Source · Select Committees · Public Accounts Committee
Second Report - NAO financial audit insights 2024–25
Public Accounts Committee
HC 94
Published 22 May 2026
Recommendations
4
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 …
Read more
Conclusions (20)
2
Conclusion
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 …
3
Conclusion
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 groups also made special payments outside their normal activities that …
5
Conclusion
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 compensation schemes nearly doubled from £2.5 billion at the end …
1
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
6
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 and supporting evidence, demonstrating the value of senior management prioritising …
7
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 the larger government departments published after summer recess for 2024–25, …
8
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 process, and particularly for those that routinely submit their accounts …
9
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 for qualifications were lack of sufficient audit evidence (six qualifications) …
10
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 around training and facilitating networking and sharing of best practice …
11
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 accounts, its first since 2018–19, and we asked it about …
12
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 of spending needed for maintenance or the risk of failure.30 …
13
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 22 26 Q 23 27 C&AG’s report, para 3.28 28 …
14
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 spent.34 HMT informed us the reason for the Ministry of …
15
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 special payments if the amounts involved are considered material to …
16
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 could be made from digital transformation in government, in terms …
17
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 audits and our own inquiries into major IT change programmes …
18
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 a role for itself, the Department for Science, Innovation and …
19
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, para 3.15 40 C&AG’s report, para 3.15 41 C&AG’s report, …
20
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 billion at the end of 2024–25, with clinical negligence accounting …
21
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 clinical negligence will be reviewed by the Department of Health …