations can be claimed,
net of savings. The following principles apply:
(a)
Additional costs are defined as those which arise
as a direct result of the Operation but which would not otherwise
have been incurred. Items such as salaries and ERNIC are not additional
costs because they are met by MoD in the normal course of events.
However, travel and allowances, which arise as a direct result
of the Operation and which would not otherwise have fallen to
the Defence Budget, are legitimate additional costs. Receipts
that cannot be recovered as a direct result of the Operations
(eg accommodation charges) should also be regarded as an additional
cost.
(b)
Consequential savings are defined as those costs
which would have fallen to the Defence Budget had the operation
not taken place (eg cancelled Exercises, allowances that ceased
upon assignment to the Operation, unused fuel.)
(c)
Stock Consumption, Replenishment and Returns.
(i)
In order to claim appropriate stock costs
it will be necessary for TLBs to record and report the additional
Stock issues to eligible operations, net of related stock consumption
savings. Until TLBs have developed adequate experience of stock
transactions they should seek assistance from DLO.
(ii)
Returns of stock originally issued to and
claimed against an operation but subsequently released for more
general use should be deducted from the stock consumption claim
in the period in which they are returned.
(iii)
As stock purchases to replenish consumption
may often fall in the following year it will also be necessary
for DLO to continue to identify and record those purchases, when
they occur, so as to support any subsequent claim for increased
Net Cash Requirement.
(i)
The additional depreciation charges incurred
by fixed assets employed on eligible operations are to be charged
to the cost of those operations, while the assets are so engaged
and where material. Paragraph 4.d.(ii) provides an alternative
treatment which TLBs may prefer to use, unless the annual additional
depreciation charge is material.
(ii)
It is proposed that Write-offs and Write-downs
of fixed assets resulting from their use on eligible operations
should be treated as costs of operations. In most situations it
may therefore prove more appropriate to reflect any additional
depreciation (caused by, say, the reduction of an asset's useful
life) in a single write-down in the final period of use on the
operation.
(iii)
Fixed Assets purchased specifically for
use in eligible operations are to be recorded as Capital DEL costs
of operations while the related depreciation and cost of capital
are AME costs of operations. This should include UORs.
(iv)
If, on completion of an operation, assets
purchased for it become available for more general use the related
depreciation and cost of capital charges will become charges to
the main Defence Budget (RfR1). Consideration must therefore be
given to providing for the AME costs through an enhancement to
the Defence Budget, as soon as the release is deemed likely.
(v)
Some fixed assets, such as Guided Weapons,
Missiles and Bombs (GWMB), will need to be replaced following
their expenditure on an operation. When expended their Net Book
Value should be written-off as a cost of operation through accelerated
depreciation. The replacement cost will be a Capital DEL cost
of operation in the period in which the expended GWMB are replenished.
5. A list of those ongoing operations for
which data capture and reporting are necessary is provided at
AC. Any new operation which did not form part of the approved
bid for funding from the pooled budgets will require separate
instructions which will be issued by CFC CFA IYM2.
6. In an effort to assist work in TLBs to
capture operations costs, it is proposed that a suite of UINs
be created. TLBs incurring costs on operations would be able to
charge costs exclusively to the appropriate UIN and so aid cost
capture. However, use of the UINs would not be mandatory. It is
recognised that some TLBs already use unique blocks of UINs and,
where these are aiding the collection of conflict prevention data,
TLBs should continue. Where the new UINs are expected to assist
is in TLBs where no such arrangements currently exist. CFC CFA
IYM staff will therefore contact TLBs to determine whether new
UINs will be of assistance.
7. Following initial discussions with TLBs,
some misunderstanding of the use of these UINs may have crept
in. For instance, it is not intended that they should capture
personnel related costs, such as travel and subsistence, since
this could only be achieved by manually transferring data. Rather,
the UINs could be used to capture on-going specific costs which
may come via feeders, such as training, medical or welfare costs.
CFC CFA IYM staff will be happy to offer advice.
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