The Foreign, Commonwealth & Development Office Accounts (FCDO) 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 FCDO’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
Valuation of financial guarantees
Description of risk
The department commonly enters into financial guarantees with third parties on non-commercial terms, where there is no active market or observable equivalent. The fair value of these guarantees is highly material to the financial statements at £1,094 million (2023-24: £722.9 million), and new guarantees have been issued in the 2024-25 financial year. There is a significant level of judgement required from management in determining the initial and subsequent measurement of these liabilities under the financial reporting framework which requires a lifetime expected credit loss valuation where the above criteria are met. These judgements relate to the complexities of the input data and assumptions used in measuring these liabilities due to changing global markets which make the modelling of the expected credit loss challenging. The department employs the Government Actuary’s Department as a management expert to design a model to measure lifetime expected credit losses.
Key observations
No material errors have been identified in relation to the valuation of financial guarantees.
Valuation and impairment of property
Description of risk
The valuation of the FCDO’s property is material to the financial statements, being £2,589 million as at 31 March 2025 (2023/24 £2,582m). The valuation of the department’s property involves significant judgement by management supported by their external property valuers (Colliers International and Knight Frank) who prepare the valuations. There is added complexity to the valuations as the properties are located around the world, involving different property markets and currencies. The valuation date is 30 September, increasing the risk of movements between the valuation date and the 31 March year-end, including the impact of foreign currency movements.
Key observations
No material errors have been identified in relation to the valuation of property.
Valuation of financial investments – British International Investment and International Financial Institutions
Description of risk
The department holds a number of equity investments. These include various minority holdings in International Financial Institutions (IFIs), as well as 100% ownership of British International Investment (BII) where inputs are unobservable. The values are highly material to the accounts at £14,865 million at 31 March 2025 (2023-24: £13,773 million). These are not traded securities, and in the absence of available market data, the valuation of these equity investments is determined through calculating the department’s share of the net assets, based on the number of shares held by the department.
This valuation is made more complex by the fact that the entities have non-coterminous reporting dates to the department. Consequently, the department has little direct assurance over the value of its investments as at 31 March, and needs to apply considerable judgement to both recognise and mitigate the level of estimation uncertainty, recognising that material movements may occur between the date of the last audited investment valuation and the department’s year-end. The lack of direct assurance over the year-end values presents a risk that the data used in the estimation is inaccurate, or that the assumptions applied are inappropriate or include error. The risk is broadly consistent to prior years.
Key observations
No material errors have been identified in relation to the valuation of the department’s investment in International Financial Institutions and British International Investment.
Property lease liabilities and right of use assets
Description of risk
The FCDO holds leased properties worldwide where the contractual terms are correspondingly diverse, complex and subject to local laws. It has many smaller accommodation leases, but also larger leases for overseas offices and residences. It also has significant UK properties such as its office building at King Charles Street, London. The wide geographical spread of the department’s estate also provides a challenge to ensure that the population of leases is materially complete. Leases have a significant impact on the FCDO’s financial statements, with a lease liability balance of £658 million and a related right of use asset balance of £693 million reported on the Statement of Financial Position as at 31 March 2025 (excluding ground leases). Significant assumptions and judgements must be applied by management in calculating the liability and asset valuation of a total of over 3,300 leases. The most significant assumption is the identification of the lease term where options to extend or break the contracts are present.
Key observations
No material errors have been identified in relation to leases.
Application of materiality
Departmental group
Materiality: £111,915,000
Basis for determining [overall account] materiality: 1% of gross group expenditure of £11,192m (2023-24; £111,100,000 materiality on gross group expenditure of £11,110m)
Rationale for the benchmark applied: I have set materiality based on gross expenditure. I consider this to be of key interest to users of the accounts as expenditure is the means with which the department achieves it diplomatic, development and consular objectives. The same rationale applies to the departmental group.
Department parent
Materiality: £111,697,000
Basis for determining [overall account] materiality: 1% of gross parent expenditure of £11,170m (2023-24; £111,000,000 materiality on gross group expenditure of £11,100m)
Rationale for the benchmark applied: I have set materiality based on gross expenditure. I consider this to be of key interest to users of the accounts as expenditure is the means with which the department achieves it diplomatic, development and consular objectives. The same rationale applies to the departmental group.
Links to accounts
FCDO Annual Report and Accounts 2024-25
- C&AG’s audit certificate and report (pages 175 to 187)
