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Defence Equipment and Support 2015-16 financial statements

The Comptroller and Auditor General, Amyas Morse, has for the second successive year qualified his opinion on the financial statements of Defence Equipment & Support (DE&S).

DE&S has again been unable to provide sufficient evidence to support certain costs, or demonstrate that all costs it has incurred, have been included in the financial statements.

The C&AG has therefore limited the scope of his audit opinion in respect of this expenditure which amounts to £434 million for private sector support costs and £65 million for other programme costs.

Private sector support costs include manpower support, consultancy assistance and technical support in the areas of project management and logistics capability. Other programme costs include travel and subsistence, training, safety and other office running costs.

In 2015-16, DE&S introduced an improvement programme to address the previously identified weaknesses which led to the 2014-15 qualified audit opinion. However, given the scale of the challenge, the programme was designed initially to provide evidence to support the trade and other payables balances meaning that the C&AG was able to remove this element of the 2014-15 qualification.

To remove its qualification relating to expenditure the Department needs to improve how it identifies and records private sector support and other programme costs. The Department’s ongoing improvement programme acknowledges this and it is developing financial management systems, processes and controls to record its costs to a level of accuracy needed for a clear audit opinion in future years.

Notes for Editors

  1. DE&S is a key part of the Ministry of Defence (MOD) Operating Model, responsible for managing the acquisition and through-life support of the MOD Equipment Programme.  It was established in April 2014 and classified as an Executive Agency of the MOD and operates as a Bespoke Trading Entity (BTE) to strengthen the customer-supplier relationship with the military, provide freedoms around recruitment and reward, and drive through efficiencies in costs.
  2. Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.
  3. The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO, which employs some 785 people. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of £1.21 billion in 2015.

PN: 70/16