our parliamentary correspondent, Accountancy Age, Wednesday 21 July 2010 at 07:33:00

Finance director's "authority" reduced by internal structures at the Ministryof Defence

The National Audit Office has called on the Ministry of Defence to step upits use of "professionally skilled finance staff" to develop a long termfinancial planning strategy ? and keep to it.

The demand is contained in a special report ahead of the MoD's Security andStrategic Defence Review. The report complained that some of the issues whichNAO chief Amyas Morse to qualify the MoD's resource accounts for 2008-09 remain.

The report revealed astonishingly that although the MoD now has aprofessionally qualified finance director on its board, it is the directorgeneral for strategy who actually leads on strategic aspects of financialplanning, leaving the finance director to the limited task of only providingadvice on the financial coherence of the emerging plans.

The NAO report said: "We take the view, in line with HM Treasury, that thisis undesirable as it reduces the authority of the finance director."

The NAO concluded : "There have been improvements in financial management inthe Department; however we consider that it still does not place financialmanagement at the heart of its decision making."

The report also records that financial planning rounds within the MoD hadidentified measures need to reduce costs because of shortfalls between forecastexpenditure and budgeted provision, but they were claimed to adversely impactdefence capability and "could not be agreed within government".

By the end of July 2009 the forecast expenditure exceeded budget for the restof the financial year by 700m and by the end of the 2020 planning round it wasclaimed to be 185m, but the real deficit was more than 500m.

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