Source · Select Committees · Public Accounts Committee
2nd Report - NAO financial audit insights 2024–25
Public Accounts Committee
HC 94
Published 22 May 2026
Recommendations & Conclusions
2
Recommendation
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 …
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Government Response Summary
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.
HM Treasury
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3
Recommendation
Accepted
We are concerned that the 17 departmental groups had to write off close to £7...
Recommendation
We are concerned that the 17 departmental groups had to write off close to £7 billion in total during 2024–25 for spending that did not achieve intended objectives. In addition to writing off £6.6 billion during 2024–25, the 17 departmental …
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Government Response Summary
The government accepted the recommendation to analyse the root causes of recent large reported losses across government to identify lessons for future investment decisions. The Treasury committed to leading this analysis and reporting back to the Committee by the end of 2026.
HM Treasury
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4
Recommendation
Accepted
Government bodies too often lack the necessary financial management skills to support digital transformation effectively.
Recommendation
Government bodies too often lack the necessary financial management skills to support digital transformation effectively. There are potentially huge gains to be had in government from successfully leveraging new technologies and digital opportunities, in terms of both better services for …
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Government Response Summary
The government agreed to the recommendation, outlining plans to include a dedicated financial management module in the Major Projects Leadership Academy by March/April 2027 and continuing efforts to strengthen finance capability through recruitment and risk management activities.
HM Treasury
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5
Recommendation
Accepted in Part
The money that government estimates it owes under various compensation schemes has risen in recent...
Recommendation
The money that government estimates it owes under various compensation schemes has risen in recent years, reaching £73.4 billion by the end of 2024–25, an £11.8 billion increase on the previous year. Annual payments from the government’s current largest ongoing …
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Government Response Summary
The government agreed to undertake an international review of compensation schemes focusing on design, funding, and delivery features. However, it explicitly stated that strict benchmarking of costs as a percentage of GDP would risk misleading conclusions, opting instead for appropriate comparisons of schemes' scope and costs.
HM Treasury
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1
Conclusion
Not Addressed
On the basis of a report by the Comptroller and Auditor General, we took evidence...
Conclusion
On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Treasury (HMT), the Government Finance Function (GFF) and the Environment Agency (the Agency).1
Government Response Summary
The government stated it agrees with the committee's introductory conclusion, then provided a detailed response outlining actions to improve financial reporting quality and timely account laying across central government, including guidance, training, and a commitment to update the Committee by November 2026.
HM Treasury
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6
Conclusion
There has been gradual improvement to reporting timescales since 2019–20, with nearly two-thirds of government...
Conclusion
There has been gradual improvement to reporting timescales since 2019–20, with nearly two-thirds of government bodies publishing their 2024–25 accounts by summer recess in 2025.12 The NAO report notes recent improvements were built on the provision of high-quality draft accounts …
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HM Treasury
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7
Conclusion
HMT told us that government bodies are legislatively required to publish their accounts by 31...
Conclusion
HMT told us that government bodies are legislatively required to publish their accounts by 31 January. While the vast majority meet this requirement, it aims for better than this by asking that accounts are published by summer recess. Eight of …
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HM Treasury
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8
Conclusion
HMT agreed there are considerable benefits to reporting by summer because this frees up finance...
Conclusion
HMT agreed there are considerable benefits to reporting by summer because this frees up finance teams to focus on more value-added and forward-looking activities in the autumn.16 HMT and the GFF told us they provide support for the annual accounts …
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HM Treasury
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9
Conclusion
The C&AG qualifies his audit opinion when material issues are identified in a body’s accounts...
Conclusion
The C&AG qualifies his audit opinion when material issues are identified in a body’s accounts that it cannot correct.20 The C&AG issued 17 qualified audit opinions across the accounts of 14 different government bodies for 2024–25.21 The most common reasons …
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HM Treasury
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10
Conclusion
We asked witnesses what they were doing to help organisations that regularly have their accounts...
Conclusion
We asked witnesses what they were doing to help organisations that regularly have their accounts qualified. The GFF noted that working with the finance community across government to remove qualifications is one of its key priorities and highlighted ongoing efforts …
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HM Treasury
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11
Conclusion
Over the period 2019–20 to 2023–24, the Environment Agency’s annual accounts were qualified five times...
Conclusion
Over the period 2019–20 to 2023–24, the Environment Agency’s annual accounts were qualified five times in succession because it could not accurately account for its flood management assets.27 However, the agency recently received a clean audit opinion for its 2024–25 …
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HM Treasury
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12
Conclusion
The agency told us there have been considerable additional benefits from improving management of its...
Conclusion
The agency told us there have been considerable additional benefits from improving management of its flood asset base. For example, it can now group assets together to better understand how they interact with each other, and more accurately forecast levels …
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HM Treasury
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13
Conclusion
The 17 main departmental groups reported more than 2.7 million losses in 2024–25 amounting to...
Conclusion
The 17 main departmental groups reported more than 2.7 million losses in 2024–25 amounting to £6.6 billion in total. The most significant reported losses related to cancelling or retiring assets, write-offs and debts no longer 24 Q 22 25 Q …
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HM Treasury
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14
Conclusion
The Ministry of Defence incurred a £1.6 billion loss in 2024–25 simply through cancelling projects.33...
Conclusion
The Ministry of Defence incurred a £1.6 billion loss in 2024–25 simply through cancelling projects.33 We challenged witnesses on whether it was acceptable that some bodies incur such huge public losses by halting projects after large sums have already been …
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HM Treasury
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15
Conclusion
Despite these large amounts, HMT noted that special payments and losses are areas of much...
Conclusion
Despite these large amounts, HMT noted that special payments and losses are areas of much greater transparency in the public sector compared to the private sector, due to more stringent reporting requirements. In contrast, private businesses only declare losses and …
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HM Treasury
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16
Conclusion
IT and digital infrastructure are integral to all government organisations.
Conclusion
IT and digital infrastructure are integral to all government organisations. The government has set out a long-term vision for digital public services, which aims for a fundamental shift in how it uses new technology.38 There are potentially huge gains that …
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HM Treasury
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17
Conclusion
However, while government generally manages business-as-usual IT changes and processes reasonably well, it often finds...
Conclusion
However, while government generally manages business-as-usual IT changes and processes reasonably well, it often finds major IT change or digital transformation more challenging, which can lead to serious and ongoing impacts for the running of an organisation.41 The NAO’s recent …
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HM Treasury
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18
Conclusion
We asked witnesses what they were doing to ensure that government’s investment in digital transformation...
Conclusion
We asked witnesses what they were doing to ensure that government’s investment in digital transformation programmes delivers its intended benefits. HMT accepted it was crucial for government to get better at leveraging AI and digital transformation. It highlighted there is …
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HM Treasury
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19
Conclusion
The GFF told us it is specifically increasing efforts around digital, data and change management...
Conclusion
The GFF told us it is specifically increasing efforts around digital, data and change management skills to support government’s digital transformation aims. It also highlighted work by the National Infrastructure and Service 38 C&AG’s report, para 3.13 39 C&AG’s report, …
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HM Treasury
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20
Conclusion
The largest ongoing compensation schemes currently administered by government have paid over £29 billion since...
Conclusion
The largest ongoing compensation schemes currently administered by government have paid over £29 billion since 2005 and annual payments from these schemes doubled from £2.5 billion in 2023–24 to £4.9 billion in 2024–25.45 Future liabilities from these schemes were £73.4 …
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HM Treasury
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21
Conclusion
HMT acknowledged that clinical negligence had a significant impact on overall levels of compensation in...
Conclusion
HMT acknowledged that clinical negligence had a significant impact on overall levels of compensation in terms of the high amounts paid each year, but noted there would inevitably always be clinical negligence in the health system.47 HMT informed us that …
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HM Treasury
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