Headlines: January 30th, 1998

Sir John Bourn, head of the National Audit Office, has criticised the financial control arrangements of the Ministry of Defence. The Appropriation Accounts for 1995/96 show a total overspend of £235m, a £9m overspend on a £7m project, and a loss of £16m from an Army pay account.The total overspend resulted largely from the cost of ground operations by UK forces in Bosnia (£45 million higher than estimated), and the payment of invoices in 1996-97 which the MOD had initially anticipated would not be settled until the next financial year (£134 million). But Sir John is concerned about the ability of the MOD to forecast expenditure and is not satisfied with the financial control arrangements.

The £9m overspend on the project to decontaminate the Waltham Abbey Royal Gunpowder Mills also attracted criticism. There was a failure to get Treasury approval for the overspend and project management was inadequate. The specific management weaknesses included: no clear budgets, no clearly defined project objectives, poorly defined terms of reference, inadequate cost control and a failure to control escalating expenditure throughout the life of the project.

The loss of £16m from the Army pay account resulted from a fundamental breakdown in financial management and control. There was no central point within the Department to either to control the account or to give an overall picture of what was being posted to it. There is no evidence to suggest that the operation of the suspense account has been fraudulent.

The Department have acknowledged the problems identified by Sir John, reviewed the failings and taken action to prevent failures in the future.