Conclusions
MoD Resource Accounts 2013-14
1. It
is disappointing that, once again, the MoD was some five months
late in laying its Annual Report and Accounts before Parliament.
While it may have been appropriate to delay the laying of the
Accounts to ensure the balance sheet figure for assets under construction
was accurate, it was concerning that this problem was identified
by the National Audit Office rather than by the MoD itself. We
were also concerned that the resolution of the problem required
a write-off of £267 million, some ten per cent of the total
valuation of assets under construction. However, we are satisfied
that steps are being taken to reduce the risk of such problems
arising again. (Paragraph 8)
2. In response to
this Report, the MoD should tell us what planning it is doing
to ensure that it appropriately manages the impact of the likely
changes to asset balances, such as write-offs of assets or shortening
the effective operational lives of equipment, that will arise
from the forthcoming Strategic Defence and Security Review. It
should also tell how it intends to manage the impact of the continuing
management reform of Service Commands. (Paragraph 9)
3. The MoD Annual
Report and Accounts 2013-14 have again been qualified on the balances
for contracts likely to contain a lease. The MoD should report
to us on the results of its latest review of contracts. (Paragraph
13)
4. We are pleased
to see that the MoD is finally managing to get to grips with the
management and control of its inventory and capital spares and
welcome the PUS's assertion that the MoD Accounts will no longer
be qualified on this basis. We also welcome the commitment by
the PUS to a detailed item by item impairment review following
the outcome of the next Strategic Defence and Security Review.
The Comptroller and Auditor General (C&AG) does, however,
point to ongoing challenges in respect of systems and embedding
good practice. The MoD should tell us how it will address these
challenges. (Paragraph 16)
5. The strategic cost
model is a crucial tool for preparation of the next Strategic
Defence and Security Review. Decisions about which capabilities
the UK can afford have to be taken on the basis of the most robust
information and a clear understanding of the cost drivers behind
capabilities. The MoD should provide us with a description of
the strategic cost model, its accuracy and any limitations that
it has identified in its utility. (Paragraph 18)
MoD performance and risk management
6. We
recognise the difficulties that the MoD has in devising a relevant
and comprehensive set of input and impact indicators. We welcome
PUS's confirmation that the MoD has implemented most of our recommended
indicators and look forward to seeing further details. We reiterate
our recommendation that more of the information provided to the
Defence Board should be provided to us and incorporated in the
Annual Report. (Paragraph 20)
Defence Equipment and Support
7. Inherent
in the appointment of project management contractors for the four
domains is the risk of 'stovepiping' equipment acquisition into
the three Services and Joint Forces Command at a time when the
MoD is looking to develop a more integrated future force. We are
sure that our successor Committee will wish to follow progress
in the continuing reform of defence acquisition and will look
to ensure that this risk doesn't materialise. In response to this
Report, the MoD should provide further details of how it intends
to integrate the two project and portfolio contractors; the contractor
providing human resource support; the yet to be appointed contractor
providing the finance and management of information systems provider;
and the Defence Infrastructure Organisation. It should also inform
us of the current state of play on the introduction of new pay
and reward arrangements. (Paragraph 32)
8. The MoD should
set out how it intends to judge the success or otherwise of the
arrangements it is currently developing. It should also determine
how it will judge whether it is appropriate to return to the market
for a GoCo solution and tell us what its timetable is for making
these decisions. (Paragraph 33)
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