"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
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.