The Department for Science, Innovation and Technology (DSIT) 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 DSIT’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 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
UKRI Grant Profiling, Recognition and Regularity
Description of risk
Research grant expenditure is the most highly material expenditure stream within the Department’s group accounts. As disclosed in note 4.3 to the financial statements, UKRI spent £9,201 million in research grants in 2024–25 (2023–24 £8,470 million). Given the high level of grant funding paid out by UKRI to external organisations, any significant irregularity could have a potentially sizeable impact.
A significant portion of grant funding is paid to higher education institutes through the grant management system used by Research Councils that form part of UKRI. This expenditure is recorded based on the assumption that activity happens evenly across the life of grants (known as the ‘straight-line basis’). This key assumption contains inherent uncertainty, as underlying activity and spend may follow varying patterns across the population of grant recipients. More detail on the nature of this key assumption can be found in note 1.26.
I judged there was significant risk that funding may not be spent and utilised for the purposes agreed within funding arrangements. In relation to the portion of grant expenditure assumed by the Department to represent underlying spend being incurred on a straight-line basis, I assessed that there was significant risk that grant expenditure may be recognised in the incorrect reporting period.
Key observations
I noted no instances of irregularity.
My review of management’s assessment of the reasonableness of applying a straight-line recognition assumption did not identify any material misstatements.
Valuation of UKRI’s defined benefit pension scheme
Description of risk
The Departmental Group financial statements include assets and liabilities associated with the funded defined benefit pension scheme (the scheme) at the Medical Research Council, which is part of UKRI. The scheme is in a net surplus position of £895 million as at 31 March 2025 (note 17). This surplus includes the scheme’s gross assets of £2.001 billion less the scheme’s pension obligation liability of £1.106 billion.
The net pension surplus is a material balance and relies on valuations which are subject to high levels of estimation uncertainty. The scheme’s asset portfolio comprises un-quoted or harder to value assets of £1.2 billion. Such assets principally comprise property investments and private equity investments made through pooled investment vehicles. These assets are not traded in an active market and so a greater degree of judgement is applied in their valuation. The pension obligation is derived from actuarial valuations of the pension liabilities, which are based on significant assumptions subject to high levels of estimation uncertainty. Further detail about the scheme and its impact on the Department’s financial statements, including sensitivity disclosures for key assumptions, can be found in note 17.
I judged that there was a significant risk in the valuation of the harder to value assets held by the scheme, as well as in the material assumptions used to derive the pension liability. I particularly considered those areas of the asset valuation and pension obligation estimates which were subject to the highest level of uncertainty. These included those scheme assets where there is a greater degree of judgement applied in their valuation, and those assumptions where a reasonable variation can lead to a material impact on the scheme’s pension obligation. As part of the risk in this area, I also considered the sufficiency and accuracy of the Department’s disclosures on defined benefit pensions.
Key observations
In the course of completing this work, I did not identify any material misstatements in the valuation of the UKRI net defined benefit pension surplus.
Application of materiality
Departmental group
Materiality: £225 million
Basis for determining materiality: Approximately 1.5% of gross core department operating expenditure of £15,705 million.
Rationale for the benchmark applied: Expenditure is the most significant financial statements element for the Departmental group, since its main objectives are delivered through expenditure on science, innovation and research initiatives, particularly through grants from UKRI. I have set this level of materiality with reference to my expectations that key users will have a high level of interest in the disclosures relating to expenditure.
Particular classes of transactions, account balances and disclosures where an additional level of materiality has been applied: There are no particular classes of transactions, account balances and disclosures where an additional level of materiality has been applied
Department parent
Materiality: £200 million
Basis for determining materiality: Approximately 1.5% of gross core department operating expenditure of £14,250 million, capped at group materiality.
Rationale for the benchmark applied: Expenditure is the most significant financial statements element for the core department, since its main objectives are delivered through expenditure on science, innovation and research initiatives. I have set this level of materiality with reference to my expectations that key users will have a high level of interest in the disclosures relating to expenditure.
Particular classes of transactions, account balances and disclosures where an additional level of materiality has been applied: There are no particular classes of transactions, account balances and disclosures where an additional level of materiality has been applied
Links to accounts
DSIT annual report and accounts 2024-25
Audit certificate and report (pages 131-145)