Tuesday, 24 January 2012

Britain's Ministry of Defence loses billions to theft and incompetence

It would seem that just as mega banks are too big to let fail so, too, huge government departments, like Britain's Ministry of Defence (MoD), are beyond the rules of good governance. For the fifth successive year the MoD's annual accounts for 2010-11 have been qualified and the MoD has no plans to comply with international financial reporting, as laid down by the Treasury, within the foreseeable future, says the Defence Committee, chaired by James Arbuthnot, MP.

Such insouciance is breathtaking, especially at a time when Britons are passing through, perhaps, the worst austerity measures since World War 2. Britain's local authorities are constantly admonished by Government to eliminate waste and cut spending but should the Treasury not look to the mote in its own eye and is it not time for the MoD to clean out its Augean stables?

The Defence Committee is dismayed that the Chancellor of the Exchequer, George Osborne, has not responded to its letter asking what his policy is on Departments who defy Treasury accounting rules. The MoD could also not provide adequate audit evidence for over £5.2 billion worth of certain inventory and capital spares. "These problems are likely to persist until, at the very earliest, 2014-15," says the Defence Committee.

In a staggeringly euphemistic statement, James Arbuthnot said: "The repeated qualification of the MoD accounts reflects badly on the MoD's financial management. The situation is unsatisfactory and the MoD and the Treasury need a clear plan to address the shortcomings in the MoD's accounting systems."

Such gross accounting and logistical incompetence, however, does not only undermine Britain's task of reducing Government debt, now put at over £1 trillion for the first time, or over 70% of gross domestic product. It also poses serious security issues. Two years ago, when I last mentioned this subject under my headline: "MoD's stock mismanagement threatens security," I referred to the Army's relatively new £1.3 billion BOWMAN tactical communications system, which provides integrated, secure radio, intercom and Internet services. Only 89% of these assets then could be accounted for by the end of the year owing to problems with accounting for radios in use on the battlefield. These radios were worth £155 million and it is a reasonable bet that some have fallen into the wrong hands.

It should be made clear that this is not simply an accounting issue gone alarmingly wrong and out of control. Massive fraud and theft are also involved. "The Committee is concerned that the level of theft and fraud in the MoD appear generally to be increasing year on year and that the level of value recovered from theft and fraud is low, " said James Arbuthnot.

Theft and fraud is not new to the MoD, whose financial black hole has reached about £38 billion. Back in 1983 the Army's COD Donnington warehouse went up in flames, and at £174 million the uninsured fire loss was the costliest in the country's history. The fire's cause was never proven but one mooted cause was arson because the Falklands war allegedly occasioned a comprehensive stock audit which, it was claimed, would have exposed serious stock losses, and so tracks had to be covered by a fire. What is certain is that the sprinkler system failed to work and it is very rare for sprinkler heads to fail. According to warehouse fire statistics there was also an even chance that the fire was arson as nearly half of all UK warehouse fires are maliciously caused.

If ever a Government department responsible for spending billions of pounds of hard-pressed taxpayers' money every year needed forensic accountants with top line logistics experience and robust systems in place the MoD must be top of the list. But it must be backed up by ruthless,
committed, and capable security personnel to root out the fraudsters and thieves for condign punishment.

Saturday, 14 January 2012

Costa Concordia's wreck exposes unlearned safety lessons

Yet again a cruise ship tragedy shows that the marine industry is still prepared to sacrifice passenger safety on the altar of profit. The cruise ship, Costa Concordia, reportedly hit submerged rocks around 9 pm, January 13 when only hundreds of metres from a harbour on the small island of Giglio off the Tuscany coast. The 114,500 tonne vessel with over 4,000 people on board suffered a 100-ft gash and quickly began to list to starboard. It is this listing action which exposes the most serious deficiencies in lifeboat capacity common to most cruise ships, despite their legal compliance with safety legislation. Three people are confirmed dead with reports of up to 70 others missing. All 24 Britons on board were reported unharmed.

One line of enquiry into the accident is looking into an electrical fault which could have caused loss of ship control but whatever the cause it is the ability to cope with the aftermath that should concern all potential cruise ship passengers most. The fact is that current SOLAS regulations do not adequately protect all passengers on board cruise ships primarily because lifeboat capacity is typically 25% short when listing precludes use of all lifeboats on the opposite side of the list. But it gets worse.

This writer has been on various big ship cruises and conducted a survey of 10 large cruise vessels' lifeboat/craft capacity. In all but one vessel there was a 25% shortfall in life craft capacity when listing was applied to the equation. The problem is further exacerbated when allowance is made for the heavy use of inflatables, typically holding 25 people each, which is a cost consideration as they are so much cheaper than rigid, covered lifeboats and they help meet safety compliance.

While inflatables can be useful the fact remains that most would not be davit-launched but jettisoned to self inflate on hitting the water. This means that many passengers would be expected to jump up to 50 ft or more into what could be a freezing, raging sea and somehow scramble into them, irrespective of obesity and any infirmities they may have. Alas, that is just what some passengers felt compelled to do on the Concordia in a bid to swim to the shore. One travel broadcaster and writer said that many of the 150-capacity lifeboats were not deployed owing to the list and subsequent rolling over onto her side. If a stricken vessel's list is very rapid then there could also be problems launching lifeboats on the listing side.

This time round the world was spared another marine tragedy of Titanic proportions. Close proximity to the shore, benign weather and the use of five helicopters prevented huge loss of life but in other circumstances it could have been tragically different. More and more cruise ships are now moving in hostile waters of the polar regions, thousands of miles from inhabited land and, sometimes, other ships. Had the Concordia been in these harsh waters and rolled over in similar circumstances the loss of life would have far out rivalled the Titanic 100 years ago, again a ship that met the then current Board of Trade regulations on lifeboat capacity.

So far the cruise ship industry has been lucky, escaping relatively unscathed from serious loss of life. But there are recent tragedies disturbing enough to demand action on lifeboat capacities. In 2006, for example, the Al Salam Boccaccio 98 sank in the Red Sea after quickly listing. Of the 1,400 people on board there were complaints among the 400 survivors that there were insufficient lifeboats. This vessel also had an extra deck installed which would have raised issues of ship stability. To pack in as many passengers as possible, new cruise ship leviathans have ever more decks. Sharp ship turns at high speed have been known to injure passengers who reported a near flipping of their ship.

Could at least some good emerge from the Concordia wreck? If it spurs progress towards more lifeboats on cruise ships to cope with listing problems then yes it would. But the supine response of the marine safety industry so far, depicted by all the lessons unlearned, does not inspire much confidence, to the industry's indelible shame. Passengers and crews deserve and expect better. Must it take another Titanic to prove a point? Evidently, it must.