The Ministry of Justice (MoJ) 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 the MoJ’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
Valuation of property
Description of risk
The group owns significant property valued at £13.2 billion (2023-24: £12.8 billion). This includes the prison and probation estate valued at £9.5 billion (2023-24: £9.1 billion) and courts estate valued at £3.6 billion (2023-24: £3.6 billion). 92% the group’s estate is considered specialised and is valued on a depreciated replacement cost basis.
The valuation of this property requires significant judgement and estimation by management and its external valuers, the Valuation Office Agency (VOA). Inaccuracies in inputs or unreasonable assumptions used in these valuations (namely in respect of determining the modern equivalent asset; the level of obsolescence and the gross internal area) could result in a material misstatement of the financial statements.
Key observations
I consider the inputs, assumptions and methods used by the department to value the property estate to be appropriate. I did not identify material misstatements as a result of the work I have performed. the work I have performed.
Assets under construction
Description of risk
Assets under construction are material to departmental group. Across the group during the year, there were additions of £1.3 billion (2023‑24: £1.2 billion); transfers to live assets of £1.2 billion (2023-24: £0.98 billion) and a year-end balance of unfinished projects valued at £2.1 billion (2023‑24: £2 billion).
There is a risk that spending on these projects does not meet the recognition criteria of the accounting standards. There is also a risk that projects classified in under construction at year-end have gone live and therefore require valuation at depreciated replacement cost rather than at cost, which generally leads to differences in carrying value. This was an area where we found errors in the prior year.
Key observations
I have obtained sufficient assurance over this risk through my substantive testing. I did not identify material misstatements as a result of the work I have performed.
Legal Aid Agency: Valuation of net receivables
Description of risk
The Legal Aid Agency (LAA) recognises receivables for contributions towards legal aid costs and overpayments to legal aid providers, with gross receivables of £411 million (2023-24: £420 million). LAA does not expect to recover all of these and has recognised an impairment of £255 million (2023-24: £247 million) to reflect this. There are two categories of these receivables:
- Receivables held at amortised cost are debts owed to LAA by providers and funded clients and recovery of costs and damages. Impairment for these amounted to £217 million (2023-24: £210 million against gross debt of £283 million (2023-24: £287 million). Assumptions are made within the models used to calculate the value of impairment and there is significant estimation uncertainty in the recoverability of these debts.
- Receivables held at fair value through profit and loss are debts owed to LAA by funded clients on civil schemes that are secured by a charge against a property. The calculation of the fair value of these receivables is based on unobservable inputs, which results in significant estimation uncertainty. Gross debt was £128 million (2023-24: £132 million) and the impairment was £38 million (2023‑24: £37 million).
Key observations
I have obtained sufficient assurance over this risk through my testing of the impairment models, data inputs and assumptions. I did not identify material misstatements as a result of the work I have performed.
Legal Aid Agency: work in progress provision
Description of risk
The provision for unbilled work completed by legal aid providers is highly material to the financial statements at £1.01 billion (2023-24: £936 million). This liability is calculated based on different models for each legal aid stream. The underlying models and methodology used for these provisions are complex and based on assumptions about the operation of the legal aid market and courts. These provisions have a high degree of estimation uncertainty, with a range of reasonable outcomes greater than my materiality for the financial statements.
The financial statements (Note 20) disclose the sensitivity estimated by the group.
Key observations
I have obtained sufficient assurance over this risk through my testing of the models, data inputs and assumptions. I did not identify material misstatements as a result of the work I have performed.
Legal Aid Agency: cyber security incident
Description of risk
In April 2025, the Legal Aid Agency identified a cyber-attack affecting its online digital services. Subsequent investigation revealed that the attack originated in December 2024, within the 2024–25 financial year.
The attackers accessed systems used to process payments to Legal Aid providers. As a result, I assessed a risk that fraudulent claims may have been submitted and paid during the period of compromise.
Additionally, several material balances and transactions in the departmental group financial statements rely on data extracted from the affected systems. These include:
- Work-in-progress provisions;
- Receivables for contributions towards legal aid costs and overpayments to providers; and
- Payments on account to legal aid providers. I considered there was a risk that the underlying data used to derive these balances may have been manipulated during the cyber-attack, potentially resulting in material misstatement in the financial statements.
Key observations
I have obtained sufficient assurance over this risk through my testing. I did not identify material misstatements as a result of the work I have performed.
Criminal injury tariff scheme provision
Description of risk
The group recognises a provision of £365 million (2023-24: £250 million) for compensation claims under the 2012 Criminal Injuries Compensation scheme. The provision includes all cases known and received by the group but have not yet been processed through to award. To determine the expected level of award; management use historic case data and overlay assumptions around how future cases will be resolve different compared to historic cases.
Due to the complexity of the model; the high levels of estimation uncertainty; and a trend of increasing caseload and increasing average case values, I consider the valuation of the provision could result in material misstatement in the group financial statements.
Key observations
I have obtained sufficient assurance over this risk through my substantive testing. I did not identify material misstatements as a result of the work I have performed.
Valuation of lease liabilities
Description of risk
The group holds £1.49 billion (2023-24: £1.66 billion) of lease liabilities across a broad portfolio of assets, mostly in the court estate alongside related right of use assets of £1.17 billion (2023‑24: £1.33 billion). The lease liabilities are subject to valuation risk because they are dependent on assumptions, for example whether management may exercise a break clause or how management has estimated the term of leases where the contract has expired. These assumptions change depending on the group’s strategy for its property and require reassessment each year. Given that changes in these assumptions can have a material impact on the accounts, I have identified the value of lease liabilities as a key audit matter.
During 2024-25, the group transitioned from managing the lease portfolio on spreadsheets to using an off the shelf lease accounting software.
Key observations
I have obtained sufficient assurance over this risk through my substantive testing. I did not identify material misstatements as a result of the work I have performed.
Valuation of defined benefit pension net asset/liability
Description of risk
The departmental group has material gross defined benefit pension liabilities including HMPPS’s share of the Greater Manchester Pension Fund (GMPF) of £4.2 billion (2023-24: £4.8 billion); and Cafcass’s share of the West Yorkshire Pension Fund (WYPF) of £614 million (2023-24: £706 million). The net liability of HMPPS’s share of GMPF is £472 million (2023-24: £529 million); and Cafcass’s share of WYPF is £17.4 million (2023-24: £2 million). These net balances are derived from highly material asset and liability balances as set out in Note 25.
Significant estimates are made in determining the key assumptions used in valuing the group’s gross defined benefit pension scheme obligations. When making these assumptions management take independent actuarial advice relating to their appropriateness.
A small change in assumptions and estimates can have a material financial impact on the group’s gross defined benefit pension obligations.
The most significant assumptions are discount rate, inflation rate and mortality/life expectancy. As part of my risk assessment, I determined that the gross defined benefit pension scheme obligations have a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than my materiality for the financial statements, which is why I considered it a key audit matter.
In addition to the pension obligations, the departmental group has rights over a £6.9 billion (2023-24: £6.7 billion) of investment assets. 30% or £2.1 billion of these assets are hard to value, where assumptions and judgments are required when determining their fair value. The remaining elements of the asset balances are easier to value. However, given the overall value of the assets, the level of error identified in prior years in initial data received from the pension funds and the element of hard to value assets, I consider pension asset valuation to be a key audit matter.
Key observations
I have obtained sufficient assurance over this risk through my substantive testing. I did not identify material misstatements in the valuation of defined benefit pension net liability as a result of the work I have performed.as a result of the work I have performed.
Application of materiality
Departmental group
Materiality: £170 million (2023-24: £170 million)
Basis for determining overall account materiality: 1% of non‑current assets (2023‑24: 1% of non-current assets)
Rationale for the benchmark applied: Non-current assets are the largest item in both the departmental group and parent Statements of Financial Position.
Significant public benefit is derived from the prison and courts estate, driving user interest in the extent and condition of those assets.
Taxpayer backed financial activity where an additional level of materiality has been applied: £135 million (2023-24: £135 million)
Basis for determining residual account materiality: 1% of gross expenditure excluding depreciation and impairment but including capital additions. (2023-24:1% of gross expenditure excluding depreciation and impairment but including capital additions)
Rationale for the benchmark applied: This threshold is set to reflect the sensitivity of financial statement users to transactions and balances reflecting taxpayer-backed financial activity. Capital additions are included since these form part of Total Managed Expenditure voted by Parliament, and depreciation is excluded to avoid double-counting.
Department parent
Materiality: £136 million (2023-24: £165 million)
Basis for determining overall account materiality: 0.8% of non‑current assets (2023-24: 1% of non-current assets)
Rationale for the benchmark applied: Non-current assets are the largest item in both the departmental group and parent Statements of Financial Position.
Significant public benefit is derived from the prison and courts estate, driving user interest in the extent and condition of those assets.
Taxpayer backed financial activity where an additional level of materiality has been applied: £108m (2023-24: £130 million)
Basis for determining residual account materiality: 0.8% of gross expenditure excluding depreciation and impairment but including capital additions. (2023-24:1% of gross expenditure excluding depreciation and impairment but including capital additions)
Rationale for the benchmark applied: This threshold is set to reflect the sensitivity of financial statement users to transactions and balances reflecting taxpayer-backed financial activity. Capital additions are included since these form part of Total Managed Expenditure voted by Parliament, and depreciation is excluded to avoid double-counting.
