Ministry of Defence 2013-14 accounts

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Amyas Morse, the Comptroller and Auditor General (C&AG), has qualified his audit opinion on the MOD’s 2013-14 accounts.

Accounting for lease-type arrangements
The C&AG has qualified his opinion for the fifth year because the Department has not complied with the accounting requirement under the International Financial Reporting Standards (IFRS) for determining whether a contract contains a lease (the kind of contract which provides the Department with exclusive or near-exclusive use of assets and capability). The C&AG has noted that the Department has made some progress in quantifying the impact of non-application of this Standard. The Department’s review confirms that the omission is material to the financial statements.

Military equipment
The MOD has provided a materially correct valuation of military equipment in the form of inventory and capital spares (at 31 March 2014). In response to previous NAO reports, the Department has implemented a systematic impairment review process and exercised greater control over its inventory and capital spares equipment.

Amyas Morse, head of the National Audit Office, said today:
“The Ministry of Defence has made significant improvements in its management of and accounting for assets held on its inventory systems. Consequently, this is the first time since the end of March 2008 that the Department has had an unqualified audit opinion on its inventory and capital spares holdings.
“However, the Department recognizes that it still faces significant challenges. In particular it remains constrained by aging legacy warehouse and inventory systems which necessitate a high level of manual intervention to ensure data integrity.”
Notes for Editors

Impairment is a downward revision of the value of assets.
The C&AG has also qualified his opinion in respect of the 2012-13 comparative balances arising from the accounting treatment applied to the impairment of the value of the Germany Estate; and of the inventory balances and charges which were subject to qualification by the C&AG in 2012-13.

A technical qualification of the value of impairment charged in the year has arisen owing to the absence of a suitable opening balance, which is a consequence of the C&AG’s qualification of the balance in 2012-13, and a lack of evidence to attribute the impairment charge genuinely arising from activity in year.

Press notices and reports are available from the date of publication on the NAO website, which is at
The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Amyas Morse, is an Officer of the House of Commons and leads the NAO, which employs some 820 employees. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of £1.1 billion in 2013.

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