18 July 2011
Amyas Morse, the Comptroller and Auditor General today qualified his audit opinion on the 2010-11 accounts of the Ministry of Defence owing to material error arising from adopting accounting policies which do not fully comply with International Financial Reporting Standards. He has also limited the scope of his audit opinion on the grounds of inadequacy of evidence to support the accounting for certain expenditure and balances in the financial statements. In his follow up to previous recommendations he highlights progress made in several areas which had been subject to previous qualifications.
The audit opinion has been qualified for the second year following the implementation of International Financial Reporting Standards because the Department has not complied with the accounting requirements for determining whether a contract contains a lease. The Department has therefore omitted a material value of assets and liabilities from its Statement of Financial Position. The Comptroller and Auditor General cannot quantify the impact of this on the accounts with certainty because, as a result of its accounting policies, the Department has not maintained the records, or obtained the information required.
The C&AG has also limited the scope of his audit opinion on the grounds of the inability of the Department to provide sufficient evidence to support the accounting for military equipment in the form of BOWMAN radios (£0.1 billion); certain inventory and capital spares (£5.2 billion); and a further, unquantifiable amount of inventory and capital spares where the associated asset platforms have been taken out of service, and for which inadequate assessment of impairment has been made.
Improvements in the Department’s asset verification processes mean the C&AG has not had to limit the scope of his audit opinion in respect of certain grouped military equipment assets worth £0.6bn. These assets were subject to a scope limitation in the 2008-09 and 2009-10 accounts.
"The Ministry of Defence has made some welcome progress in improving asset verification exercises. However, the Department is still not able to provide enough evidence to support the accounting for over £5.3 billion worth of military equipment, and it has also failed to follow proper accounting requirements with regards to leases for the second year running. Therefore, I am qualifying my audit opinion."
Amyas Morse, head of the National Audit Office, 18 July 2011