Recommendation 2

Qualified accounts are a persistent feature of government’s financial reporting and may indicate underlying weaknesses in the financial controls of some bodies. There were 14 government bodies with qualified accounts in 2024–25. Moreover, there are bodies such as the Department of Work & Pensions and HM Revenue and Customs where ongoing qualifications due to material levels of fraud and error have persisted for 36 and 20 years respectively. We are not at all persuaded that such high levels of fraud and error can or should be regarded as inherent features of these organisations’ systems. Excluding the state pension, overpayments due to fraud and error in the most recent DWP accounts were £9.3 billion or 6.2% which is why these accounts have been qualified for 36 years. This enormous figure has been accepted for far too long and action led by the Treasury should be taken to reduce it. The recent positive example of the 3 Environment Agency shows that, with sustained commitment of time and resources, it is entirely possible to move from repeatedly qualified accounts to a clean audit opinion. The Agency reports numerous additional benefits from improving the financial management of its assets, such as being able to better estimate levels of needed capital investment and forecasting risk of failure. recommendation HM Treasury and the Government Finance Function should increase support for departments or organisations with qualified accounts. It should write to the Committee in a year’s time evaluating the success of these actions.