NAO refuses to sign off MoD accounts for sixth year

7 December 2012

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7 December 2012 | Adam Leach

The National Audit Office (NAO) has refused to verify the Ministry of Defence's (MoD) annual accounts for the sixth year running over accounting, stock-taking and remuneration errors.

A spokesman for the NAO told SM that each year, a minority of departmental annual accounts are not signed off, but that for it to happen six years in a row was “uncommon”.

The independent auditing body, which verifies the annual accounts of all government departments, took the decision because it said the MoD had failed to provide sufficient evidence to support its £10 billion valuation of spare parts and inventory. Further, it failed to follow the required accounting procedures with regard to recording leased equipment. In addition, it also failed to receive sign off from the Treasury for paying Bernard Gray, chief of defence materiel, more than the prime minister, the NAO said.

Amyas Morse, head of the NAO, said the MoD was not able, “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.” 

Despite this, the watchdog said the ministry had made progress and improved the way it keeps track of its inventory. The reported referenced actions, such as “focusing efforts towards higher value warehouses and inventory items”, “initiating an additional programme of location checks” and “new IT solutions” as steps in the right direction. As a result, Morse removed a previous limitation regarding the valuation of its stock BOWMAN radios because the department was able to provide sufficient information.

An MOD spokesperson, said: "This is a problem inherited from the previous administration and the NAO has acknowledged our continued progress in improving the management of our 1.2m lines of stocks and supplies which expected to be resolved by a new inventory system that is due to be completed by 2015. Work is in hand to remedy the second qualification, which relates to technical accounting requirements for contracts that may include a lease. As we have said in previous years, this is deep rooted problem that will take time to fix.".

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