NATIONAL AUDIT OFFICE

REPORT BY THE

COMPTROLLER AND

AUDITOR GENERAL

Ministry of Defence:The Financial Management ofthe Military Operation in theFormer YugoslaviaORDERED BYTHE HOUSE OF COMMONSTO BE PRINTED6 DECEMBER 1996

LONDON: The Stationery OfficeHC 132 Session 1996-97Published 11 December 1996 28.95

MINISTRY OF DEFENCE: THE FIN~CIAL MANAGEMENT OF THEMILITARY OPERATION IN THE FOWER VUGOSLAVM

This report has been prepared under Section 6 of the National Audit Act, 1983for presentation to the House of Commons in accordance with Section 9 of theAct.

John Bourn

ComptroUer and Auditor GeneralNational Audit Office

28 November 1996

The ComptroUer and Auditor General is the head of the National Audit Officeemploying some 750 staff. He, and the National Audit Office, are totaUyindependent of Government. He certifies the accounts of an Governmentdepartments and a wide range of other public sector bodies; and he hasstatutory authority to report to Parhament on the economy, efficiency andeffectiveness with which departments and other bodies have used theirresources.

MINISTRY OF DEFENCE: THE FINANCWMANAGEMENTOFTHEMILITARYOPEWTIONIN THE FORMER WGOSLA~

Contents

Preface and mh observations

Part 1: Tke background to the cnrrent situation in tbeformer Yugoslavia, and the United ~gdom’smifitary contribution

Part 2: The United Wgdom’s fmancid contribution,and the costs recovered

Part 3: The mmagement of assets

Part 4: me provision of goods and services

Pages

1

7

16

24

32

Appendices

1. The methods used by the National Audit Office 45

2. Timetable of key events 46

3. The United Kngdom’s contribution to the Utited NationsProtection Force (UNPROFOR) 49

4. Nations contributing forces to the Implementation Force 51

5. Background information on the North Aflmtic Treaty Organisation(NATO) 52

Some of the United Kingdom’s suppofi vehicles and storesin theatre

17

Suppofl vehicles have had to covarvary high milaagea over poorrosds and in ditticult conditions - particularly in tha wintermonths when there were large numbers of mad tratticaccidents. The United Sirrgdom hava soma 1,400 Landrovers, andsome 190 DROPS vahicles which are designed to carry palletisedloads, in theatre.

19

ctoraoe sites.The Royal Fleet Auxiliary vessel - Resource - is moorad in Split to provide logistics

Some of the United Kingdom’s main battle equipment in theatre

One ef the 74 Saxon armmrred vehicles intheatre.

The United Singdom have had some26 Challenger tanka, 300 armouredvehicles and 28 helicnptera ofvarimra ~pes in thealre.

Some 18AS90155mm self-propelled guns have been deployed.

MINIS~YOFDEFENCE:THEFINANCMLMANAGEMENTOFTHEMIMT~YOPEWTIONINTHEFORMERWGOSMW

Photographs of the mititaryoperation in the formerYugoslavia

The damage to property7 .\\A 8 ,..

The Zetra Stadium, ssene of Torvill and Dean’s gold medal victoryin the 1984 Writer Dlympica, and the airpofl in Sarajevo.

9

Damage to houaea in Sipovo. During the yeara of fighting in Bosnia, nearly 2 million people were made homeless,

The conditions in the former Yugoslavia

During the winter moolhs, temperature reached aa lowas -2WS and heavy snowfalls were common.

Many of the brrildinga used by British troops weredamaged m in a poor sondifion.

2

Some troops have been living and working intents indifficult sontitions.

The Implementation Force eafimate that some 5 million mineswere laid by the warring factions in Bosnia, and that it could takeup to 30 yeara 10 clear Ibem.

MINSTRYOFDEFENCETHEFINANCWMANAGEME~OFTHEMIHT~Y OPEWTIONINTHEFORMERWGOSmVM

The foUotig pages show photographs of:

a) The conditions ~ the former Yugoslavia

b) The damage to property

c) Some of the United figdom’s main batie e@pment in theatre(e@pment nmbers reflect the position as at May 1996)

d) Some of the United Wgdom’s support vehicles and stores in theatre(e@pment nmnbers reflect the position as at May 1996)

Photographs:

1,6,7,9,11,12,13,14,15,16,17,19 and 21 0 Crom Copyrigh~OD

2,3,4,5,8,10,18 and 20 National Audit Office

MINISTRYOFDEFENCE:THEFINANCWWAGEMENTOFTHEMILITARYOPEWTIONINTHEFORMERmGOSM~

Preface and mainobservations

1 This report examines the management by the Ministry of Defence (theDepartment) of the United Kngdom’s mfitary contribution to the NATO-ledImplementation Force (IFOR)in the former Yugoslavia. The study concentratedmainly on the financial management of the largest element of the operation -the ground forces contribution. One of the aims was to identify lessons whichmight assist the Department in the remainder of the operation and in futureoperations.

2 To examine the situation on tbe ground, the National Audit Office visitedBosnia-Herzegovina (hereafter referred to as Bosnia), the focus of the NATOoperation, and Croatia, where much of the United Kngdom’s support element isbased. Shortly after their return the National Audit Office passed key findingsfrom the visit to the Department, so that early action cmdd be taken whererequired. The main findings, and tbe Department’s response, are reflected inthis report, which is sptit into the fo~owing parts:

. the background to the current situation in the former Yugoslavia, and theUnited Kngdom’s mihta~ contribution (Part 1);

. the United Kngdom’s financial contribution, and the costs recovered (Part 2);

. the management of assets (Part 3);

. the protision of goods and services (Part 4).

3 The methods used by the National Audit Office are set out in Appendix 1. Indoing their work, they looked to see whether recommendations made by theCommifiee of Pubhc Accounts foUoting the Gti ConRict had been apphed.

4 Nthough the United Kngdom has had troops in Bosnia since 1992, its IFORcontingent was deployed in support of the NATO-led operation at a particdarlydifficdt time. In addition to the volatile pohtical and mi~tary situation, troopshad to be deployed quickly and at short notice during tbe winter months, whentemperatures reached as low as -25c and hea~ snowfa~s were common - mostof Bosnia is mountainous. New camps had to be estabhshed in over 20 locationsin Bosnia. Many of the buildings used were damaged or in a poor condition,with no water or power or communications systems. In the early days of theoperation, some troops were hving in tents, with Emited heating, and only basicwashing and toflet facihties. Some camps had major problems disposing of rawsewage.

MINISTRYOFDEFENCE:THEFINANCW MANAGEMENT OF THEMIMTARY OPERA~ON IN THE FORMER WGOSMVM

5 The troops also have to contend daily with the hazard of landmines. The IFORestimate is that some 5 mi~on mines were laid by the warring factions inBosnia, and that it could take up to 30 years to clear them. Without an accuraterecord of their location, it is extremely dangerous for troops and civfians tomove off the country’s roads,

Admiral Leighton W. Smith, Jr, former Commander, Implementation Force

6 Despite all these difficulties, the Department and NATOboth consider that thekey mihtary tasks of the Implementation Force have been achieved. and that amore secure environment now exists for the continuing pohtical, citi andeconomic aspects of the peace agreement,

Admiral Leighton W. Smith, Jr, former Commander, Implementation Force

7 In conducting their examination, the National Audit Office reco~ised thedifflcuft and dangerous conditions which the Armed Forces and their civihansupport staff have faced, and continue to face. This report, and the observationsbelow, should therefore be seen in the context of these condltirms.

Main observations

8 The main observations from the National Audit OffIceexamination are asfouows:

On the implementation of the lessons from the Gfi Con~ct

a) The Department have done much to implement the recommendations of the

Committee of Public Accounts following the Gdf Confict. For example, theyhave had finance and contracts staff in the former Yugoslavia since the firstdays of the United Mngdom’s involvement. They have introduced guidanceon the financial principles to be followed in operational situations (they areconducting their contribution to the IFOR operation on the basis that normalpeacetime accounting rules apply) (paragraphs 1.17 and 1.18). And theyhave strengthened their arrangements for chartering ships (paragraphs 4.27to 4.31), There are some areas where the Department need to do more.

On costs

b) In January 1996 the Department informed Parhament that their estimate ofthe additional cost of the Department’s contribution to the IFOR operationwas in the region of E300 mi~ion. The Department have been monitoring

i

MINISTRY OF DEFENCE: THE FINANCWMANAGEMENTOFTHEMILITARYOPERATIONIN THE FORMER WGOSLAW

their costs since the operation began, and in October 1996 their estimatewas some 8337 mifion. They forecast tbe cost of their contributions to theair and maritime operations to be around a further f125miRion. Sincesignificant elements of the cost depend on factors beyond the Department’scontrol, they recognise the need to continue reviewing their estimate of theadditional costs (paragraphs 2.5 to 2.11).

c) In preparing their estimates the Department drew on their experience of theUNPROFORoperation in the former Yugoslavia for some aspects of the IFORoperation. But they recognise that future deployments may take many forms,and have taken steps to gather information on larger scale operations suchas the GuKConRict. They are developing computer programs to analyse thishistorical data with a view to providing a cost estimating tool(pal-agrapbs 2.10 and 2.1 1).

On cost recoveq

d) The Department can recover certain costs from NATO,the most significant ofwhich have been the costs incurred by the Head~arters ARied CommandEurope Rapid Reaction Corps. Most of the costs have been recovered by tbeDepartment, although the current Memorandum of Understanding withNATOdoes not apply to operations, such as the IFOR operation, which areoukide the NATOarea (paragraphs 2.12 to 2.16).

e) In recovering tbe cost of goods and services provided to other nations,formal agreements were not in place with every nation until six months intothe operation. The Department consider that the time taken has not restitedin any financial penalty (paragraphs 2.17 and 2.18).

On fiancial controls

0 Even in difficult operational conditions, the Department need, as theirguidance recognises, to maintain proper controls over cash, payments andstores. The National Audit OffIceidentiRed weaknesses in these areas, andthe Department have taken corrective action. The importance of propercontrols was mderlined when the Department uncovered one example ofirre@ari@ in the bi~ paying process. In this case, the Department havetaken disciphna~ action against an individual (paragraphs 4.35 to 4.40).

g) There were problems in accounting for ammunition and other stores. Forexample, ammunition issued from the United Kngdom to the formerYugoslavia tota~ng E6.7 miRion had not been confirmed by units as havingbeen received. FoUowing the Department’s subsequent investigations, theDepartment have stated that aUthis ammunition has been confirmed ashaving been received. It is important that the Department complete theirinvestigation of other discrepancies qnic~y (paragraphs 3.15 to 3.17).

MINISTRYOFDEFENCETHEFINANCW WAGEMENT OF THEMILITASY OPEWTION IN THE FORMER YDGOS~VtA

On the protision of goods and sertices

h) The provision of suitable accommodation has been a cha~enge for tbeDepartment. They have prope~ leases in the former Yugoslavia, costingover S500,000 a month, but they faced a dfilcult situation in that theirrequirements were urgent, and in the absence of a fmctioning prope~market they did not have a firm basis for assessing the reasonableness of therents demanded by owners, The Department wfl need to guard againstimproper or exaggerated claims from owners when prope@ is handed back,and are taking action accordingly (paragraphs 4.4 to 4.10).

i) The Department have also spent some S30 mi~on on flat packaccommodation uniti, initia~y for use in theatre and which wi~ then beavailable for use on subsequent operations. Delays in erecting the unitsmean that they have not had the fu~ benefit from them in the currentoperation (paragraphs 4,11 and 4.1 2).

j) The Department have negotiated with the United Nations on the price for

e@Pment tiat the Department agreed to purchase when responsibfity forthe mihtary operation transferred to NATO.The cost of these items wi~ beoffset against amounts owed by the United Nations to the United Kngdomfor the UNPROFORoperation (paragraph 4.14).

k) The Department used competitive tendering for au their commercialtransport requirements, They shoufd consider, though, whether there ismore they cotid do during the operation to approach the market earfier forsome of their requirements for commercial transport. ~flst the Departmentreceived a minimum of three bids for each ship charter, in three cases theyreceived only one comphant bid. By approaching the market earher, theDepartment may be able to generate greater competition, although thisneeds to be balanced against the risk that requirements might change(paragraphs 4.23 to 4.32).

1) Owing to initial dehve~ problems, the Department’s offtake of fuel underarrangements agreed with the United States of America has been below thatestimated. The Department have formauy requested that the UnitedKngdom’s participation in the arrangements be substantia~y scaled back,and the Department have set up their own contract wtth a local suppher tomeet many of their needs (paraWaphs 4.21 and 4.22),

The management of assets

m) The Department’s data show that the avaflabihty levels for mission essentialequipment have been high. They recognise, though, that they need toimprove the rehabihty of their data. As their support vehicles (Landroversetc) have been put to greater use than expected, and in very harshconditions, they have suffered considerable wear and tear. And moregenera~y, the operations in the former Yugoslavia have focused theDepartment’s attention on the management of their support vehicles, Oneproblem the operation has highhghted is the diffictity which can arise when

4

MINISTRYOFDEFENCE:THEFINANC~MAGEMENTOFTHEMILITARYOPERATIONIN THE FORMER WGOSLAW

the Depa~ent have many variants of the same e@pment in the fomerYugoslavia they have over 80 variants, and some 300 build standards, of theLandrover (paragraphs 3.3 to 3,7),

n) The need to deploy forces urgently from the Utited figdom and Gemany,and the destruction of communications hnks in Bosnia, posed problems inprotidlng support to the operation. In particdar, there were problems withthe availabihty of spares for vehicles, and other equipment. A key factor iuthis has been that the initial stock of spares held by mits was based onpeacetime usage as they had httle time to adjust their holdkrgs to meet theexpected demands of the operation. The Depa~ent recognise that in futureit may be more appropriate to base their holdings of spares on consumptiondata from rigorous training exercises and operations (paragraph 3.10),

o) Mso, the Department did not have vlslblhty over stock holdings in theatre ascommunication finks to their computer systems could not always beprotided. The Department accept that, as a consequence, demands wereplaced on United Kngdom depots when stocks may have efisted in theatre,The Department’s computer systems had been designed for use in situationswhere there is a good communications infrastructure (paragraphs 3,8to 3.10).

p) Since the Gti ConRict, the Department have developed and introducedinformation systems to improve their visibih~ over and tracking of assets,although their planned system for trackiug air cargo pa~ets has been delayedby more than a year. From their experiences of the IFOR operation, theDepatient recognise that this is an area to which they need to give furtherattention, as efisting and newly developed systems have been only patilaUysuccessfti in keeping track of items, For example, the Department’s systemsfor tracking e@pment were uuable to cope with the data generated by thesheer volume of equipment moving around in the early stages of theoperation. The Department are developing urgently a new system to trackequipment held in the former Yugoslavia (paragraphs 3.11 to 3.13).

9 In smmary, the Ministry of Defence have achieved a great deal in the operationin the former Yugoslavia, and have done so iu extremely difficdt conditions,There are some key points which they need to bear in mind for the future, andthese are set out below

5

MILITMYOPEWTIONINTHE

MINISTRYOFDEFENCE:THEF[NANCML MANAGEMENTOFTHEMILITWYOPEHATION[NTHEFORMERVOGOSLA~

1.1

1.2

Part 1: The background tothe current situation in theformer Yugoslavia, and theUnited Hngdom’s militarycontribution

The Ministry of Defence (the Department) had some 14,500 Service personneland approximately 150 cifians deployed in the former Yugoslavia theatre ofoperations during the peak of their contribution to the NATO-ledImplementation Force (lFOR). In October 1996, the Department’s estimate of thead&tional cost of their contribution was S337 mtRion. Under a mandate fromthe United Nations, the Implementation Force took over from the UnitedNations Protection Force (UNPROFOR)in Bosnia on 20 December 1995, tiththe stated mission - “to monitor and enforce comphance with the mihta~aspects of the Dayton Peace Accord.

The Peace Accord ofRciaUyended hostihties in Bosnia on 14 December 1995.The main featmes of the Accord, and the main objectives of the lFOR operation,are set out in Box 1. This mtitiuational operation is tbe first NATOlandoperation, and is being undertaken outside NATO’snormal area of responsibihty.

framework for lasfingpeace and rapid sconomic reconstruction in the region. It includes:

.

.

.

.

—

agreement to the deployment of a NATO- led Implementation Force (IFOR) to enforce the cessation of

hoetihties, and provide a secure environment for the implementation of the political, civil and economic

aspects of the Accord;

providing, within a single Bosnian state with is own central institutions, for two distinct entities-the

Bosnian Federation of Bosniacs and Bosnian Croats (commonly referred to se the MusHm-Croat

Federation), and the Repubfika Srpaka under Bosnian Serbs. They will control 51 per cent and

49 percent of Bosnian territory respectively. The Accord sets out the new inter-entiv boundafles, and

the territov to be transferred between the factions

esfabtiahing a functioning government, through an election programme to be supervised by the

Organisation for SecuriV and Cooperation in Europe, and instituting a major economic reconatructimr

programmd

reducing local mitifsry forces and negotiating progressive confidence building measurea.

continued...

7

MINISTRYOFDEFENCE:THEFINANCW WAGEMENT OF THEMIUTARY OPERATION IN THE FORMER ~GOSMU

The NATO-Ied IFOR has a key role to playinthe implernerifationof the Oayton Peace Accord? I&main

mi~tia~ tasks include

. e~bhahing and montoring a four kilometre-wida zone of separation between the forses of the former

warfing fasfion$

. monitoring the withdrawal of forces from those areas to be tmnsferred to another enti~, and, at a later

stage, monitoring the entry of forses to the newly transferred area$

. overseeing the withdmwal of all hea~ weapons and forces to barracka and cantonment sitas,

These tasks are to be completed against set milestones, with the main onas completed by 18 Aptil 1996.

The Implementation Forse is to be withdrawn after one year.

1.3 The background to the current situation in the former Yugoslavia, and theinvolvement of United Kngdom Forces, is complex. To provide anunderstanding of the lead-up to the transfer of responsibtity in theatre horn theUnited Natione to NATO,and the role of the United Rngdom, thisp~fioftiereport focuses on:

. the background to the current situation in the former Yugoslavia

. the United fingdom’s znihtary contribution, and

● the management arrangements for the United Ringdom’s con~ibution.

mat is the background to the current situation inthe former Yugoslavia?

1.4 Hostihties began in the former Yugoslavia in June 1991, after two reptihcs -Slovenia and Croatia - declared theiz independence, and Serbia tried forcibly toprevent them from breaking away, After fierce fighting in Croatia, anunconditional ceasef~e was signed in November 1991 between Serbia andCroatia. Under the ceasefire, around 30 per cent of Croatia remained under thecontrol of Croatian Serbs, backed by Serbia. In February 1992, the UnitedNations Security Council estabhsbed the United Nations Protection Force(UNPROFOR)and mandated it to help supervise the Withdrawal of the FederdYugoslav Army, to assist with the return of displaced persons who had fled fromtheir homes, and to monitor human rights.

1.5 In March 1992, fighting broke out in Bosnia when Bosnians voted forindependence, and Bosnian Serbs who were opposed to independence attackedthe new Bosnian government forces. Bosnian Serbs took control of 70 per centof Bosnia, taking territory from Bosnian Croats and Bostiacs (commonlyreferred to as Bosnian Muehms). In response, the United Nations SecurityCouncil extended the UNPROFORS miseion to Bosnia, and mandated them tohelp with humanitarian aid. Over the next three years, fighting continuedbe~een the warring factions, despite attempts to negotiate a peace setiement.

M[mSTRYOFDEFENCE:THEFINANCMMANAGEMENTOFTHEMILITARYOPERATIONIN THE FORMER WGOSLA~

1.6 In 1995, after Bosnian Serbs atiacked tbe United Nations’ safe areas ofSrebrenica and Zepa, the United Nations warned that any further attacks on thesafe areas wodd be met with a mifitary response. Despite this, in August 1995a she~ fied from Bosnian Serb positions exploded in the “safe area” of Sarajevokimng 37 people. NATO,in support of the United Nations’ operation, respondedwith airstrikes against radar, communications, artiUery and missfle sitesthroughout Serb held parts of Bosnia. Bosnian Serbs ako came under heavyattack from Bosniac and Bosnian Croat Forces, assisted by the Croatian Army,losing territory to them.

1.7 In October 1995, a60daycease&e wasaWeed beWeenthe warning factionsand, in November, peace taks began. These tab led to the signing of theDayton Peace Accord on 14 December 1995. Figure 1 shows the formerYugoslavia before the conRict began in Jme 1991, and the situation inDecember 1995, includlng the ceasefue he and the territory to be transferredbetween the two Bosnian entities. Since December 1995, the NATO-ledImplementation Force have been undertaking the mihtary tasks set out in theDayton Accord, while the internationa~y appointed High Representative -Carl Bfldt - has been progressing the titian aspec~ of the Accord. On14 September 1996, federal elections were held across Bosnia. Local electionswere postponed until 1997. Further detafi on the key events are set out inAppendix 2.

mat is the United ~gdom’s fitarycontribution?

1.8 United Kngdom Forces have been deployed in the former Yugoslavia sinceMay 1992, and their role in the UNPROFORoperation, together with the costs,are set out in Append~ 3. When the mdtinational forces in the formerYugoslavia passed from United Nations to NATOcontrol, the United figdom’scontingent increased substantiaUy, in he with the re@rements of NATO’swider mission of enforcement, and at the height of the IFOR operation, inJanuary 1996, involved some 14,500 Service personnel. Since that time, thesize and shape of the NATOforce has changed as the mission has developed,and the United Kngdom contingent has conse~ently reduced (see Figure 2 onpage 11).

1.9 The United Kngdom have been contributing to each component of the IFORoporation: ground, maritime and air (the United Kngdom’s &i-Servicecontribution is known as Operation RESOLUTE).The NATOair operation -DENYFLIGHT - which began in support of the Utited Nations, enforced a no-flyzone over Bosnian territory until December 1995. The air resources used werethen transferred to Operation DECISWE EDGE, which is enforcing the Rightrestrictions imposed by IFOR. The NATOand Western European Unionmaritie Operation - SHARP GUARD- continued to enforce economic sanctionsagainst states of the former Yugoslavia.

MINISTRYOFDEFENCE:THEFINANC~ WAGEME~MILIT~Y OPERATION IN THE FORMER ~GOSMVM

OF THE

Rgure 1: The former Yugoslavia before June 1991, and tha situation in Bosnia-Hemegovina in Dacambar 19g5

\

\

1ASERBIA

..

“--l

zr“ ,, ~KOSOVO ‘j :

)

,. ~,..... . .. . .

MACEDONIA

GREECE fl

The map on the right shows the situation inBosnia-HeEegovina following the Dayton PeaceAccord in December 1995. As pafl of theagreement, two distinct entities have beenestablished within a single Bosnian state - theBosnian Federation of Bosniacs and BosnianCroats (commonly rererred to as the Muslim-CroatFederation) and the Republika Srpska underBosnian Serbs. The Damon Accord acts out thenew inter-entity boundaries, and the tertitory to betransferred between th~ factinns

1

The map on the left shows the Federation ofYugoslavia and its constituent republics aa theywere from 1945 to 1991.

rKey OaflOn agrssment lineRepublika Srp$ka:Serb-controlled areaFederation of BosrdacsandBosrdan Croats:Bosniac-controlled area~ Croat.contmlled areaII Federationterdtodal gail~ Serb terfltorial gain ,Source: Ministry of Defence and Daflon Peace Accord

10

MINISTRYOFDEFENCE:THEFINANCW MANAGEMENT OF THEMILITARY OPERATION IN THE FORMER YOGOSLA~

Figure 2: Approximate numbers of United Wngdom personnel involved in the IFOR

operation

Mifitary Civilian:

Ground Maritime and AirJanua~ 1996 11,500” 3,000

Ostober 1996 9,200”’ 500} 150””

, including some 500 reservists

*’ including some 1,200 reservists

“*’ including some 95 Merchant NaW personnel

Source: Mirristv of Deferrce

This figure shows the approximate numbers of United Wngdom personnel involved in the IFOR operation.

The numbers have reduced since the beginning of the operation.

1.10 In Hne with the Dayton Peace Accord, however, economic sanctions have beengradua~y scaled down, and from May 1996 the United Kngdom’s naval shipsstarted to withdraw from the Adriatic. (The Royal Fleet Auxihary ship,Resource, remains moored in SpHt to provide logistics support to the UnitedKngdom’s ground forces in Bosnia and Croatia.) Operation SHARP GUARDended in October 1996.

1.11 The IFOR land operation is being conducted by a ground force which at its peakwas some 55,000 strong. By October 1996 it had reduced to 49,000. It ie madeup of troops from 32 comtries ~sted at Appendix 4), includlng 16 non-NATOcomtries. The United Ringdom are pla~g a central role, with 9,200 troops inOctober 1996. They command one of three mfitary sectors estabhshed byNATO,with the other major force contilbutors - the United States (15,000troops) and France (7,000 troops) - commanding the other two. Figure 3 onpage 12 sets out the mihtary sectors.

1.12 Head~arters 1st (United Ringdom) Division command Mtiti National Division(South West), based in Banja Luka. (~ey replaced Headquarters 3rd (UnitedKngdom) Division in Jtiy 1996.) The core fighting capabfity is provided by theUnited Kngdom’s 20 Armoured Brigade, based at Sipovo. This includes twosquadrons of ChaUenger tanks, a Warrior and a Saxon Battahon, two batteriesof AS90 howitzers and a fight gun battery. The 1st (United Kngdom) Divisionalso commands contingents of Canadians, Czechs, Dutch and Malaysians.United Ringdom rear support elements, including logistics, engineering andmedical troops, are deployed throughout the area, but are concentrated mainlyat Spht in Croatia.

1.13 Rgnre 4 on page 13 sets out the NATOcommand structure for the landoperation. The three mititary sectors are under the dwect command of NATO’sHeadquarters Wed Command Europe Rapid Reaction Corps” - a multinational

“ On 20 Nove&er 1996, the HeadquaflersAMsdCoaand Ewope Rapid Reaction Corps wasreplaced by another NATO Headpatiers (Headqoafiers wDCENTI - this report reflects tie

position up to this date.

MINISTRY OF DEFENCE: THE FINANCW MANAGEMENT OF THEMILIT~Y OPEWTION [N THE FORMER VUGOSMW

Figure 3: The military sectors

1.14

1“’’’”’’’~~CROATIA

~~,:::..,,),, ,, ,,,.“

Btis.nja?:“::’: ~ ~ .,..‘.,........‘i6~ ‘“~aatd”~‘.;:;Y,,,,,,,{I:ff ~,.

,.,,:mj,Herzegoiin’ii{ ‘,..,;; ‘i~,,.:j

~

,i,Mrkonflc-Grad.,..,,,,,,, “‘Tuzla,.,...’

.,, 3ERBI,.>,, ‘i. “’.’:’,, ““’

.,.* 3p0v0?;,

..:,.

●Kupres•~ Saraje”o

isel~k..: ~

IY.‘Q ..;.,”.O‘“””Key :Mosj---- Peace aareement tinel=i~)~WoNSource: Ministry of Defence

Figure3 showsthethreemilitarysectors established by NATO for the IFOR oDerafion. The IFORground force is made up of troops from 32 countries, but the military sectors are commanded bythe three largest troop contributing countries - the United Kingdom, the United States andFr.nce

NATOHeadwaiters whose permanent peacetime location is RheindaMen inGermany. The United Kngdom is the Framework Nation for the Headwaitersand has continued with this role for the IFOR deployment. This means theyprovide the Corps Commander - Lieutenant General Sir Michael Waker -aromd ha~ of the Headquarters staff and aUof the signals and support unitsassigned to the Headquarters (totaMng 1,900 personnel at the beginning of theoperation and 1,200 hy October 1996). Some United figdom personnel haveremained in Germany to manage the Headquarters’ communication finks.Ftiher information on NATOand the Headquarters Ned Command EuopeRapid Reaction Corps is provided in Appendti 5.

mat are the arrangements for the managementof the United fingdom’s mifitary contribution?

Athough the operation is NATO-led,the United Kngdom’s contribution re@eea sizeable national management structure, to provide support and financialcontrol, The arrangements are set out in Fignre 5 on page 14.

12

MINISTRY OF DEFENCE: THE FINANCW WAGEMENT OF THEMILITARY OPEWTION IN THE FORMER WGOSLAW

Rgrrre 4: The command siructura for the NATO land operation

I

Allied Command Europe (ACE)(under US General George Jorrlwan)

I

Allied Forcas Southern Eurnpe(AFSOUTH)/lFOR Command

(undar US Admiral Josaph Lopaz)

Headquarters Allied CommandEurope Rapid Reaction Cnrps

(HQARRC)(under United Kingdom

LieUtananl General Sir Mishael Walker]

) ) )US Division 1 Ha (UK) Division French DivisionSecior North Sector South West Sector South East

(Maior General Kiszely)

Source: M;n;stry of Defence

This figure shows the chain of cnmmand for the land operation of the Implementation Force inBosnia, and where the United Kingdom troops fit in this structure.

North Atlantic Council - this ia the main civil and decision-mating body of NATO. It is chairad bythe Secretay-General and usually compflses the ambassadors of the member statea, althoughmeetings are held twice yearly at foreign minister level. The North Atlantic Council providespolitical guidance and direction fnr the Supreme Allied Cnmmander Eurnpe (SACEUR). TheNorth Atlantic Council haa pnlitical cnntm over the Implementation Force operation;

Allied Cnmmand Europe (ACE), commanded by Supreme Allied Commander Europe (SACEUR)- ACE is one of the two strategic areas covered by NATO. The traditional task of ACE, underSACEUR (US General George Jmdwan), ia to safeguard the area etiending from the nofihern tipof Norway tn Southern Europe, including the whole nf the Mediterranean, and from the Atlanticcoasthne to the eastern border of Turkey. While Bosnia is not a NATO member, its Europeanlocation has placed SACEUR in nverall cnmmand nf this out-of-area operation. He ia located atSupreme Haadquamers Allied Powers Europe, in Belgium;

Allied Forces Southsrn Europe (AFSOUTH) AFSOUTH, under US Admiral Joseph Lopez(formerly Admiral Leighton Smith), is nne of the three major subordinate commands operatingunder SACEUR. Command of all IFOR operations - land, air and aea - falla to AFSOUTH. For theoperation it has relocated from ita peacetime baae in Naples, Italy, to Sarajevo;

Headquarters Allied Command Europe Rapid Reacfinn Cnrps (HOARRC) - follnwing the end ofthe Cnld War, and in recognition of the need for more rapidly deployable forces, which couldrespnnd to increasingly diverse threats, Headquaflers ARRC waa established aa the landcnmponent of NATO’s European Rapid Reaction Forces. The United Kngdom is the FrameworkNation for the Headquarters, providing the Corps Commander - lieutenant GeneralSir Michael Walker - and the majnrity of the staff. Its role in Bnsnia is to act as the Headquartersnf the Implementation Force land operation. The tmopa under its command are those in thethree military sectors.

MINISTRY OF DEFENCE: THE FINANCIAL WAGEhfENT OF THEMILITARY OPERATION IN THE FO~ER WGOSLAVM

Figure 5 The management structure fnr the United Kngdom’s cnntrihution to the IFOR operafion

[ . . ,,,: ,,, ,:.,. ,’‘: “.’;,!’,..,...... ,,:7:,’,::..,~,,:,,>:.,.,,:..:.:.,,;!., ,~. > .:,,..: .,.: :::,:.: .: .,.:....,,’:.“: , : .,

1’””’ .,.● under Joint Commander - General Sir Roger Wheeler● tfi-SerViCe suppoti organisation, initially based at Headquaflers Land

Command, Salisbury. From 1 October 1996, responsibilities passed tothe new Permanent Joint Headquatiers at Noflhwood

● responsible for deployment, sustainment and withdrawal ofUnited Kngdom Forces

II ● responsible for providing financial andsecretaflat suppofl to Joint Commander I I

IIIIII

1’ I I ‘1I

● holds financial authority for all in-theatreHeadquatiers Allied Command Europe RapidReaction Corps expenditure which falls to theUnited Kingdom

● delegated powers by United Kingdom’s JointCommander

I

~fi&swfa_.,.*:...,,.:,,......,,,,............8 senior financial adviser to United Kingdom’s

Oeputy Chief of Staff (personnel and logisticsSuppofl)

n responsible for scrutiny of expenditureproposals, ensuting financial proptiety andregularity and providing financial informationon costs incurred

B in-theatre focal point for liaison with NATO onissues such as Headquaflers Allied CommandEurope Rapid Reaction Corps costreimbursement

8 based in Kiseljak, near Sarajevo

II.IIII

● holds financial authority for all in-theatreexpenditure incurred by United Ungdomelements of the Multinational Division inSector South West

● delegated powers by United Kingdom JointCommander

IJ I

● senior financial adviser to Commander,British Forces

● responsible for scrutiny of expenditureproposals, ensuting financial proptieW andregularity and providing financial informationon costs incurred

● in-theatre focal point for issues such asrecovery of expenditure and provision ofresources

● suppotied by finance and budgets, contractsand claims staff

● based in Split and Banja Luka

.,

Source: National Audit Office /Mirristry of Defence

Under the arrangements set out in Figure 5, financial and contractual powers and responsibilities have been delegated to both theCommander of Btitish Forces in Bosnia - Major General Kiszely in Sector South West - and to the United Kngdom’s Depu~ Chief of Staff -(responsible for personnel and logistics support) Brigadier Judd at Headquaders Allied Command Europe Rapid Reaction Corps. Together,they have the authofltp for all United Kngdom in-theatre expenditure on the IFOR operation. A Civil Secreta~, and a Hnancial Secreta~ atHeadquatiers Altied Command Europe Rapid Reaction Corps, together with associated suppofl staff provide financial guidance and suppotito military personnel. While the Civil Secreta~ and his Headqua~ers Allied Command Europe Rapid Reaction Corps equivalent reporf totheir military commanders, they also have functional responsibility to the Command Secretaflat at the Joint Headquarters, who issueguidance on the financial and contmctual pflnciples to be applied in theatre.

14

MINISTRY OF DEFENCE: THE FINANCUMANAGEMENTOFTHEMILITARYOPEWTIONIN THE FORMER YOGOSMm

1.15 The Joint Headquarters’ role is to provide support to the United Kngdomcontingent, including their deployment, sustainment and withdrawal. TheHeadquarters have tri-Service personnel and civifians, experienced in areassuch as inte~gence, planning and logistics. Untfl 1 October 1996 the JointHeadquarters was based at Headquarters Land Command, Sahsbury. After thatdate the new Permanent Joint Headquarters at Northwood assumedresponsibi~ty for llle uperatiull, pruvidiug Cununand Headquarters suppon tothe Joint Commander, currently Commander-in-Chief Land - GeneralSir Roger ~eeler,

1.16 Under the arrangements for the financial control of the United Kngdom’soperation, the Department have delegated financial and contractual powers andresponsibihties to the Commander of the British Forces in Bosnia. Similarauthority for United Kngdom expenditure at the Headquarters ARied CommandEurope Rapid Reaction Corps has been given to the United Kngdom DeputyChief of Staff responsible for personnel and logistics support.

1.17 The Committee of Pubfic Accounts, in their Fifty-fifth Report, Session 1992-93(HC 729), noted that foHowing the Gti ConfRct the Department had identifiedthe need for Civil Secretary support in theatre at the start of an operation, toprovide financial guidance and support to military personnel. A Civil Secreta~has been in place in the former Yugoslavia since November 1992, based initia~yat Spfit in Croatia and more recently at Banja Luka in Bosnia, Early inJanuary 1996, a Financial Secretary, with duties similar to the Civil Secreta~,was deployed from Germany with the Headquarters wed Command EuropeRapid Reaction Corps, to ~se~ak, near Sarajevo. He is also responsible forfiaison with NATOofficiab on financial matters.

1.18 Civil Secretariat staff in theatre are working to detailed guidance which sets outthe financial principles to be apphed on operational deployments. The guidancewas drawn up in response to recommendations of the Committee of PnbhcAccounts, foUoting the Gti Confict. It emphasises that an operationaldeployment does not in itse~justifi the abandonment of normal accounting,contractual and financial principles. In the case of the IFOR operation peacetimeaccounting roles apply.

MINISTRY OF DEFENCE: THE FINANCU MANAGEMENT OF THEMILITARY OPERA~ON IN THE FORMER YOGOSLA~

Part 2: The United Wngdom’sfinancialthe costs

contribution, andrecovered

2.1

2.2

2.3

2.4

2.5

This Part of the report examines the costs to the Department of the UnitedRingdom’s contribution to the Implementation Force (IFOR). It focuses on

. the United Kngdom’s financial contribution;

. the costs recoverable from NATOand from other nations.

mat is the United figdom’s financialcontrfiution?

The Government makes annual Rnancial contributions towards the costs ofNATO.In addition, costs may he incurred on specific operations undertaken byNATO,as in the former Yugoslavia.

The IFOR operation is being conducted on the basis that each of theparticipating nations is responsible for meeting the costs of their troops and

emprnent, and the costs of supporting them - that is, “costs he where they fa~.Certain other costs, however, such as the deployment of NATOHeadwaiters insupport of the operation Qncludlng the Headwaiters ~ed Command EuropeRapid Reaction Corps and many of its additional costs in theatre), as we~ asfission-critical engineering infrastructure costs, are being reimbursed by NATOfrom budgetary contributions by member nations. Participating nations are akoreWired to reimburse other nations the cost of certain goods and seticesprovided to them, including those provided by the United Kngdom.

& the costs of the IFOR operation span a nurnher of the Department’s budgetholders, and are largely demand-led, the Department do not have a specificbudget for their contribution to the IFOR operation, although they haveprepared an overa~ estimate of their costs. N expendltme has to be justiedand approved in the normal way, and the Civil Secretary and his staff are inplace to ensure that proper expenditure controls and procedures are foUowed intheatre.

Have the Department identWled the additiond costs of theIFOR operation?

Accurate information about the estimated and actual costs of the operation isvital for effective financial management, and for decision-making. FoUowing theGuy ConRict, the Committee of Pubhc Accounts pointed to the importance of the

16

MINIS~Y OF DEFENCE: THE FINANCW MANAGEMENT OF THEMILIT~Y OPEWTION IN THE FORMER wGOSLA~

Department being able to identify tbe additional costs of patilcipating inmihtary operations - that is, those costs which arise as a direct resdt ofoperations, and which wotid not otherwise have faUen to the Defence BudgetThe Committee also stressed the importance of Parliament being informed ofadditional costs which indicate the funding Parhament wi~ have to protide.

2.6 In January 1996, the Armed Forces’ Minister informed Parhament that theaddltirmal cost of the United Kngdom’s contribution to IFOR was estimated tobe “in the region of S300 miRion for the duration of the operation”. The UnitedStates estimate their costs to be $3 biUon (or S1.86 biuon). The Depatiment’sestimate included S4. 2 mi~on for the United Kngdom’s share of the additionalcosts of the Headquarters ~ed Command Europe Rapid Reaction Corps’ rolein Bosnia.

2,7 The estimate of additional costs is largely for the ground forces contribution.The Department forecast that their continuing contributions to the air andmaritime Operations - DECISI~ EDGE and SHARP GUARD- wiU be around afurther f125mi~on. The Depa~ent did not ioclude these costs in the estimatefor the IFOR operation because they were afready being incurred on etistingNATOoperations in the former Yugoslavia.

2.8 The Department have been monitoring their costs since the IFOR operationbegan, and forecasting those expected for the remainder of the operation. Forthe period from January to September 1996, the total forecasts from individualbudget holders ranged from S200 miRion to S355 miRion. CentraUy though, tbeDepartment’s view, given their detatied knowledge of the assumptionsunderpinning the original estimate, was that the Hkely overa~ outturn was SMin the region of E300 mifion. In October 1996, the Department’s estimate,based on an assessment of the budget holders’ forecasts, was E337 miRion.Figure 6 on page 18 shows the breakdown of both tbe original estimate and thecurrent estimate. In November 1996 the Secretary of State for Defence informedParhameut of tile Department’s latest estimate. IIe announced that, subject toParhamentary approval, the Government has agreed that E244 mi~on wiR beprovided from the Reseme in 1996-1997 to meet the costs for the groundoperations, and the S24 mWon the Department estimate win be spent in thisfinancial year for Operation DECIS~E EDGE. Expenditure on the IFORoperation WU also fa~ in later financial years.

2.9 Much of the increase in the estimate was due to higher personnel andsustainment costs, covering food, fuel and spare parts, and resulted from there@ement to keep a larger force in theatre for longer than had beenentisaged origina~y. Higher repair costs have ako been estimated. This isbecause the mfleages recorded by, and the incidence of damage to, theDepartment’s large vehicle fleet proved to be much higher than under normalconditions, whilst maintenance had to be carried out in arduous workingconditions. These factors led to a large increase in the estimated costs forrefurbishment and write-off of vehicles at the end of the operation. This is thelargest element of the current estimate. There have been offsetting decreases inother elements of the estimate, and the key assumptions are discussed inparagraph 2.11.

17

MINISTRYOFDEFENCE:THEFINANCW WAGEMENT OF THEMILITASrYOPEWTION IN THE FORMER WGOSMVM

Hrrrrre6 The Deoartmen~s estimate of the additional costs of the IFOR amerafimr

2.10

2,11

January 1996 October 199$:

f million f mi[lionPersonnel 5.4 17.0

Set Up 71.9 58.0

DeploymenURedeployment 38.1 20.0Sustainment 189.8 239.0

Rotation/Roulement 0.4 3.0

persunnel coats - such as separation allowances paid to married miltary personnel wfrilethey are in the

former Yugoslavia, civiian overtime in the United tingdom and welfare prrwisio~

set-up costs - such as accommodation in the former Yugoslavia, engineering logistics and the purahase of

equipment from the United Nations

deployment /redeployment costs - such as the costs of transporting troops and veticles to the former

Yugoslavia, and their return at the end of the operation;

sustainment costs - such as food, fuel, ammunition, urgent operational requirements, refurbishment of

equipment, rest and recreation and resupply flights

rO!afiOn/ rurdement coats - these include the costs of tmopa’ travel when on leave, from the airport/

aeapoti in the Untied Kngdom or Germany to their home base, as well as the mulement of urdts and

equipment It ia standard practice for units to be replaced after a six month operational deployment and, for

the current operation, the Department have decided that much of the major equipment should also be

replaced. ~he initial estimate did not include mulement, but the current estimate does include a provision

for these costs.)

The National Audit Office examined the progress made by the Department inimproving their systems for aseeseing and estimating coste, in response to therecommendation of the Committee of Pubhc Accounts frdfoting the GtiConfict. They found that the Department had drawn on the growing number ofUnited Nations’ peacekeeping operations to estabfish a sizeable database ofcosts. Future deployments may take many forms, however, and the Departmenthave also taken eteps to gather information on larger scale operations, such asthe Fafklands and GuKWars, and are developing computer programs to analysethis historical data with a view to providing a cost estimating tool.

In Ene with their assurances to the Committee, the Department drew on theirexperience of the UNPROFORoperation in Bosnia when preparing theirestimates for their contribution to the IFOR operation, although they do nothave information on aU costs, ae the United Nations provided much of thein-theatre support for the UNPROFORoperation dlrecfly. Afeo, the Departmenthave had to make assumptions on matters which are largely beyond theircontrol but which have a significant impact on their costs:

a) The Implementation Force was deployed for 12 months, with aUtroops to beout of theatre by the end of NATO’smandate on 20 December 1996, TheDepartment assumed that United Kngdom ground Forces wodd reduceafter sk months by some 67 per cent (from 11,500 to around 3,800 troops).By August 1996 only 2,300 troops had been withdrawn, The costs of

1s

MINISTRYOFDEFENCETHEFIN~CM WAGEMENTOFTHEMILITMYOPEWTIONINTHEFORMERWGOSW~

sustaining troops for the second sk month period of the operation wifitherefore be higher than origina~y estimated. Aso, the withdrawal phasemay extend until March 1997. The additional costs are reflected in theDepartment’s current estimate.

Maintaitig the United Ringdom’s Forces at fti strength abo means thatadditional costs are hkely to be incurred for the rmdement of units (seeFigure 6). The original estimate dld not include the cost of the rmdement ofunits and their equipment since it was assumed that tour lengths would notexceed Sk months. The current estimate, however, includes such costs.

b) The original estimate for ammunition was based on 28 days’ stock, at acost of some S120 miRion. At current rates of usage, however, most of theammunition wi~ be returned eventua~y to stores, leaving some trainingusage, transportation and refurbishment as the only additional cost –S1O miRion is the Department’s current estimate.

c) The original estimate included S24 mfion in case the Department had tomake additional contributions towards NATOS costs of the operation. TheDepartment have recently revised this to S9,8 miRion. Currently, NATOaremeeting their costs from tithln efisting budgets, and the Departmentconsider it unhkely that there win be a ca~ on nations to provide additionalfoods for the Implementation Force.

The Department, however, had to meet the fuR costs of the food and hvingaccommodation for the United Wgdom element of the Headquarters of theRapid Reaction Corps. This is in fine with normal NATOprocedures whenthese staff are in Rheindahlen. The Department had thought at tbe outsetthat these costs (some S150,000 to E200,000 a month) woufd be met in partby NATO(paragraph 2.16) and had not therefore a~owed for them in theirestimates.

d) FoUowing the Gti ConRict, the Committee of Pubhc Accounts stressed theimportance of being informed of the additional costs which arise from theloss or accelerated depreciation of equipment. Reflecting this, theDepartment’s original estimate included E20 miTlon.

The Department’s cwrent estimate makes an a~owance ofS134 miRion forthe mite-off and refwbishment of vehicles, but the Department recognisethat the method used to calctiate these costs needs further development. TheDepartment are currently working on a new model for calculating such costsfor future operations.

19

MINISTRYOFDEFENCETHEFINANCIALMANAGEMENTOFTHEMILITARYOPERATIONINTHE FORMER WGOSLAVM

mat is the position on costs recoverable fromNATOand from other nations?

(a) Recoveries from NATO

2.12 The Department can recover from NATOthe costs of approved mihtaryinfrastructure projects undertaken in Sector South West - such as thereconstruction of bridges and the repair of roads. To quahfy for NATOfunding,projects shmdd meet only minimum mihtary requirements for the operation. ByJune 1996, work totalhng $2.7 miRion (El.7 mi~on) had been approved. Therebuilding of roads and bridges for the civihan and economic recons~uction ofthe former Yugoslavia is not a part of the IFOR mission, although troopcontributing nations may provide separate funding for such work.

2,13 Partictiarly at the start of the IFOR operation, there was an urgent need forrepair work to keep roads open for mihtary transport. However, to ensure thatthey wodd be reimbursed the cost of infrastruc~e projects, the Department’spractice has been to obtain NATOapproval before quah&lng projects werestarted. From their test checks, the National Audit Office found no evidence offailure by the Department to do tils. The Department have constructed twobridges at their own expense, but they were committed to do this before theIFOR operation began.

2.14 The Department also recover from NATOmost of the additional costs arisingfrom the role of the Headquarters Nhed Command Europe Rapid ReactionCorps in commanding the IFOR land operation. The United figdom’sresponsibihties as the Framework Nation for the Headquarters are set out in aMemorandum of Understanding. Under Wls agreement the United figdomhears the costs of providing “the command, communications, administrationand logistical support” of the Headquarters in peacetime. AR 12 nationsparticipating in the Headquarters are responsible for meeting the costs of theirown personnel, includlng pay, a~owances, housing, weKare and medical fees, aswe~ as any additional support or communications required over and above thatwhich the United Kngdom has agreed to supply. Other costs are met byparticipating nations from a shared funding budget.

2.15 As the Headquarters is operating outside their intended area of operation -normaUy within the sphere of NATO’sNed Command Europe - theMemorandum of Understanding does not apply to the current deplo~ent inBosnia. The Department’have, however, used the Memorandum as the basis foragreeing with NATOwho wi~ bear which costs. The resdt is that theDepartment have agreed to meet many of the costs for which they are norma~yresponsible in Rheindahlen, includlng

. the manpower costs of the United Kngdom element of the Headquarters and

. support equipment, such as communication systems, vehicles and office

e@Pment, UPto the United Kngdom’s National Scale of Supply - the levekprotided normally to United Kngdom personnel,

20

21

MINISTRYOFDEFENCE:THEFINANCIALMANAGEMENTOFTHEMILITARYOPEWTIONIN THE FORMER WGOSMVW

2.16 The Department’s aim has been to avoid incurring any costs additional to thosepaid for the Headquarters when the personnel and equipment are at theirpeacetime base at Rheindahlen in Germany. FoUowing negotiations, theDepartment accepted that they would meet the additional costs of food andhving accommodation for United Kngdom personnel. By June 1996, NATOhadagreed to pay foc

. the cost of moving the Headquarters’ personnel and equipment to Bosnia.Some S2.5 milhmr has akeady been reimbursed to the Department, whoarranged their transportation, and the Department expect the costs ofremoving the Headquarters from theatre to be similarly reimbursed;

. helicopter operating costs up to a specified Emit set by NATO;petrol, oil,lubricants and fuel; stationery and office supphes; and the carriage of spareparts for the Headquarters’ equipmenh

. stity per cent of accommodation costs. Under NATOrties, NATOnorma~ymeet the cost of the Headquarters’ working accommodation at theirpeacetime base in Germany. In Bosnia, however, it is often d~lcrdt todistinguish he~een working and hving accommodation. Tbe remaining40 per cent of accommodation costs in the former Yugoslavia (deemed torepresent hving accommodation) is shared between the member nations ofthe Headquarters, in hne with their share of the staff. As the largestcontributor of staff, the United Kingdom pay the majority of these costs,amounting to S50,000 per month;

. third party claims for damage involving Headquarters’ vehicles, the majorityof which are owned by the United Kingdom. In addition, NATOhave spentsome $42 milhon (S26 mi~on) on communication requirements over andabove those provided by the United Hngdom, and some $40 miRion(E25 milion) on other tasks undertaken by the Headquarters, such as Corpslevel engineering.

By October 1996, the Department were also recovering some f3.9 miRion fromNATOfor costs the Department have incurred on food preparation, utity usageand mapping information for the Headquarters.

(b) Recoveries from other nations

2.17 The Department also recover tie cost of goods and services provided to othernations participating in the IFOR operation - such as communication facfities,food, fuel, accommodation and transport. In practice, the support requestedfrom the United Kngdom in Sector South West has been fairly smaU - bySeptember 1996 the Department had rccovcrcd $122,000 (S76,000) and wereawaiting settlement ofafufier$134,000 (f83,000).

2.18 Without formal agreements for the provision of support to other nations, thereis a risk of dispute about the amounts to be recovered and the method ofrecovery. The National Audit Officenoted that it was not until June 1996,sti months into tbe IFOR operation, that the Department completed the last of

22

MINISTRY OF DEFENCE: THE FINANC~L MAGEMENTOFTHEMlLITARYOPERATIONINTHEFORMERYOGOSLA~

their agreements with each of the four main nations operating in Sector SouthWest. Canada, Malaysia and the Netherlands each signed a Memorandum ofUnderstanding. The Czech RepuhEc agreed to an exchange of Ietiers. TheNational Audit Office also noted, however, that the Department had taken a firmhne in the absence of formal agreements, only providing assistance when localagreement had been reached that their costs would be reimbursed. TheDepartment consider that the time taken in reaching formal agreements has notrestited in any financial penalty.

MINISTRYOFDEFENCE:THEFINANCN MANAGEMENT OF THEMILITAHY OPEWTION IN THE FORMER wGOSM~

Part 3: The Management ofAssets

3.1

3.2

3.3

3.4

3.5

The IFOR operation is being conducted on the basis that participating cmmtiieswi~ provide tieir own national “stove-pipes” to support their &oops in theformer Yugoslavia. This means that with a few exceptions they must be capableof sustaining their own forces in theatre. To this end, the Depatiment havee@pment and stores valued at some El bifion in the former Yugoslavia.

The National Audit Office examined:

. the availahihty of equipment and spares; and

. the Department’s arrangements for safeguarding equipment and stores.

The availabtity of eqtipment and spares

The Department’s target is to have 80 per cent of mission essential equipment(for example main battie tanks, recove~ vehicles, and infantry fighting vehicles)available for use at any time. For some of these equipments, tiIs fi~e is5 to 10 per cent higher than their normal levek. For other equipments theDepartment’s target is 70 per cent. Tbe Department’s data showed that in theperiod January to April 1996 most vehicles had met or exceeded the targets,although they have some reservations shout the accuracy of the data providedby units. To achieve these levels of avaflabi~~, the Department haveconsiderably increased the stock of spares held by supporting units.

Even though repotied availabihty levels have been generaUy high, theDepartment have been concerned shout the condition of their support vehiclessuch as bti fuel tankers, Landrovers and DROPSvehicles (a tianspoti vehicle

with its own load handhng system, designed to carry pafletised loads). Theusage of these vehicles has been higher than the Depar~ent had planned for“instead of the expected ‘X vehicle operation he armomed vehicle) it has been a‘B’vehicle (ie support vehicle) campai~”.

The support vehicles have had to cover ve~ high mileages over poor roads andin difficult conditions, causing heavy wear and tear, and a high amitirm rate -partictiarly in the winter months, when there were large numbers of roadtraffic accidents. Mso, nnhke armoured vehicles, which enter and leave thetheatre with the units which “own” them, some support vehicles have been intheatre for a number of years. The Depaflment state that support vehicles havenot been available to send out to tbeatre to replace those cmrently there,

because there are hmited stocks of suitable vehicles in the United fingdom.

24

MINISTRYOFDEFENCE:THEFINANCUMANAGEMENTOFTHEMILITAOYOPEWTIONIN THE FORMER YOGOSm~

3.6

. 3.7

3.8

3.9

3.10

The Committee of Pubhc Accounts, in their Third Repofi, Session 1992-93,(HC 67), were concerned at the extent to which the Depatiment are runntigover-age suppofi vehicles and incurring costs on uneconomic repaks and otherfinancial and operational penalties. In response, the Depa~ent stated thatfuuding constratits wodd &ctate that a number of support vehicles wouldcontinue to be run-on past the most economical point of disposal. They addedthat there was a balance to be struck between managing short term cashaUocation problems and mtiitising longer tem costs hcumed through therunning of over-age vehicles. Their experience on the IFOR operation hasfocused the Depa~ent’s attention on the problems associated in managingtheir fleet of support vehicles, and they are considering the financial andoperational aspects of this.

The wear and tear on suppoti vehicles ti the fomer Yugoslavia has led to asurge M demand for spare parts and assemblies. The Department haveexperienced patiicular problems with Landrovers because of the variety of leftand right drive vehicles and nmerous build standards. The Department haveover 80 variants in the former Yugoslavia and, within these, over 300 buildstandards. This means that a large range of spares is reqtied. There have,however, been more general problems with the availability of spares, and theseare examined in para~aphs 3.8 to 3.10 below.

The Depatient’s main stores depots are in the Utited Kngdom. Stores arealso held in the fomer Yugoslavia by eight suppotilng mits. In the earlymonths of the IFOR operation, the suppotig uuits had difficdty meeting mits’requirements. Ntbough they met most of the demands for those spares they areexpected to hold in stock, iuitia~y they dld not achieve the target for meeting audemands for spares, which the Department set at 45 per cent. Theatrestockholdings have increased since the deployment of the IFOR and are nowvalued at some E30 mi~lon, This has enabled the Depafiment to respond morequicUy to utits’ needs.

The National Audit Office noted that tbe Department achieved their target formeeting au demands for spares in theatie from September 1996. But in onecase examined by the National Audit Office, a supporting unit had met only6 per cent of all demands in the first month of the IFOR operation. As the mitgained experience of usage, the situation improved. By March 1996, the ratehad increased to 28 per cent, and by October 1996 it had reached 40 per cent,just below the target. To do this, the uuit increased its boldlngs from 4,000 fineitems to over 8,000.

The National Audit Office noted that a nmber of factors had contfiuted to thelow availability of spares in theatie:

. the stock of spares held by uuits tiitia~y deployed from the United Hngdomand Germany was based on peacetime usage as they had httle time to adjusttheir holdings to meet the expected demands of the operation. In practice,operational usage and diffictit local conditions have led to heavy demands onequipment, and these have generated a requirement for spares not normaUyheld by uuits, The situation was made more difflcdt as suppotiing units were

MINISTRYOFDEFENCE:THEFIN~CIALMANAGEMENT OF THEMILITARY OPEWTION IN THE FORMER YUGOSMW

expected to support equipment for which they dld not norma~y hold spares,and for which they had fittfe experience of the pattern of demands. Inaddition, supporting units had to cope with providing spares for vehicles withvarious build standards, and therefore d~erent spares requirements(paragraph 3.7). The Department are undertaking further work urgently toensure that on future operations units deploy with sufficient stocks of sparesto meet the potential demands, They consider that part of the answer maybeto base their holdings of spares on consumption data from rigorous trainingexercises, and on experience from this and other operations;

. the lack of visihifity over the holdings of spare parts in theatre. TheDepartment’s computer systems shotid have provided this tisibih~, hut theyhad been designed for use in situations where there is a goodcommunications infrastructme, and this had been largely destroyed inBosnia. The Department could not make available a dedicated mihta~communication system for logistic purposes because there were competingoperational requirements in theatre. Thus demands were placed on UnitedKngdom depots for spares which may already have been in theatre. TheDepartment now consider that for this operation they have overcome most ofthe problems associated with providing communications finks to theircomputer systems.

The Department’s arrangements for safe~artingeqtipment and stores

3.11 To assist with the efficient planning of movements into and out of theatre, theDepartment need to keep track of the location of equipment and stores. It is alsoessential for asset management and accounting purposes that the Departmenthave proper controls to safeguard against losses and damage to equipment andstores held in theatre,

The tractig of assets

3.12 After the Gulf Conflict, the Committee of Pnbfic Accounts, in their Twenty-e&tbReport, Session 1993-94 (HC 393), expressed concern that the Department did

not have sound management information systems for movements and fortracking freight. In response, the Department stated they had since introduced,and were developing, a number of Semite-specitic but hnked informationsystems, taking account of new technolo~ (such as barcoding) and bestcommercial practice. The National Audit Office therefore reviewed theDepartment’s progress in developing their systems in the context of the IFORoperation.

3.13 From their tisit to the former Yugoslavia, the National Audit Office identiledsome problem areas with the tracking systems used on the IFOR operation. Andfrom their experiences on the IFOR operation the Department recognise thatthis is an area to whlcb they need to give further attention. The National AuditOfficenoted:

MINISTRYOFDEFENCE:THEFINANCUMANAGEMENTOFTHEMILIT~YOPEWTIONIN THE FORMER wGOSMm

.

. on tractig the location of eqnipment h theatre, at the start of theIFOR operation the Department had several manual and computer systemsfor tracking equipments. Separate systems existed for tracking vehicles,trailers and generators, reefers (refrigerated containers) and leasedcontainers, and hehcopters. The Department found that they were unable tokeep their records up to date. This was because of the sheer volume ofequipment sent to theatre at the start of the operation, the redistribution ofequipments within the theatre, and the six monthly rodement which meantthat units left theatre with their eqtipment. The Department atso do not haverecords on the location of equipments such as communication systems,optronics and special test equipmen~

. to improve their tracking of equipments the Department are developinganother system the Theatre Equipment Database Yugoslavia - which reheson har coding. The bar coding of equipment is being done by a team of27 personnel in theatre. ~enever an equipment is moved it wi~ be trackedthrough the bar coding system, up-dating the computer database in theprocess, The Department expect the system to be ftiy operational next yeac

. on tracking spares in theatre, the Department did not have fti visibihtyover their holdlngs because units do not have a guaranteed communicationsfink to the computer system (paragraph 3.10);

. on trac~g stores which are in transit, the Department have developedfreight numbering and tracking systems to provide vlslbdlty of equipmentand stores. The National Audit Officewere informed that there wereproblems with poor communication kks between stores accounting systemsand tracking systems, and that problems with downloading large volumes ofdata meant reversion to manual data input at times. In investigating thediscrepancies referred to in paragraphs 3.15 and 3.16, the Department wi~need to examine the extent to which their freight tracking systems aredeuvering what was expected of them;

. on tracking the location of empty containers in theatre, the Department

have been unable to keep their computer records up to date. The trackingsystem fists some 1900 containers of which the Department do not know thelocation of some 300. Once empty, containers maybe used for a wide varietyof purposes other than for carrying consignments, such as a makeshiftshelter or a store. To improve their tracking the Department intend to includethem on the Theatre Equipment Database Yugoslavia. They are continuingtheir search for the missing containers;

. on tractig air cargo paUets, the Department’s losses of these items onthe IFOR operation(15) are lower than those experienced during tieGuKConfict (228). The Department expect their forthcoming pallet trackingsystem, which is more than a year overdue owing to development problems,to minimise losses. They now expect this system to be introduced inJanuary 1997.

27

MINISTRYOFDEFENCE:THEFINANCM MANAGEMENT OF THEMILITARY OPERATION IN THE FORMER WGOSMVM

3.14

3.15

3.16

The controls over stores

The Department require that for stores in the former Yugoslavia normalarrangements for accounting, stocktaking and custody shmdd operate. It isimportant that proper accounts records are maintained, and that stores areaccounted for correctly when moved from one location to another, Re@arstocktaking should abo be nndetiaken, The National Audit Office examined theDepartment’s controls over stores, includlng ammunition, medical stores,general defence stores and fuel. They found that there had been a breakdmvn inthe controls over ammunition in particular, and the Department haveundetiaken urgent investigations.

<

(a) Accmmtiig for stores

Units’ accounts should reflect accwately the stores held, and entiies shmdd besupported by properly authorised transaction vouchers. The National AuditOffice examined the stores accounts at a number of locations, and found that

. at one location in Bosnia, there were significant discrepancies be~een theaccount records and the amount of ammunition held in the store. Recordsshowed that some 452 Milan anti-tank missiles, with a value of someS6 mi~on, should have been held but they were not in the store. As a resdtof their investigations, the Department have stated that this was anaccounting error, and that au Milan missiles deployed to tbeatie have sincebeen accounted for. Other records showed that various types of ammunition,including hand-fired i~nminatig rockets, shmdd be held but again they werenot. There were also no vouchers supporting the issues and receipt of ttisammunition. The Depatiment have stated that these vouchers have nowbeen traced and that work is continuing to reconcile the accounts;

. at another location in theatre, the quantities of ammunition recorded on theissue vouchers cmdd not be agreed to the entries in tbe accounfi

. at a medical store in Croatia, vouchers authorizing the issue of meticalsupphes were missing, Aso, one account showed that 20 autojets ofMorphine Sdphate and 10 ampoules of Codeine Phosphate shmdd be held,but they were not in the store. Both are opium based drugs which, under

Section 10(2) of the Misuse of Drugs Act 1971, shmdd be properlysafeguarded, with transactions documented and proper records kept. TheDepartment have stated that this was an accounting error and haveconfirmed that no drugs were missing,

Units must also record correctly the movement of stores. men stores are sentfrom one unit to another the sender raises an issue voucher. The sender’saccount is not clear until they have documented evidence the receipt voucherthat the stores have been received. If stores are not receipted there is a risk thatitems issued to units may be lost or stolen in transit, with no fo~ow-up action toinvestigate the reasons for the discrepancies. Checks by the National AuditOffice showed a number of instances where stores had not been confirmed byunits as having been received, These included:

MINISTRYOFDEFENCE:THEFINANCML MANAGEME~ OF THEMILITARY OPERATION IN THE FORMER YOGOSM~

. ammunition issued from the United Kngdom to the former Yugoslaviatota~ng S6,7 mi~on. The Department have stated that the work to reconcilethe accounts concerned has been completed and au of the ammunitionaccounted fo~

. some 500 separate consignments of ammunition issued within theatre,which computer discrepancy reports showed in May 1996 as not beingreceipted. Tbe Department have stated that over 260 of these consignmentshave since been receipted. Checks by the National Audit Office on some of theissues fisted in the discrepancy reports indicated that over 2,000 rounds of30mm ammunition had not been received by the unit to which it had beensent. The Department have stated that this was the resdt of an accountingerror and that the ammunition had in fact been dehvered to the correct uniti

. several hundred items of general defence stores sent from the UnitedKngdom to one unit in the former Yugoslavia in June 1995 andJanuary 1996. The issues had not been downloaded to the receiving unit’scomputer system, with the resdt that the system was unable to match issueswith receipts. The Department, therefore, had no way of knowing whetheritems had gone missing. Further checks by the National Audit Office showedthat certain stores had not been received, They included engineeringewpment valued at around S1OO,OOO.The Department have stated that theyhave reviewed and taken onto account al stocks at the location concerned,and that they have taken action to ensure that discrepancy reports are issuedby the system in the future;

. issues of medical stores to the former Yugoslavia were not supported by IssueTransaction Sheets, in the period March to October 1996, due to a problemwith the implementation of a newly introduced computer system. Thesesummaries are important in that they provide each unit with a monthlyrecord of aUthe issues of medical stores which have been made from theUnited Kngdom in response to unit demands. The Department state that theproblem has now been corrected.

fb) Stocktaking

3.17 The balances on stores accounts shodd be regdarly checked by stocktaking.The National Audit Office examined the Department’s arrangements forcarrying out stocktakes of their stores in the former Yugoslavia. They found thak

. during the period October 1994 to February 1996-17 months - there hadbeen no stocktake of the ammunition at one location. men the Departmentdid a stocktake in March 1996, it revealed significant discrepancies - a netdeficiency of S388,000 between the account records and the holdings ofammunition. Further stocktakes undertaken hy the Department haverevealed addltirmal discrepancies, and the account is being adjusted. TheDepartment have stated that in October 1996 these discrepancies comprisedsome E3.3 mi~on of ammunition stored in theatre for which there is nosupporting documentation, and about E4 mi~on of ammunition for which

29

MINISTRYOFDEFENCE:THEFINNCMLHAGEMENT OF THEMILITARY OPERATION IN THE FORMER ~GOSMVM

there is documentation but which has not yet been traced. This compareswith the total ammunition stock held in theatre in October 1996 ofS55. 5 mi~on. The Department have undemay a fu~ investigation;

. at the fuel depot at Sipovo, staff carrying out stocktakes on the amount of fuelin the fabric pi~ow tanks used for storing fuel found it difficuk to obtainaccurate readings as the tanks stretch with age, and the Department arereviewing their guidance. They consider that the risk of losses from fraud arelow as other checks are carried out to ensure that the fuel dehvered istransferred to the tanks:

. stocktakes have not been carried out forsome general defencestocks. TheDepartment have said they wi~ ensure that stocktakes are carried out infuture.

A fabfic oillow taflkused for stotino fuel,

3.18 Stocktaking should also identify any weaknesses in the custody arrangementswhich wmddcause loss ordamage to the stores. The checks sbodd coverwhether there are adequate measures to prevent the unauthorised access ofpersons to the area where items are stored, and whether precautions have beentaken to reduce the risk of loss from fire, The National Audit Officerecognisethat, in the former Yugoslavia, the Department are using temporary sites wherethe conditions are less then ideal. They noted, however, several cases wherecontrols could he improved, andthe Department have taken action on them.

30

MINISTRYOFDEFENCE:THEFINANCW WAGEMENT OF THEMILITARY OPERATION IN THE FORMER YUGOSLA~

3.19 Inonecase, there were siWfilcant fire risks atabukfiel instaUation whichcontained 480,000 Htres of fuel, valued at El 25,000. The insta~ation,comprising sti fabric pi~ow tanks, was sited on a peat bog and was surroundedby large mounds of saw dust which codd be interna~y combusting - the sitewas previously a wood factory. The Department have stated that this locationhad been chosen for operational reasons and that considerable efforts weremade to reduce the level of risk. They accepted, however, that risks remained,and after considering a range of options the Department decided that currentoperational circumstances wodd a~ow them to close the insta~ation.

‘?:

MINISTRY OF DEFENCE: THE FIN~CMLMAGEMENTOFTHEMILITARYOPEW~ON IN THE FORMER YUGOSMVM

4.1

4.2

Part 4: The provision of goodsand services

The Department have purchased a wide range of goods and setices for theIFOR operation, Some are provided by local supphers, as one-off pmchases,others are provided under central or local contacts, Under the Status of ForcesAWeements (Box 2) the host nations also provide support to theImplementation Force.

Atthe start of the operation, Status of Forces Agreements were signed by NATO with the Repubhcs ofBosnia-Hemegovina, Croatia, and Yugoslavia, covering host nation suppoti, Host nation suppofl covers

civil and mifitary assistance provided in peace, crisis and war by a heat nation to allied forces wMch are

located in, or in tmnsit through, its tertitmy,

Assistance under the agreement includes the provision of pmpe~, the tight to contract with local

Supplers, exemptions from Wes and duties, and the fight to employ local civihans It also provides that

NATO military personnel are subject to the jurisdiction of their national elements, that NATO personnel shall

have free and unrestricted passage and unimpeded access in each countW, and that NATO are allowed to

operate their own internal mail and telecommunications semices.

The National Audit Office examined the Department’s arrangements forpmchasing those goods and semices where the most signifi~ant expendi~e isinvolved. They also enquired about the consideration the Department havegiven to other forms of contractor suppoti, and examined whether there areproper controls over cash and payments in theatre. This Part of the reportexamines, therefore:

.

.

.

.

.

.

.

.

the Department’s arrangements for leasing proper~ and providtigaccommodation for troops;

the purchase of United Nations owned e@pment;

the payment of ta, airport and port charges;

the employment of local civihans;

the supply of fuel;

the movement of personnel, equipment and stores;

contractor suppo~

the control over cash and payments to local supphers in theatre.

32

MINISTRYOFDEFENCE:THEFINWCW WAGEMENT OF THEMILIT~Y OPERATION IN THE FORMER YUGOSM~

The Department’s arrangements for leasingproperty and protiding accommodation for troops

4.3 men the IFOR operation began, there was an urgent requirement foraccommodation. Tbe Department negotiated proper~ leases. They bought flatpack moddar accommodation units to erect on the property they had leased.And they arranged hotel accommodation in Croatia, which was required for thedeployment and roulement of troops.

The leasbg of property

4.4 Under the Status of Forces Agreements, such property as NATOneeds for theoperation should be provided free of charge, though for privately ownedproperty NATOadvised nations to pay the owner a reasonable rent. Currently,the Department have 90 leases on property in Bosnia and Croatia, which intotal cost over 1500,000 a month. Tbe properties include apartments, factorysites, hotels and a bus depot. Five properties are provided free of charge to theDepartment under the Status of Forces Agreements.

4.5 The Department had taken steps to confirm the ownership of prope~, and hadconstited their legal adviser where necessary, but obtaining conclusive proofhad been difficult in many cases. The National Audit OffIcenoted two caseswhere the Department stiU had doubts about whether the properties wereprivately owned. At the time they were paying rent tota~ng E28,000 a monthfor these properties. They have confirmed that satisfactory evidence of privateownership has been obtained in one case, and in the other they have stoppedpaying rent pending further investigations.

4.6 The National Audit Office also noted that, because of the situation in Bosnia, theDepartment dld not have a firm basis on which to assess whether the rentswere reasonable. There was no “market” in the usual sense of the word; theDepartment were not looking to use prope~ for the purposes for which it hadbeen built - essentia~y, they needed shelter; and the prope~ was usuaUy inpoor condition. The Department consider, however, that they have negotiatedrents which reflect the condition of the properties and their location - in thecases examined by the National Audit Office, those rents at the top end of thescale were 50 per cent higher per square metre than those at the bottom.

4.7 As two of the cases examined by the National Audit Office concerned propertiespreviously rented by the United Nations during the UNPROFORoperation, theNational Audit Office compared the rents paid. For one property the UnitedNations had paid S4,500 a month, compared to S22,500 now paid by theDepartment. The Department have looked into this further and have concludedthat the amount paid by the United Nations was exceptiona~y low for such aproperty. In another case, the United Nations paid a rent of S23,000 a month in1994 and the Department are now paying S25 ,000 but the United Nations’ leasewas negotiated four years eartier.

33

MINISTRY OF DEFENCE: THE FINANCWL MANAGEMENT OF THEMILITARY OPEWTION IN THE FORMER YOGOSLAVM

4.8 To safeguard the Department’s position speciahst contracts staff shmddnegotiate leases, and in most cases this had happened. However, in MO casesexamined by the National Audit Office, mi~tary personnel had entered into acontractual commitment to obtain tie properties because there was an urgentoperational need for them and contracts staff were not hnmediately available.

4.9 To defend against improper or exaggerated claims from owners when proper@is handed back, it is important to do condition surveys, wherever possible,when occupying property. The Department have included a condltimr in theleases which provides that they wi~ return the property in a reasonable state ofrepair, having regard to its original condition (which was genera~y poor). TheNational Audit Office noted, however, that the leases let in the early weeks of theoperation do not include condition surveys, and that most leases were let duringthis period. There is a risk, tierefore, that the Department cotid face claimsfrom owners, even where they have made considerable improvements to mostproperties, such as restoring power and water supphes, to make them habitable.

4.10 The Department acknowledge this, but point out that tiere was instilcient timeto do the surveys because sites were occupied at short notice roving tooperational retirements. They have confirmed to the National Audit Office thatcondition surveys are now undertaken prior to any new leases being agreed,and that, where leases have been terminated, they have not been asked to makeany payment for damages. They have also confirmed that photographs andother documentary evidence have now been co~ected, and will be used todefend vigorously any claim for damages.

The pmchase of modtiw accommodation units

4.11 Given the level of damage to property in Bosnia, the hkely increase in the UnitedKngdom’s contingent and the harsh weather conditions, the Departmentidentified a need, before the IFOR operation began, to supplement their stock oftents with other accommodation. Following competitive tendering, they agreedterms with a contractor for the supply of modular accommodation units(together with shower and toilet units), medical and dental units, sewagetreatment plants and power generating facfities for some 4,250 personnel at acost of S30.7 miUon. The Department intend the units to be avaflable for use on

future operations,

4.12 In January 1996, almost as soon as the IFOR operation began, the Departmentawarded the contract. Their intention was to get the new units in place as soonas possible because of the poor hving conditions in Bosnia. The units weredehvered as flat packs for erection by Army Engineers and, in accordance withthe contract, dehvery of the first 500 was in January 1996 with the remaining3,750 units dehvered by mid-April. However, the erection of the accommodationunits was not completed untd July 1996, seven months into tbe IFOR operation,because:

. engineering resources were in short supply, as they were needed for otheroperational tasks; and

MINISTRY OF DEFENCE: THE FINANCIAL MANAGEMENT OF THEMILITARY OPERATION IN THE FORMER ~GOSW~

The modular accommodation units were dehvered as flat packs for erection by Army Engineers.

.

The accommodatkm units have been used to form camps of vadous sizes.

35

MINISTRYOFDEFENCE:THEFINANCIALMANAGEMENTOFTHEMILITARY OPERATION IN THE FO~ER ~GOSLAVM

4.13

4.14

4.15

. the accommodation units came in various camp sizes. At the time thecontract was let, the Department had not known precisely where in theirarea of operations the accommodation units wotid be required or the sizeof camps. To give themselves flexihifi~, they ordered units comprising9 x 250 man camps and 4 x 500 man camps. Nevertheless, as the actualrequirement for camp sizes was different from those ordered, the units hadto be reconfigured and repackaged by the Depatient. In the process, anumber of additional parts were needed with the restit that when the campswere erected they coufd not be used immediately,

The contracts for hotel accommodation

The Department forecast that their expenditure on hotel accommodation in theformer Yugoslavia wi~ he some S3,5 miRion by the end of December 1996. Tokeep hotel costs under control, the Department bought some 100 flat packaccommodation units from the United Nations (in advance of the contractreferred to in paragraph 4.11) so that staff could he moved out of hotelaccommodation. They also negotiated discount rates with hotels used on are~ar basis, and made block bookings for troops arriving into and departingfrom theatre and who need to spend short periods in accommodation iu Spht.

The purchase of United Nations o-cd equipment

On the transfer of responsibi~ty for the mihtary operation to NATO,the UnitedNations offered to se~ some of their equipment to NATOand participatingnations, The Department agreed to purchase some items, such asaccommodation units and generators, partictiarly those they were afreadyusing. The National Audit Office confirmed that the Department had vefied theexistence of each item and assessed its condition. The Department have agreeda purchase price for the items of f5,2 mi~ion, which wi~ be offset againstamounts owed by tie United Nations to the United Ringdom for the UNPROFORoperation (Appendix 3, paragraph 8). The Department’s estimates of theadditional costs of the operation (paragraphs 2.6 to 2.11) include provision forthese purchases.

The pa~ent of tax, airport and port charges

Under the Status of Forces Agreements, NATOforces are a~owed to contractdirectiy with supphers for goods and services without payment of tax andduties. The Agreements also provide that “NATOwi~ use airpofis, roads andports without payment of duties, dues, toUs or charges”, although they wi~ not“claim exemption from reasonable charges for services requested andreceived, Operations, movements and access are not aUowed to be impededpending payment for such services. The Nationa