Select Committee on Defence Second Report

3  Consolidated Departmental Resource Accounts

Unqualified audit opinion

101. The Departmental Resource Accounts for 2005-06 were given an unqualified audit opinion by the Comptroller and Auditor General.[142] We note that this is the third year running in which the MoD's resource accounts received an unqualified audit opinion and commend the Department on its achievement.

Laying of Annual Report and Accounts

102. The Annual Report and Accounts 2005-06 were published on 14 July 2006, three and a half months after the end of the financial year to which the reported performance and financial accounts relate. This represented a marked improvement compared to the laying of the 2004-05 Annual Report and Accounts which were published on 28 October 2005, some seven months after the end of the financial year. We note that the MoD fulfilled its commitment to publish the Annual Report and Accounts 2005-06 before the Summer parliamentary recess. We look forward to the MoD publishing future Annual Reports in a similarly timely fashion.

103. On 19 September 2006, PriceWaterhouseCoopers, in association with the National Audit Office, awarded the MoD's 2005-2006 Annual Performance Report the 'Building Public Trust Award: For Telling It How It Is in the Public Sector'.[143] The criteria for this award included "the sufficiency, quality, scope and robustness of communications to stakeholders in relation to: the Service Delivery Environment; Strategy and Structure: Managing Delivery and Performance".[144] We congratulate the MoD for winning the 'Building Public Trust Award' for its Annual Performance Report. We look to the MoD to make further improvements in the presentation of the Annual Performance Report next year. A more extensive index, and greater use of cross-referencing, would be helpful.


104. The Departmental Resource Accounts provides details of losses and special payments as follows:


105. The MoD is seeking to improve processes for losses and special payments in three areas:

106. We note that losses reported in the MoD's 2005-06 Resource Accounts have reduced compared with the previous year. We look to the MoD to continue to take action to minimise losses in the future.


107. During our inquiry into the MoD Annual Report and Accounts 2004-05 we examined the £147 million loss relating to a building at AWE Aldermaston.[148] We examined the £205 million loss relating to Chinook Mk 3 helicopters in our Defence Procurement 2006 inquiry.[149] We therefore focussed on the two losses, totalling £310 million, relating to the MR and LR TRIGAT programmes. Details on these two losses are set out in Note 31 to the Annual Report and Accounts:

  • MR TRIGAT—constructive loss of £105.343 million arose from the UK Government decision not to proceed into production for the medium range anti-tank guided weapon system.[150]
  • LR TRIGAT—constructive loss of £205 million arose from the UK Government decision not to proceed into production for the long-range anti-tank guided weapon system.[151]

108. The MoD reports that losses "also result from sensible management decisions" such as the decision to withdraw from the Medium Range TRIGAT project to procure a more advanced solution more quickly at a lower through-life cost.[152] We sought further information on what the UK had gained from its involvement in the early stages of these two equipment programmes, and whether the UK would be entitled to any payment should these weapon systems be sold to other countries in the future. The MoD told us that:

Involvement in the early stages of the Long Range and Medium Range TRI-national Guided Anti-Tank (TRIGAT) programmes improved MoD's understanding of Guided Weapon performance modelling and demonstrated the capabilities and limitations of relevant technologies. Under the terms of the Memoranda of Understanding and contracts, MoD is entitled to share with the participating nations the Commercial Exploitation Levy which would accrue from sales to 3rd parties.[153]

109. Losses resulting from the UK government's decision to withdraw from the Medium Range and Long Range Anti-Tank Guided Weapon System programmes total some £310 million. We accept that withdrawing from equipment programmes to reflect changing requirements can be a sensible management decision. We look to the MoD to ensure that the knowledge gained from participation in these programmes is utilised and that opportunities which may result in a return on the investment from the sale of these two equipments are pursued.

142   HC (2005-06) 1394, p 186 Back

143 Back

144   Ibid. Back

145   "Closed Cases" are where the losses and special payments have been formally signed off. "Advance Notifications" are where the losses and special payments arose during 2005-06 and prior years but where the cases have not been formally signed off and the amounts are the MoD's best estimates. Once they are formally signed off they will appear in future accounts as closed cases (HC (2005-06) 1394, p 135) Back

146   HC (2005-06), 1394 paras 267-268 and pp 236 and 240 Back

147   Ibid., p 135 Back

148  HC (2005-06) 822, paras 83-87 Back

149  HC (2006-07) 56, paras 63-70  Back

150   HC (2005-06) 1394, p 236 Back

151   Ibid. Back

152   HC (2005-06) 1394, p 135 Back

153   Ev 26, para (17) Back

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