WIREDGOV

Amyas Morse, the Comptroller and Auditor General, has limited the scope of his audit opinion on the 2009-10 accounts of the Ministry of Defence, as he did for the MOD’s 2008-09 accounts, because the Department was unable to provide evidence to support the existence and value of certain assets and inventory balances.  He has also qualified his audit opinion because the Department’s accounting policies are not fully compliant with International Financial Reporting Standards.

In his report on the 2008-09 accounts of the MOD, the C&AG noted the challenges facing the Department in maintaining adequate records for certain spares, inventory and military equipment such as vehicles, grouped assets and BOWMAN radio equipment.

Following last year’s NAO report, the Department has taken steps to improve its management of spares, inventory and equipment.  The main areas of weakness on spares and inventory, that continue, relate to high levels of discrepancies in stock counts; inadequate assessment for impairment and an inability to reconcile warehouse system records with accounting systems.  These issues are more extensive than reported last year because the Department’s actions to address the prior year findings and the audit work of the C&AG’s staff have brought a wider range of issues to light.

Keeping track of equipment has improved for vehicles but is still inadequate for grouped assets and BOWMAN radio equipment.

In addition, the Department has not complied with the accounting requirements for determining whether a contract contains a lease and therefore a material value of assets and liabilities has been omitted from its financial statements.  The Department has told the NAO that the cost of reviewing all of its existing contracts to determine whether they contain leases would exceed the benefits of compliance.  While acknowledging work is getting underway, the NAO believes – as does the Department – that a serious and concerted effort should be made to become compliant.

Action has also been taken to address the issues identified last year of a lack of documentation and levels of error identified in the payment of allowances and expenses made via the Joint Personnel Administration system.  This has meant that the C&AG has been able to remove the qualification of his opinion in this area although his qualification on deductions from pay for food and accommodation continues.  There remains significant further work to be done to establish a robust control environment and ensure that processes are sound.

Amyas Morse, head of the National Audit Office, said today:

“Despite action by the Department to improve its asset management and accounting, the issues I have identified are systemic and deep-rooted.  The level of control exercised by the Department is not yet sufficient to enable me to provide an opinion on a significant proportion of assets reported in the financial statements.”

Notes for Editors

1. Press notices and reports are available from the date of publication on the NAO website, which is at http://www.nao.org.uk/.
2. The Comptroller and Auditor General, Amyas Morse, is the head of the National Audit Office which employs some 900 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.

Full report - Report of the Comptroller and Auditor General on the 2009-10 accounts of the Ministry of Defence