Recommendation 2

It is completely unacceptable that the Department failed to maintain accounting records to support more than £6 billion of assets included in its 2024–25 Annual Report and Accounts. The Comptroller and Auditor General concluded that the Department’s 2024–25 accounts did not provide a true and fair representation of its financial position. This was because the Department had misclassified historic expenditure by the Atomic Weapons Establishment (AWE), some of which dated back to 2007, as spending that had resulted in it developing infrastructure. The issue arose because the Department did not accurately reflect the costs of AWE’s asset management 3 programmes on its own balance sheet. About 85% of the overstatement was due to early-stage feasibility work being capitalised, and the Department is likely to write off some of those costs. The Department has identified control weaknesses in its processes which it needed to put right. However, the Department’s repeated emphasis on the complexity and scale of its spending only highlights the importance of it having effective controls and processes in place across all its activities, which it tests regularly to ensure they continue to fulfil their purpose. The Department should set out: a. What additional checks and processes it has put in place so that the Accounting Officer was assured that all balances reported in the 2025–26 financial statements presented to the National Audit Office for audit were supported by appropriate accounting records and complied with accounting policies. b. How it will ensure that its checks and assurance processes continue to work as intended in future years. c. In writing to the Committee, how much of the costs it has written off, as soon as it has agreed the amount.