Government response
The HCDC report and its conclusions and recommendations
address the performance of the Ministry of Defence under the previous
Government. This Response is made by the new coalition Government.
1. (Recommendation 1) It is a cause of concern
to us that the NAO found the need to qualify the MoD's Resource
Accounts for the third consecutive year, particularly given the
assurances made to the Committee by both the Secretary of State
and the Permanent Under Secretary last year. It cannot be acceptable
that the MoD continues to fail to provide accurate and sufficient
audit evidence to support their accounts, both in relation to
personnel administration and stocks and assets. (Paragraph 7)
The Ministry of Defence is working hard to address
the issues raised by the NAO in their report. For the Joint Personnel
Administration (JPA) system, the work is being driven forward
by the Assurance and Compliance Working Group, a team of senior
finance and compliance staff drawn from each of the Top Level
Budget areas under the leadership of a 1* officer. Considerable
progress has already been made but some measures are complex and
may take time to fully implement. Therefore, despite the effort
being devoted to resolving relevant issues there is a risk that
some measures may not have bedded down and become fully efficient
before the next audit.
Regarding audit evidence, much of the problem relates
to claim receipts retained by individuals. Particular difficulty
was experienced obtaining receipts from personnel serving on operations
or who had left the Service. Closer liaison with the NAO prior
to the current audit has enabled the Department to improve its
performance in this area. Work is also ongoing to improve the
provision of evidence to support pay, food and accommodation charges
and progress is expected before the next audit.
For Bowman, an Asset Management Improvement Project
(BAMIP) has been initiated to address the asset tracking and financial
accounting concerns raised by the NAO. The Department recognises
the importance of accurate stock recording and monitoring, and
is working hard to address all the points raised by the NAO. A
detailed action plan to improve stock accuracy has been implemented.
2. (Recommendation 2) We agree with the Secretary
of State's assessment that capability in theatre must be the Department's
first concern. However, failing to maintain accurate and full
information on personnel and to keep track of assets such as Bowman
has the potential to threaten the long-term capability of the
Department, including operational capability. The MoD therefore
needs to take urgent action to rectify the outstanding problems;
progress made on implementing the recommendations of the NAO is
welcome, but must continue in earnest, but needs to be increased.
(Paragraph 8)
For JPA, the Assurance and Compliance Working Group
is fully seized of the need to implement the NAO recommendations
as a matter of urgency, and is pursuing them with vigour. The
importance of maintaining accurate and full personnel information
is fully recognized, and a number of initiatives are being taken
forward to improve data quality and management information. This
includes work identifying common input errors, improving training,
and introducing controls to minimise errors and detect them when
they do occur to enable early correction.
MoD first took action in 2007 to improve the management
of Bowman assets. Against the background of reduced radio fits
and better management of resources, the MoD introduced "Whole
Fleet Management" for Bowman radios to enable us to meet
the high tempo of operations with the existing radio fleet. It
has brought a high 'churn rate' of Bowman radios. This revealed
that asset management procedures and Information Systems were
not up to the job of tracking Bowman radios and other assets.
This first phase of work was driven by the need to
ensure the Department could track and manage Bowman radios and
other assets to support operational planning. This work was completed
to the satisfaction of HQ Land Forces. An engineering asset management
system (BACMS) has been developed to keep track of Bowman asset
condition and was provided to all Front Line Command (FLC) Units
by April 2010. All FLC units have been trained in the use of BACMS.
The NAO concerns surrounding asset tracking and financial
accounting for Bowman radios led to the establishment of BAMIP,
which is designed specifically to address each of the concerns
raised by the NAO; and additional resources have also been assigned
to expedite delivery.
Of the 27 BAMIP recommendations identified, some
16 have been fully implemented to date with work proceeding on
the remaining 11 where there is a full programme to rectify and
address these issues.
3. (Recommendation 3) We are concerned that the
resolution of the problems in relation to the JPA that led to
the qualification of the MoD's Resource Accounts last year has
shed light on further problems. It is of great importance that
the remaining problems with the JPA system are resolved as quickly
as possible. The MoD cannot possibly hope to manage personnel
effectively with incomplete or inaccurate information and must
ensure that any further problems that arise are dealt with immediately.
(Paragraph 15)
The JPA Assurance and Compliance Working Group is
addressing all JPA-related issues arising out of the NAO report,
including those items recently identified, and good progress is
being made. Control accounts are now reconciled each month, Service
Personnel and Veterans Agency and Top Level Budget staff liaison
has been improved, and data cleansing work is being carried out
by the single Services. In addition, a project is underway to
improve the quality of management information provided by JPA.
From March 2011, this will deliver immediate improvements in terms
of reporting functionality and system performance with the opportunity
for further enhancements to be captured in future work. Processes
systems and practices are kept under review and regular upgrades
are made to rectify identified issues.
4. (Recommendation 4) That the MoD could not,
at a given time, account for the whereabouts of radios worth £155
million is unacceptable. While we acknowledge the difficulties
associated with tracking assets in theatre, particularly given
the deliberately flexible nature of Bowman, the MoD cannot afford
to be complacent in this matter. The security implications associated
with losing equipment such as this are significant; having an
effective audit trail is the only way to ensure that all radios
are accounted for. We hope that the development and roll out of
the Bowman And Communication Management System (BACMS) and Joint
Asset Management and Engineering Solutions (JAMES) systems can
be achieved quickly and effectively. (Paragraph 22)
The MoD accepts that there is a need to improve the
process of Bowman radio tracking. The BAMIP project is a 27 point
programme to address the issues raised by the NAO in their Management
Letter. The development of a Financial User Requirements Document
for the JAMES and Management of the Joint Deployed Inventory (MJDI)
planned systems has been completed as a key step in ensuring our
new systems developments meet our requirements. These encompass
serial tracking of the Bowman radio fleet. Both JAMES and MJDI
are fully funded. The current plan is:
· MJDI
(deployed inventory system):
· Initial
Operating Capability—early 2011
· In Service
Date Rollout Land Deployed—late 2013
· Full
operating capability—late 2014
· JAMES
Land (engineering management system):
· Go
Live functionality—late 2010
· Start
Roll Out—early 2011
· Roll
out complete—late 2014
A clear distinction needs to be made between the
lack of central visibility of Bowman radios and other Bowman assets
on an authorised MoD accounting system, and the security of these
radios and other assets. MoD's security procedures require all
security controlled items to be separately recorded. MoD has performed
a separate exercise to determine whether the lack of accounting
visibility is an indicator that these security procedures are
not being followed leading to an increased security risk. Through
this process, MoD has satisfied itself that this is not the case
and that the current security risk is as low as reasonably practical.
5. (Recommendation 5) While the sample taken by
the NAO for its analysis is not large, it is statistically valid.
It is possible that the NAO's sample had a higher incidence of
errors than is the case overall, but it is equally possible that
the opposite could be the case. We hope that the NAO will continue
to monitor closely the MoD's management of stock, perhaps giving
consideration to undertaking a broader analysis of this problem
at some future date. (Paragraph 24)
MoD recognises the importance of accurate stock recording
and monitoring, and is working hard to address all the points
raised by the NAO. New stock checking processes have been introduced
for 2009-10 and around double the amount of stock is being counted
compared with the previous year. A detailed action plan to improve
stock accuracy has been implemented including the specific training
of staff through the logistics optimisation programme and collaborative
working to identify obsolete stock. Some improvements have also
been made to Information Systems. A modernisation and rationalisation
of stock inventory and warehouse systems is planned.
6. (Recommendation 6) It is of course vital that
the MoD identifies and ensures that all staff are aware of and
working towards its key objectives and strategic direction. We
recognise that the Strategy for Defence is designed to respond
to current and short to medium term organisational needs but are
concerned that its five year declared time table should not pre-empt
or restrict the introduction of changes that will be identified
in the Strategic Defence Review. We would expect any organisational
and other management and budgetary measures identified as part
of that Strategic Defence Review to be implemented as soon as
possible and before 2014 as required. (Paragraph 30)
The initial release of the Strategy for Defence (SfD)
was intended to provide interim direction to the Department pending
the outcome of a Defence Review—now the Strategic Defence
and Security Review (SDSR). This 2014 horizon was necessary to
assist prioritisation of Departmental spending in Planning Rounds
PR10 and PR11. Subsequent planning rounds will take direction
from the outcome of the SDSR. It is our intention to supersede
the current SfD with a new edition that will be the primary mechanism
for implementation of all outcomes from the SDSR, which is re-examining
the overall business model in Defence, and determining how it
will be improved.
7. (Recommendation 7) While we welcome the Department's
review of its performance management system, we hope that the
outcome of this work will feed into the SDR and we once again
emphasise that new programmes must not pre-empt the findings of
the SDR. (Paragraph 31)
MoD's revised performance management system is in
three parts. A Strategic Performance Report and Risk Report will
be produced annually to enable the Defence Board to evaluate and
adjust strategy between major Reviews, principally through the
adjustments to Defence Strategic Direction and timed to inform
the Planning Round. A Performance and Risk Report will be produced
quarterly showing progress in implementing the most significant
objectives that flow from the SfD and Defence Strategic Direction.
In addition, Sub-Strategy owners and Top Level Budget Holders
will report on, and be held to account for, delivery of their
Sub-Strategies and annual performance of their TLB. The revised
system will better implement the SfD now and the strategy that
emerges from the SDR.
8. (Recommendation 8) While improvements have
been achieved, work to implement the Department's Capability Review
Implementation plan quickly and effectively must continue, and
areas of previously good performance cannot be allowed to slip.
It is vital that staff reductions and Value For Money savings
are achieved without impacting directly or indirectly upon frontline
capability and contingent readiness. (Paragraph 37)
MoD welcomes the Committee's acknowledgement that
progress has been made in implementing the response to our previous
Capability Reviews, which has been focussed on engaging better
with the rest of Whitehall, in clarifying roles and responsibilities,
in simplifying some of our systems and processes, and in embedding
throughout Defence a strong sense of the highest priority—support
to operations in Afghanistan.
Over the last 12 months positive, practical steps
have been taken across a wide spectrum of areas to pursue the
commitments made in response to the Re-Review, in particular,
the need to develop a more robust overarching strategy for the
Department and to inject more pace into the implementation of
Capability Review findings. Specific actions include:
· As
one of the main priorities, the visibility and corporate nature
of senior leadership teams has been improved.
· The
SfD (2009-2014) was published in October 2009. That was followed
in February this year by the Defence Green Paper.
· Work
has been driven forward on building capability in MoD civil servants.
The MoD Civilian Workforce Strategy has been updated with a focus
on Afghanistan, leadership and performance management.
· The
MoD achieved a 25% reduction in Head Office posts (approximately
1,000 people), whilst ensuring performance did not suffer as a
result.
· The
MoD continued to reach out to partners and stakeholders—working
closely on Afghanistan with FCO and DFID, and making partnership
(on both a local and national level) one of the two themes of
the Defence Green Paper.
The Cabinet Office undertook an assurance check in
March of this year, and the new Government will conduct major
reform of the MoD as part of the SDSR.
In the current fiscal climate and to alleviate pressures
on the Defence budget, it is important that the maximum benefit
is obtained from resources. The Value for Money savings under
CSR 07 are recycled and reinvested in Defence, and each initiative
is assessed to ensure it does not affect overall Defence Objectives.
The funding released is reallocated according to Defence priorities
allowing a higher number of priority activities to be funded.
9. (Recommendation 9) The MoD has a poor record
of compliance with data protection legislation. Whilst we are
encouraged by the progress that has made in implementing the recommendations
of Sir Edmund Burton, there continue to be too many incidents
of data loss. The heightened number of incidents reported in the
last year highlights the severity of the problem and the need
for the MoD to continue to be aware of and to manage the risks
more robustly. Unless it becomes evident by the time of the next
annual report that progress has been made, we recommend that a
champion to drive this important area of policy is appointed at
ministerial level. (Paragraph 41)
The 2008-09 Annual Report covered the period immediately
following the loss of the laptop containing recruitment data that
led to Sir Edmund's Burton Review of the handling of personal
data in MoD. The report's publication and the Department's targeted
communications resulted in greater awareness of the issue across
MoD. This translated into a greater number of incidents of data
loss being reported. This was also a consequence of implementing
the recommendation to conduct an audit of holdings of removable
media. This work uncovered a number of instances where media could
not be accounted for and was therefore reported as missing. In
a number of these cases it is likely that the media had not been
properly accounted for over a period of some years rather than
being lost or stolen.
Building on the good progress made implementing the
recommendations from the Burton Report and Data Handling Review;
an Information Assurance Programme has been established to take
forward work in this area, with the goal, set by the Defence Board,
of ensuring that MoD achieves Level 3 compliance with the Information
Assurance Maturity Model by April 2012. This work is focussing
on changing behaviours across the Department; a starting point
for this work has been the rolling out of a Protecting Information
Training Course, which as of October 2009 had been completed by
more than 90% of staff.
At the current rate, the number of incidents reported
to the Information Commissioner that will be published in the
2009-10 Annual Report will show a reduction on the figures from
2008-09, and should provide the Committee with the reassurance
that progress continues to be made.
10. (Recommendation 10) While we accept that the
MoD is following Treasury guidance regarding the use of terms
such as "some progress", we are concerned that these
phrases are unhelpful when used in isolation, without giving any
indication within the Annual Report as to their meaning in real
terms. We recommend that the MoD ensure that an explanation of
these assessments are included in next year's report. Furthermore,
the Department needs to make the basis for these assessments clear.
A full outline of targets and sub-indicators will not be appropriate
in every case—where there is operational sensitivity, for
example. However, we expect the Department to provide as much
information regarding the assessment of performance as is practically
possible. (Paragraph 47)
MoD recognises the Committee's concern. Parameters
for reporting performance against Spending Round targets are set
centrally by HM Treasury and all Departments are expected to work
with these when providing assessments. In addition, MoD has to
take into account security issues and that some performance indicators
are not susceptible to quantitative treatment. In recognition
of these factors, in the 2007-08 report MoD sought to provide
a thorough narrative on qualitative performance indicators. 2008-09
performance indicators were set before the start of that year
but the Department has noted the Committee's desire to see the
assessment of performance given more prominence in the Annual
Report and Accounts for 2009-10.
11. (Recommendation 11) Given that the recently
published Strategy for Defence identifies operations in Afghanistan
as the Department's "main effort", it is important that
both we and the public are able to make a reasonable assessment
of the Department's performance in this area. The war in Afghanistan
and the casualties incurred are inevitably emotive subjects. We
recognise that the Department cannot make public all of its activity,
but we recommend that the MoD needs to put more work into accurately
conveying its performance on operations to the public. There are
some welcome signs that this is beginning to improve. (Paragraph
52)
MoD agrees with the Committee that it is important
that both Parliament and the public are able to make an informed
assessment of the Department's performance in ongoing operations
in Afghanistan.
In the course of the last year, MoD has taken steps
to improve its performance in conveying progress on operations,
and the Committee's recognition that this has improved is welcome.
The UK's involvement in Afghanistan is a cross-Government effort
and this extends to the communication strategy. MoD contributes
to the work of the cross-Government Afghanistan Communications
Team and website on Afghanistan that provides information on political,
military and development progress. The Department has recognised
the increasing interest in and correspondence on operations from
Members of Parliament and the public and has allocated new resources
and personnel to ensure that questions posed are answered in a
timely fashion. In addition, the Chief of the Defence Staff appointed
Major General Gordon Messenger as the Department's spokesperson
on Afghanistan. He is providing regular briefings, alongside colleagues
from Other Government Departments, to explain better the nature
of the campaign and of the UK's contribution to it in Helmand
and elsewhere.
12. (Recommendation 12) The MoD must continue
to work to implement the recommendations of the NAO and PAC as
quickly and effectively as possible. (Paragraph 56)
MoD agrees with the Committee. In the Treasury Minute
(Treasury Minutes on the Fifty-fourth Report from the Committee
of Public Accounts, Session 2008-9, Cm 7736)) the Department fully
agreed with seven of the PAC's recommendations and largely or
partially agreed with the remaining four. It will implement those
recommendations with which it agreed in full, and those elements
of recommendations with which it largely or partially agreed.
This work is well underway.
The Department has a robust process in place internally
for tracking the progress of its implementation of PAC and NAO
recommendations. Furthermore, it is required formally to report
on the progress towards implementation of PAC recommendations
as part of its Annual Report. The Department's Annual Report is
expected to be published on 13 July 2010, which will include an
update on progress towards implementation of the PAC recommendations
relating to the 'Support to High Intensity Operations'. A similar
exercise takes place internally in the Department for recommendations
that are made by the NAO.
13. (Recommendation 13) Addressing the continuing
problem of maintaining manning balance, particularly with regard
to pinch point trades, needs to be a high priority for the Department.
This is a long-term concern that directly affects the operational
capability of the Armed Forces. It can only be addressed by ensuring
that personnel are not only recruited and trained effectively,
but that they are retained. To ensure that the improvements seen
in recruitment are reflected in the long term, the Department
needs to ensure that budgets are sufficient to meet training needs,
and that remaining in the Services is attractive to personnel,
both financially and in terms of wider Service life, such as meeting
harmony guidelines. (Paragraph 66)
The Armed Forces continue to exploit a significantly
higher level of interest in a career in the Armed Forces and the
particular benefit of being able to select high quality recruits,
who, it is hoped, will recognise the benefits of military service
as a long term career. The need to achieve and maintain manning
balance is a primary aim of all three Services, particularly to
address structural imbalances, pinch point trades, and to maintain
Harmony guidelines. Recruiting fluctuates in response to the economic
situation, market forces and demographics. Recruiting measures
are adjusted through national, regional and local marketing profiles
to adapt to the changing situation. The Service brands are well
known and they offer attractive employment opportunities but it
is recognised that more can be done: the Service Personnel Strategy
is the Defence Board's strategy for delivering and sustaining
the people component of Operational Capability now and in the
future. The plan recognises the need to deliver on future personnel
challenges with mechanisms that are both flexible and affordable.
Considerable efforts are made to reduce all pinch
points either through growth or retention. Measures to grow personnel
in the pinch point trades are wide ranging and include focussed
marketing, increased training capacity, reductions in course wastage,
and Golden Hellos. Timely retention measures help to prevent already
trained and experienced Service personnel from leaving the Armed
Forces. Measures such as Financial Retention Incentives, streamlined
promotion, increasing promotion flows, and focussed career management
are all part of a wider package of professional and social reforms,
which include improvements to family and single personnel housing
and welfare.
14. (Recommendation 14) An arbitrary target on
readiness which does not reflect the reality of the MoD's operational
requirements serves little purpose. The MoD needs to ensure that
it communicates the real position of readiness effectively. (Paragraph
70)
MoD agrees, and this is the primary reason for changing
the system. Future reporting on readiness will provide a clearer
analysis of which Force Elements are committed to operations and
undertaking military tasks, and how many are available for contingent
tasks.
15. (Recommendation 15) It may be that greater
accountability over budgets among senior officials would improve
the situation. However, we will be discussing the complex issues
of equipment procurement in greater detail in our separate Report
on Defence Equipment. We welcome the publication of the MoD's
Defence Strategy for Acquisition Reform, which represents an initial
step towards addressing these issues. (Paragraph 73)
MoD noted the Committee's report on Defence Equipment
(Sixth Report of Session 2009-10 published on 4 March 2010) and
has responded separately to its recommendations and conclusions.
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