MOD accounts qualified

The National Audit Office (NAO) has refused to sign off the financial accounts of the Ministry of Defence (MoD) for the third year running.

Amyas Morse, the NAO’s comptroller and auditor general, said that while the MoD had “improved its recording of the equipment and supplies it holds in its warehouse and stock systems”, it had not furnished the auditors with enough evidence to back up its valuation of military equipment in the form of inventory worth £3bn and capital spares worth £7bn.

An in another area of concern, the department said it had not yet obtained the necessary approvals for the remuneration package of the MoD’s chief of defence materiel.

Morse has also qualified his audit opinion because the MoD has not complied with the accounting requirements introduced under International Financial Reporting Standards, for determining whether a contract contains a lease.

Because of this the NAO, which verifies the annual accounts of all government departments, has – for the third consecutive year - omitted a material value of assets and liabilities from its Statement of Financial Position. The impact of this, the NAO reports, is that it cannot quantify the effect on the accounts with any certainty because, “as a result of its accounting policies, the MoD has not maintained the records, or obtained the information required”.

Amyas Morse, NAO chief, said:

‘The Ministry of Defence has made welcome progress in improving the way it keeps track of its inventory and capital spares. It is still not able, however, to provide enough evidence to meet the accounting requirements for its valuation of over £10 billion worth of military equipment.’

‘It has again not followed proper accounting requirements with regards to leases. Therefore, I am qualifying my audit opinion.’

The watchdog reported that it had removed a previous limitation regarding the value of BOWMAN radio equipment because the MoD has now provided the right level of information.