Dated June 2007. Supplied via TSO's On-Demand Publishing Service

This report analyses the Annual Report and Accounts 2006-07 of the Ministry of Defence (MoD) (published as HC 697, session 2006-07, ISBN 9780102946369). The MoD's assessment of its expected achievements against its six Public Service Agreement (PSA) targets, which run until the end of March 2008, has deteriorated since the previous year's Annual Report and Accounts. At the end of 2007, the MoD did not expect to meet the target relating to generating forces and expects "only partly" to meet targets relating to recruitment and retention, and defence equipment procurement. The failure to meet the target for generating forces is a consequence of the continuing high levels of deployment of the Armed Forces. The Committee is concerned that the Armed Forces have been operating at or above the level of concurrent operations they are resourced and structured to deliver for seven of the last eight years, and for every year since 2002. Achieving manning balance in all three Service continues to be a challenge. Shortages remain within many specialist trades in all three Armed Services, but especially in the Army Medical Service. The report notes the failure to meet harmony guidelines in the Army and the Royal Air Force - another indicator of the pressure on the Armed Forces from the continuing high level of operations - and another target missed by all three services is for ethnic minority recruitment. The MoD continues to experience substantial forecast cost increases on equipment programmes, and the report notes delays in delivering equipment programmes to the planned in-service dates. The MoD faces difficult choices in the face of expected cuts in the defence programme and the management of a streamlining exercise to reduce civilian posts in the headquarters.

This report analyses MoD's annual report and accounts 2004-05 (published in October 2005 - later than planned - as HC 464, session 2005-06, ISBN 0102935424) which combines MoD's annual performance report and the consolidated departmental resource accounts. Overall MoD's performance against its seven Public Service Agreement (PSA) targets has been mixed: three were "met", two were "partly met", one was "on course" to be met, and one was "not yet assessed". On recruitment and retention (partly met) all three armed services are suffering from critical shortages in various specialist trades, including aircrew and medical personnel. Although MoD reported £400m of savings in the operating costs of the Defence Logistics Organisation, the Committee criticizes the fact that not all of them could be validated. On procurement, MoD did not meet the targets relating to project time slippage. Cost decreases of £699 million were reported on the top 20 major defence equipment projects, but much of this was a result of cuts in the numbers of equipment ordered or in the capability of equipment. Losses reported in MoD's Financial Accounts totalled some £400 million, a lower figure than the previous year but still a substantial sum. Reported losses on the Landing Ship Dock (Auxiliary) programme, which involves the procurement of four transport ships, were some £100 million and further losses might arise. Another loss totalling £147 million related to a building project at the Atomic Weapons Establishment at Aldermaston. The building was unable to meet the requirement and no other use could be found for it. It is another example of substantial waste which has to avoided in the future.

Olympic Delivery Authority annual report and Accounts 2006-2007

Higher Education Funding Council for England annual report and Accounts 2010-11

For the sixth successive year, the Ministry of Defence Accounts were qualified. The Qualifications covered non-compliance with international reporting standards on the treatment of some contracts; lack of audit evidence on the valuation of inventory (worth some £3 billion) and of capital spares (worth some £7 billion); and on the regularity of the Accounts because of the failure to obtain approval for the remuneration package of the Chief of Defence Materiel. The MoD was also five months late in submitting its audited accounts to Parliament. The National Audit Office had found errors in its sample examination of accruals and so the MoD decided to resolve these problems before submitting the accounts. The MoD said they did not have the necessary expertise to manage the financial complexity that featured in the implementation of the Strategic Defence and Security Review so sought assistance. The MoD should ensure its people have the right skills to deal with all financial problems so that they do not need to bring in expensive external accountants. There is also concern about the MoD's reluctance to estimate the full costs of its operations in Afghanistan, Iraq and Libya. The NAO did not consider that the MoD has adequate information, especially with respect to recording the cost of its activities and outputs, to run its business effectively. The MoD should set out its commitment to improving its management information. It is also vital that defence spending remains at more than 2 per cent of GDP in line with the UK's NATO commitment.

The Sovereign Grant Act 2011 which came into effect from 1 April 2012 consolidated the funding provided to support the official duties of the Queen and maintain the Occupied Royal Palaces that up to 31 March 2012 had been provided under the Civil List and the Grants-in-aid for the maintenance of the Occupied Royal Palaces, Royal Travel and Communications and Information. The Queen's official expenditure is met from public funds in exchange for the surrender by The Queen of the revenue from the Crown Estate. The Sovereign Grant was set at 31.0 million pounds for 2012-13. Official expenditure met by this Grant in 2012-13 amounted to 33.3 million pounds, an increase of 0.9 million (2.6 percent) in absolute terms and a decrease of 0.2 percent in real terms compared to the previous year. The equivalent of the excess of expenditure over the Sovereign Grant of 2.3 million in 2012-3 was drawn down from the Sovereign Grant Reserve. From 2013-14 the Sovereign Grant will be calculated based on 15 percent of the income account net surplus of the Crown Estate for the financial year two years previous. The Crown Estate surplus for the financial year 2011-12 amounted to 240.2 million pounds thereby producing a Sovereign Grant of 36.1 million for 2013-14