Sir John Bourn, Head of the National Audit Office, reported to Parliament today that although he had qualified his audit opinion on whether the Ministry of Defence’s Resource Accounts for 2002-03 presented a true and fair view, the Department had made further improvements since 2001-02. And he reported that the Department continues to make good progress.
The Ministry of Defence undertakes a wide range of complex functions and holds a vast portfolio of assets. Therefore the change to resource accounting has presented the Department with a number of challenges. At the outset, the Department recognised that much needed to be done and has made great efforts to improve the quality of its financial accounting information.
The MOD has improved the accuracy of its accounting for stock and spares which contractors use. This means that one of the two issues which contributed to the audit qualification last year has been rectified.
However, Sir John was unable to confirm the accuracy of some £1,128m adjustments to operating costs relating to movements in RAF consumable stock and capital spares. This is because the MOD has many old stock management systems which are not entirely suited to producing accruals based financial information.
Sir John also reported on the cancellation of a major IT project. £118 million had been spent on the Defence Stores Management Solution project. It was cancelled after the MOD concluded that other projects had a greater priority. Weaknesses in the Defence Logistics Organisation’s business change programme and its management have been identified. And Sir John’s report notes the initiatives the department has already put in place to address these weaknesses.