The Department for Culture, Media & Sport (DCMS) has published its 2024-25 accounts. Gareth Davies, the Comptroller and Auditor General (C&AG), has issued a clean audit opinion, providing assurance to Parliament on the financial statements.
Here we share highlights from his audit certificate. You can read the full certificate and report on the accounts in context in DCMS’s annual report and accounts.
Opinion on financial statements
In my opinion, the financial statements:
- give a true and fair view of the state of the Department and the Departmental Group’s affairs as at 31 March 2025 and their net operating expenditure for the year then ended; and
- have been properly prepared in accordance with the Government Resources and Accounts Act 2000 and HM Treasury directions issued thereunder.
Opinion on regularity
In my opinion, in all material respects:
- the Statement of Outturn against Parliamentary Supply properly presents the outturn against voted Parliamentary control totals for the year ended 31 March 2025 and shows that those totals have not been exceeded; and
- the income and expenditure recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.
Key audit matters
Consolidation process – Departmental Group
Description of risk
The Departmental Group financial statements consolidate financial information from the core Department and, in 2024-25, detailed in note 24, 33 Arm’s Length Bodies (ALBs) and their own subgroups.
The production of the Department’s Group financial statements is complex because:
- the consolidation process requires multiple levels of consolidation of ALB’s within the group as some ALB’s have their own sub-groups. The Department is required to consolidate only those ALBs which are within their boundary and therefore must ensure that some members of ALB’s own groups, where these entities are not included within the departmental boundary, are removed from the consolidation. This exercise is complex for BBC’s commercial subsidiaries and the trading companies of museums where the financial information of the sub-consolidation is removed before departmental consolidation.
- approximately half of the ALBs prepare their own financial statements under an accounting framework different than that of the Departmental group, which uses HM Treasury’s Government Financial Reporting Manual; therefore, complex and material alignment adjustments are required.
- given the size and complexity of the group, there is risk that consolidation adjustments and elimination of intra-group transactions are incomplete or inaccurate.
Key observations
Other than that which has been noted in the key audit matter 2, I did not identify any significant misstatements as a result of the work I have performed over the consolidation process and the consolidated financial and disclosure information in the group financial statements.
I found that the process prepared and used by the department to consolidate the information of ALBs is adequate.
Valuation of property – Departmental Group
Description of risk
The valuation of the Departmental Group’s owned and leasehold land and buildings as at 31 March 2025 is £6,587 million (£6,668 million 31 March 2024). Financial details of these properties held on the Departmental group’s statement of financial position detailed and in notes 6 and 7.
Under the HM Treasury’s Government Financial Reporting Manual, the Departmental Group financial statements recognise owned and leasehold property at its current value. As such, property used as part of the Departmental Group’s operations should be valued at current value in existing use at each reporting date. The Departmental Group’s accounting policy is to complete full valuations every five years, supplemented by indexation or other forms of desktop valuation in intervening years.
For the purposes of my audit, I considered that there is, in aggregate, a significant risk over the consolidation of property (including right of use assets) and related balances. Given the specialist nature of the properties (for instance historical properties and museums and galleries) significant judgement is required in the valuation of these properties. In most cases, we have relied on the audit work of component auditors to provide assurance over these balances.
In their own financial statements, the BBC recognise property at historic cost under IFRS. For the Group financial statements adjustments are required for these BBC properties to be recognised at current value in existing use (either a market value approach or depreciated replacement cost for specialised property).
I have not used the work of component auditors over the valuation of BBC properties including Land and building right of use asets. I audited the valuation of BBC properties as part of this engagement.
The large range and value of BBC owned and leased land and buildings increases the risk of material misstatement due to:
- potentially inappropriate assumptions and methodology used to value the properties, for example the estimated future rental potential;
- potentially inaccurate data used in the calculation of property valuations, for example internal floor areas;
- potential errors in the model used to calculate the value of property; and the disclosure of estimation uncertainty within property valuations not being sufficient or accurate.
Key observations
In the course of completing this work, I identified a misstatement in the Department’s accounting for a sale and leaseback transaction, which led to a material audit adjustment.
Valuation of BBC public corporations – Departmental Group
Description of risk
BBC Commercial Limited’s direct subsidiaries have been classified by the ONS as public corporations and are not therefore members of the DCMS group. In accordance with the Government Financial Reporting Manual the public corporations are accounted for in the Departmental Group accounts as a financial asset recognised at fair value. Management estimate the fair value of their investment in these public corporations by discounting forecast cashflows to the statement of financial position date. The valuation of the ‘Investment in BBC public corporations’ financial asset in the Departmental Group financial statements is £2,302 million as at 31 March 2025 (£2,702 million as at 31 March 2024).
This is an area of significant risk as management are required to make significant judgements in respect of the assumptions to inform future expected cash flows, data inputted for current business and economic developments and the methodology used to calculate an estimated fair value.
Key observations
I have obtained sufficient assurance over this key audit matter through my substantive testing. I did not identify significant misstatements in the department’s valuation of the BBC’s public corporations as a result of the work I have performed.
Application of materiality
Departmental Group
Materiality: £85.5 million (2023-24 £85 million)
Basis for determining overall account materiality: 1% of prior year’s total operating expenditure of £8.6 billion
Rationale for the benchmark applied: I have identified gross expenditure as the appropriate benchmark. As well as the BBC’s broadcasting and media operations, the Departmental Group’s main activities include the preservation of culture and heritage of the nation and encouraging participation in arts and sports through grant expenditure. Expenditure on performing these functions across its sectors is of relatively high interest to the users of the accounts and it is voted on by Parliament through the supply process.
I also considered whether gross assets should be used as a materiality basis, particularly given the Departmental Group’s focus on preserving heritage, including the land and buildings and other heritage assets included in the Departmental Group financial statements. However, many Departmental Group assets are heritage assets valued either at historic cost or nil value (by agreed accounting convention). Therefore, the asset valuations included in the Departmental Group financial statements are unlikely to reflect all of the intrinsic value users place on such assets (such as accessibility to the public) and the government’s strategy for managing these assets is not primarily informed by the valuations included in the Departmental Group financial statement.
Department – core
Materiality: £58 million (2023-24 £58 million)
Basis for determining overall account materiality: 1% of prior year’s total operating expenditure of £5.8 billion
Rationale for the benchmark applied: I have identified gross expenditure as the appropriate benchmark. As well as determining policy across its sectors, the main function of the core Department is to govern and oversee the delivery and outcomes of its arm’s-length bodies within the Departmental Group.
The Department issued £5.6 billion Grant-in-aid (GiA) in 2024-25 (£5.3 billion in 2023- 24) to ALBs, which drives the activities of the rest of the Departmental Group. GIA is 89% of the core Department’s operating expenditure. Expenditure on performing these functions is of most interest to the users of the accounts.
I also considered gross assets as a materiality basis for the Department but, as for the Departmental group, I concluded that asset valuations included in the Department’s financial statements are unlikely to reflect the full intrinsic value of the assets to the users of the accounts.
