Source · Select Committees · Public Accounts Committee
Recommendation 2
2
Accepted
Qualified accounts are a persistent feature of government’s financial reporting and may indicate underlying weaknesses...
Recommendation
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.
Government response summary AI-generated
The government agreed to increase support for departments with qualified accounts through updated guidance, training, technical support, and forums. It committed to writing to all qualified bodies regarding their 2025-26 accounts and providing an update to the Committee by November 2027.
Summary of the government's response below — read the verbatim text to verify.
Government Response
Accepted
HM Government · verbatim extract
Accepted
The government agrees with the Committee’s recommendation departmental or other organisation’s accounts, and what they may indicate about the operation of financial controls in these bodies. In the 2024-25 financial year, the NAO issued two disclaimed opinions, six true and fair qualifications, and nine regularity opinions. Some of these qualifications relate to known issues, such as the challenges of providing estimates and sufficient audit evidence for compensations schemes which was highlighted in the NAO’s report. Other qualifications are long-standing, such as those relating to fraud and error in DWP and HMRC. Both organisations are making significant efforts to reduce instances of fraud and error, and work with the NAO to ensure a cost-effective control environment. HM Treasury and the Government Finance Function will continue to take action to support the quality of financial reporting across government, including through updated guidance, training, technical support and forums for sharing learning and good practice. The Technical Accounting Centre of Excellence drives improvements across the technical accounting landscape within the Government Finance Function. Performance will be monitored by the Finance Foundations Group, the senior leadership forum accountable for driving excellence across all finance foundations. The Treasury will write to all central government bodies that receive qualifications for their 2025-26 accounts to understand whether the qualification is expected to remain in 2026- 27 and what actions are being taken to resolve underlying issues. There will likely be some bodies who receive qualifications after the pre-recess reporting deadline. The Treasury therefore proposes to write to the Committee with an update by 30th November 2027, once the 2026-27 cycle is complete.