The Department for Education (DfE) 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 DfE’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 its net expenditure for the year then ended; and
  • have been properly prepared in accordance with the Government Resources and Accounts Act 2000 and HMT 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

Valuation of the Student Loan Book including data inputs

Description of risk

The English Student Loan Book is a highly material estimate within the Department’s accounts. The student loans valuation is derived from an intricate statistical model and relies on significant management judgements, interventions, data inputs and assumptions that are individually complex or subjective. Small changes in assumptions can lead to material changes in the estimate.

This risk is only relevant to the parent Department, which accounts for the loan book in its entirety. The data inputs into the student loan book (processed and administered by SLC have also been classified a significant risk, which is captured within my consideration of the valuation of the student loan book. As at 31 March 2025, the loan book comprises £265 billion of issued loans, valued at £158 billion in the accounts. The carrying value is made up of £151 billion of higher education loans (Plans 1, 2 and 5), £6 billion postgraduate loans (Plan 3) and £935 million further education loans (Plans 2 and 5).

The valuation model itself requires a significant forward-look at many key areas of the UK economy. The model must account for macroeconomic assumptions which are expected to incorporate key factors affected by the UK economy such as inflation, employment and earnings of the loan book population, and the Bank of England baserate, and these are projected up to 2072 in many cases. The model is therefore not overly sensitive to short-term trends given the longevity of the repayments window.

The valuation model and the data inputs, including assumptions, into the model are considered a key audit matter as the valuation is highly material, highly judgemental and is a complex estimate.

Key observations

I performed extensive work on the key loan model pipelines and am content that the method used is appropriate, that the estimated valuation of the loan book is in line with the model 196 DfE Consolidated Annual Report and Accounts 2024-25 Return to Contents and its outputs, that the model data inputs are appropriate and complete and the key assumptions are appropriate.

I concluded that the valuation models are operating as expected and that this represents a reliable estimate of the valuation of the loan book in line with IFRS 9 as interpreted and adapted by FReM. I concluded my testing on new loans issued and the loans repaid in year.

The result of my work was satisfactory. However, I draw attention to the disclosures made in note 1.3.2-1.3.5 and note 14 concerning critical accounting judgements and key sources of estimation uncertainty relating to the valuation of student loans. As set out in these disclosures there is a high degree of inherent estimation uncertainty in the loan valuation, as repayments are highly dependent on macroeconomic circumstances over the long-term. Significant changes to the valuation could occur as a result of the subsequent information and events which are different from the current assumptions adopted by the Department.

Regularity of Loans and Grants

Description of risk

I identified the risk of irregularity of grants and loans across the Departmental Group as a significant risk and key audit matter. Significant numbers and values of grants and grant-like loans (ie student loans) are issued by entities within the Departmental Group. The Department issued £20.7 billion in student loans and paid out £88.3 billion in resource grants and £5.5 billion in capital grants in the current year. Grant expenditure is inherently riskier with respect to regularity than other types of expenditure incurred by the Departmental Group. This is mainly because the benefit of the underlying goods/services is received by a party other than the Department, so it is more difficult for the Department to determine if the benefit has been delivered in those circumstances where the primary legislation requires it to do so. This risk also encompasses the accuracy of formula-driven grant allocations and the validity of underlying data used to produce them where this data is provided by the recipient themselves.

My prior year estimates of aggregate grant irregularity across the Departmental Group have not been material. However, a consistent issue was identified in previous years where I noted a significant value of grant spend where assurance was limited. These were grants that were exposed to some risk of irregularity, though they varied in value and by grant stream year-on-year. In the current year, this has remained the case, with some newer grant streams being more difficult to assure as regular, as well as having irregularity associated with some existing grant streams. The total irregularity this year was also not material, although I continued to identify some sizable irregularity associated with the Department’s grants.

The risk also includes the risk of fraud and error in the student loan population, which is tested as part of the loan book audit but also forms part of our overall assessment of regularity of loans.

I assessed that there are continuing financial pressures in the education sector, which may incentivise people to claim additional funding inappropriately. There are several new grant streams in year, including £2,027 million new early years entitlement, £1,188 million new core budget grants, £1,067 million teacher pension contribution grants, £173 million for wraparound programme, £278 million for supporting families, £86 million for Advanced British Standard – schools and £46 million for targeted retention incentives. As noted, assurance over new grant streams can have an elevated risk as new assessment procedures are put into place which may not be operating effectively throughout the year, or which are required at speed to address an issue in the current year.

This risk is group-wide, with key contributors being the Department itself and its £15 billion of grants, ESFA and its assessment of £79 billion of grants, and OfS. Student loans are also administered by the SLC as a service organisation for the Department.

Key observations

As a result of my testing, I identified irregular grant spend in several areas. Within the core Department, I identified estimated irregular grant spend of £61 million relating to various grant streams. I also identified an estimated £588 million of irregular spend within ESFA and £63 million of known irregular spend.

Separately, I identified an estimated £327 million of irregular student loans issued.

Budgetary pressures

Description of risk

I identified a risk relating to the Department being at risk of breaching HM Treasury-imposed budgetary control totals on specific ring-fenced expenditure within the Resource Departmental Expenditure Limit (RDEL). The ring-fences are not voted Parliamentary control totals reported in the Statement of Outturn against Parliamentary Supply or included within the Supply Estimates. However, they form a vital part of the HM Treasury (HMT) spending control framework. A breach of a ring-fence is a breach of an HMT control and therefore irregular. ln early 2025, the Department itself had identified the risk that it would breach the policy ring fences and was engaging with HMT to identify ways in which it could regularise the position. As the external auditor, I recognised the risk of irregular expenditure arising from a breach of HMT budgetary control totals, and I also identified the risk that management was in a unique position to manipulate the budgetary classification and recognition of transactions to achieve a more favourable outcome, and if possible, avoid breaching these HMT budgetary controls.

Finally, I identified a corresponding risk that the policy ringfences in place would restrict the Department’s authority to make virements between sections and subheads of its Estimate, such that it would exceed the provision in its estimate at section or subhead level.

Key observations

My testing of journals and cut-off and completeness of expenditure did not identify any deliberate manipulation of the budgetary classification and recognition of expenditure.

The Department obtained approval from the Chief Secretary of the Treasury (CST) for the relaxation of the policy ringfenced expenditure within RDEL, thereby removing the risk of breaching the policy ringfenced expenditure controls.

The Department also sought CST approval forthe relaxation of the depreciation ringfence, but this was rejected. The Department has exceeded HMT’s budgetary control total in respect of RDEL excluding depreciation by £590,000.

I consider the overspend on RDEL excluding depreciation to be irregular. I have assessed that the irregularity is not material, primarily due to the value of expenditure in breach, but in making my assessment I have also noted that RDEL excluding appreciation is a key control within HM Treasury’s spending control framework.

Application of materiality

Departmental Group

Materiality: £925 million

Basis for determining overall account materiality: 0.95% of grossed up P8 expenditure of £97 billion (£90 billion in 2023-24) excluding the expenditure impact of student loans as this is highly volatile. Materiality was not updated for the final outturn figures.

Rationale for the benchmark applied: I have identified gross expenditure as the appropriate benchmark, given it is likely to be the key focus for users of the account. The Departmental Group’s main activities are to provide education services, which it does mainly through grant expenditure, which makes up the majority of gross expenditure. I also assessed other benchmarks, and noted that net assets or profit, as is used by auditors in the private sector, are not appropriate for a major Department of State, particularly one with no profit.

I excluded the fair value movement of student loans from the gross expenditure figure as it is a volatile figure and holding the loan book is not the main driver in determining the Department’s activity.

I have not sought to use an alternative benchmark for the student loan book, or for grant regularity. The grant regularity consideration is the same as the expenditure and therefore is deemed sufficient.

Department parent

Materiality: £921 million

Basis for determining overall account materiality: 0.95% of grossed up P8 expenditure of £97 billion (£90 billion in 2023-24) excluding the expenditure impact of student loans as this is highly volatile. Materiality was not updated for the final outturn figures.

Rationale for the benchmark applied: The Department materiality benchmark has the same rationale as the Departmental Group as the majority of the Group’s spend is within the Department and its executive agencies.

Department for Education Annual Report and Accounts 2024-25

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