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Consolidated Departmental Resource Accounts Ministry of Defence Consolidated Departmental Resource Accounts 2009-2010 Ministry of Defence Consolidated Departmental Resource Accounts 2009-10 Resource Accounts presented to the House of Commons pursuant to section 6(4) of the Government Resources and Accounts Act 2000 Ordered by the House of Commons to be printed 26 July 2010 HC 258 London: The Stationery Office £35.50 © Crown Copyright 2010 The text in this document (excluding the Royal Arms and other departmental or agency logos) may be reproduced free of charge in any format or medium providing it is reproduced accurately and not used in a misleading context. The material must be acknowledged as Crown copyright and the title of the document specified. Where we have identified any third party copyright material you will need to obtain permission from the copyright holders concerned. ISBN: 9780102966251 Printed in the UK for The Stationery Office Limited on behalf of the Controller of Her Majesty’s Stationery Office ID P002367551 07/10 Printed on paper containing 75% recycled fibre content minimum. Contents Departmental Resource Accounts 2009-10 6 to 114 Annexes A – Core Data Tables 116 B – Public Service Agreement and Departmental Strategic Objectives 126 Performance Data Tables C – Public Accounts Committee Recommendations 129 D – Ombudsman’s Queries Relating to Complaints against the MOD 171 Departmental Resource Accounts 2009-10 3 Intentionally blank 4 Departmental Resource Accounts 2009-10 Departmental Resource Accounts 2009-10 Contents Annual Report 6 Management Commentary 11 Remuneration Report 16 Statement of Accounting Officer’s Responsibilities 28 Statement on Internal Control 29 The Certificate of the Comptroller and Auditor General to the 36 House of Commons Comptroller and Auditor General’s Report on the 2009-10 40 Resource Accounts of the Ministry of Defence The Accounting Statements: Statement of Parliamentary Supply 49 Operating Cost Statement 51 Statement of Financial Position 52 Statement of Cash Flows 53 Statement of Changes in Taxpayers’ Equity 54 Statement of Operating Costs by Departmental Strategic Objectives 55 Explanatory Notes to the Accounts: Statement of Accounting Policies 56 to 65 Other Notes to the Accounts 66 to 112 Votes A Statement – Statement of Approved Maximum Armed 113 to 114 Forces Numbers The Annual Report History and Background The present Ministry of Defence (MOD), the Department, was formed by the amalgamation in 1964 of the Ministry of Defence, the Admiralty, the War Office and the Air Ministry, and the inclusion in 1971 of the Ministry of Aviation Supply. In 1973, the operations of the Atomic Weapons Establishment were transferred from the UK Atomic Energy Authority to the MOD. Principal Activity The principal activity of the Department is to deliver security for the people of the United Kingdom and the Overseas Territories by defending them, including against terrorism, and to act as a force for good by strengthening international peace and stability. The Defence Plan 2010-14 sets out the top level objectives for the Defence Board’s strategic management of the Department as: ● Achieve success in the military tasks we undertake, at home and abroad. ● Be ready to respond to tasks that might arise. ● Build for the future. Further definition of the Departmental Objectives in terms of outputs is given in the Statement of Net Operating Costs by Departmental Strategic Objectives and in its supporting Note to the Accounts – Note 25. Departmental Boundary1 As at 31 March 2010, the Department consisted of 8 (2008-09: 8) Top Level Budget (TLB) Holders. The TLBs are responsible for providing forces and support services required for a modern defence force and are detailed in Note 3 to the accounts – Analysis of Net Resource Outturn. Within the TLBs, there were 32 (2008-09: 38) reporting entities, known as management groupings, producing detailed management accounting information as part of in-year financial management, planning and budgeting processes. Accounting transactions are recorded at management group level for in-year management purposes but reporting for the annual financial accounts is based on TLB level returns. There are 6 (2008-09: 6) on-vote Defence Agencies (listed in Note 35 – Entities within the Departmental Boundary). Defence Agencies publish their own accounts. All on-vote Agencies are also management groupings. Further information on each agency can be found on their respective websites, details of which are in the table below: Agency Website Defence Storage and Distribution Agency http://www.mod.uk/DefenceInternet/MicroSite/ DES/OurTeams/JointSupportChainTeams/ DefenceStorageAndDistributionAgencydsda.htm Defence Vetting Agency http://www.mod.uk/DefenceInternet/AboutDefence/ WhatWeDo/SecurityandIntelligence/DVA/ MOD Police and Guarding Agency http://www.mod.uk/DefenceInternet/AboutDefence/ WhatWeDo/SecurityandIntelligence/MDPGA/ People, Pay and Pensions Agency http://www.mod.uk/DefenceInternet/MicroSite/PPPA/ Service Children’s Education http://www.sceschools.com/home-ie6.php Service Personnel and Veterans Agency http://www.veterans-uk.info/ 1 The Departmental Boundary in this context relates to the boundary of the Departmental Resource Accounts. 6 Departmental Resource Accounts 2009-10 Also included within the Departmental Boundary are Advisory Non-Departmental Public Bodies (NDPBs) sponsored by the Department; these are listed at Note 35. There are 4 (2008-09: 4) Executive Defence Agencies established as Trading Funds, and owned by the Secretary of State for Defence, at 31 March 2010. The Trading Funds produce their own accounts and fall outside the Departmental Boundary. Further details are provided in: Note 17 – Financial Instruments, Note 32 – Related Party Transactions and on the Trading Funds’ websites: Trading Fund Website Defence Science and Technology http://www.dstl.gov.uk/ Laboratory (Dstl) UK Hydrographic Office (UKHO) http://www.ukho.gov.uk/Pages/Home.aspx Met Office http://www.metoffice.gov.uk/ Defence Support Group (DSG) http://www.dsg.mod.uk/default.asp The Department also sponsors 3 (2008-09: 5) Executive Non-Departmental Public Bodies (NDPBs): The RAF Museum, The National Army Museum and The National Museum of the Royal Navy. The National Museum of the Royal Navy was previously reported as separate museums: The Royal Naval Museum, The Royal Navy Submarine Museum and The Royal Marines Museum. The 3 Executive NDPBs receive Grants-in-Aid from the MOD and fall outside the Departmental Boundary. Further details are at Note 32 – Related Party Transactions. The Oil and Pipelines Agency, the NAAFI and the Fleet Air Arm Museum are Public Corporations; they also fall outside the Departmental Boundary. Pension Liabilities The transactions and balances of the Armed Forces Pension Scheme (AFPS) (including the Gurkha Pension Scheme, the Non-Regular Permanent Staff Pension Scheme and the Reserve Forces Pension Scheme) and the Armed Forces Compensation Scheme are not consolidated in these financial statements. The report and accounts of the AFPS are prepared separately; further information is available on the website: http://www.mod.uk/DefenceInternet/AboutDefence/WhatWeDo/Personnel/Pensions/ ArmedForcesPensions/ The Department’s share of the transactions and balances of other pension schemes to which employees belong (e.g. under Civil Service Pension (CSP) arrangements, the NHS Superannuation Scheme and the Teachers’ Pension Scheme) is also not consolidated in these accounts; separate accounts are prepared for the schemes and details can be found on the following websites: http://www.civilservice-pensions.gov.uk/facts_and_figures.aspx http://www.dcsf.gov.uk/aboutus/reports/ http://www.nhsbsa.nhs.uk/pensions Other employees are members of smaller pension schemes e.g. schemes for Locally Employed Civilians in Germany, Cyprus and Gibraltar and the Merchant Navy Ratings Pension Fund; estimates of the liabilities for these schemes are included in the figure for Provisions for Liabilities and Charges (see Note 24). Departmental Resource Accounts 2009-10 7 Employer’s contributions payable to the Armed Forces, Civil Service, NHS, Teachers’ and other pension schemes have been charged to the Operating Cost Statement. Further information on the various pension schemes can be found in the Remuneration Report and at Note 10 – Staff Numbers and Costs. Future Developments The Defence Plan 2010 – 2014 provides a forward looking view of performance and development for the Department and can be found at: http://www.mod.uk/NR/rdonlyres/AB3A3278-2820-40EF-AA15- 9BDA7D0A5318/0/Defence_Plan_2010_2014.pd Further information on the Strategic Defence and Security Review (SDSR) can be found at: http://www.mod.uk/DefenceInternet/AboutDefence/People/Speeches/SofS/20100614StrategicDefe nceAndSecurityReview.htm International Financial Reporting Standards In accordance with HM Treasury’s timetable for the introduction of International Financial Reporting Standards (IFRS), the Department has prepared and published, for the first time, accounts based on IFRS as adapted and interpreted by HM Treasury in the Government Financial Reporting Manual (FReM). Further details of the policies applied are provided at Note 1 to the accounts – Statement of Accounting Policies. The Department enters into arrangements with contractors that do not take the legal form of a lease but, under the International Financial Reporting Interpretations Committee’s interpretation number 4 (IFRIC 4), may convey to the Department the right to use assets in return for payment.
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