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Report of the Comptroller and Auditor General on the 2010-11 Annual Accounts of the Ministry of Defence
Amyas Morse, the Comptroller and Auditor General today qualified his audit opinion on the 2010-11 accounts of the Ministry of Defence owing to material error arising from adopting accounting policies which do not fully comply with International Financial Reporting Standards. He has also limited the scope of his audit opinion on the grounds of inadequacy of evidence to support the accounting for certain expenditure and balances in the financial statements. In his follow up to previous recommendations he highlights progress made in several areas which had been subject to previous qualifications.
The audit opinion has been qualified for the second year following the implementation of International Financial Reporting Standards because the Department has not complied with the accounting requirements for determining whether a contract contains a lease. The Department has therefore omitted a material value of assets and liabilities from its Statement of Financial Position. The Comptroller and Auditor General cannot quantify the impact of this on the accounts with certainty because, as a result of its accounting policies, the Department has not maintained the records, or obtained the information required.
The C&AG has also limited the scope of his audit opinion on the grounds of the inability of the Department to provide sufficient evidence to support the accounting for military equipment in the form of BOWMAN radios (£0.1 billion); certain inventory and capital spares (£5.2 billion); and a further, unquantifiable amount of inventory and capital spares where the associated asset platforms have been taken out of service, and for which inadequate assessment of impairment has been made.
Improvements in the Department’s asset verification processes mean the C&AG has not had to limit the scope of his audit opinion in respect of certain grouped military equipment assets worth £0.6bn. These assets were subject to a scope limitation in the 2008-09 and 2009-10 accounts.
Amyas Morse, head of the National Audit Office, said today:
"The Ministry of Defence has made some welcome progress in improving asset verification exercises. However, the Department is still not able to provide enough evidence to support the accounting for over £5.3 billion worth of military equipment, and it has also failed to follow proper accounting requirements with regards to leases for the second year running. Therefore, I am qualifying my audit opinion."
Notes for Editors
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The audit found that of the 50,893 BOWMAN radio sets recorded on the system (an increase of 5,961 on 2009-10), the Department could only provide supporting evidence in the form of serial numbers and location data for 37,645. The C&AG has been able to review evidence to support a further 9,155 but the Department was unable to provide any suitable evidence to support the existence of 4,093 radios.
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In addition to the improvements in asset verification processes, the C&AG has also noted improvement in respect of the accounting for income from food and accommodation charges and the reporting of the numbers of personnel to be retained by the Armed Forces (Votes A) which were subject to a scope limitation in 2009-10.
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Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained from The Stationery Office on 0845 702 3474.
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The Comptroller and Auditor General, Amyas Morse, is the head of the National Audit Office which employs some 880 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.
Press Notice 48/11
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