The UK Ministry of Defence (MoD) places too little emphasis on financial management in its decision-making, according to a report by the National Audit Office.
The ministry's annual financial plans have been overcommitted and, by the end of July, forecasts indicated that it would exceed its budget for the rest of the year by [pounds sterling]700m.
The report recognises that cost inflation in the defence sector is higher than that in the domestic economy and that most defence projects are long-term investments and relatively inflexible. But it argues that the MoD could use financial management more effectively to address factors that are within its control.
The report also states that the MoD's finance function is not as central to strategic planning as it should be. Financial management is not given priority to counter the ministry's tendency to overcommit its strategic planning.
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