Amyas Morse, the Comptroller and Auditor General (C&AG), has again qualified his audit opinion on the Ministry of Defence’s accounts.
The C&AG has qualified his opinion for the seventh year running because the Department has again not complied with the accounting requirement under the International Financial Reporting Standards (IFRS) for determining whether a contract contains a lease (the kind of contract which provides the Department with exclusive or near-exclusive use of assets and capability).
The MoD has previously confirmed that compliance with the standard is possible for existing contracts – but in practice this would create significant challenges. There would be a need for changes in business systems and processes, as well as for wider interaction by the Department with its supplier base to obtain the necessary asset and liability information.
In 2015-16 the Department formally decided to improve compliance with International Accounting Standard (IAS) 17 for new single contracts impacting a single site, with effect from 2016-17. The Department intends this to act as a pilot to allow it to develop further understanding of the challenges and resources required to improve compliance. The Department intends to review the progress and results of this exercise during 2016-17 including consideration of whether it can be expanded further.