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Report of the Comptroller and Auditor General on the 2011-12 Accounts of the Ministry of Defence

December 6, 2012, 4:16 pm

“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.”

Amyas Morse, head of the National Audit Office, 6 December 2012

Amyas Morse, the Comptroller and Auditor General, has again refused to sign off the financial accounts of the Ministry of Defence.

While the Department has improved its recording of the equipment and supplies it holds in its warehouse and stock systems, the C&AG has not been provided with sufficient evidence to support MOD’s valuation of military equipment in the form of inventory worth £3 billion and capital spares worth £7 billion.

The Department has not yet obtained the necessary approvals for the remuneration package of the Chief of Defence Materiel. Consequently, the C&AG has reported on the absence of this authorisation.

The C&AG has also qualified his audit opinion because the Department has not complied with the accounting requirements, introduced under International Financial Reporting Standards, 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 for the third year running. The C&AG 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.

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