National Audit Office head Gareth Davies has given the Ministry of Defence a “qualified” opinion on its 2024-25 annual report and accounts because of a lack of information about ongoing capital projects in a £6.13bn portfolio.
The public spending watchdog also identified a shortfall of £2.56bn in the MoD’s provisions for legal and other liabilities that the department recognised in its 2023-24 financial statements.
The NAO said its capital projects concerns centred around the MoD’s failure to provide accounting records for projects being carried out on its behalf by the Atomic Weapons Establishment, which helps deliver the UK’s nuclear deterrent.
It said that as of 31 March this year, AWE – which is a non-departmental public body sponsored by the MoD – accounted for £6.13bn of the department’s total “assets under construction” relating to property and associated equipment. Of that total, £1.5bn was identified as relating to “legacy” projects.
The NAO said the value of AWE’s legacy projects had remained unchanged for several years and the MoD was “unable” to provide assurance that the value was appropriate.
It added that “several other balances” within the AWE’s ongoing capital projects portfolio appeared not to “meet the criteria” for continued recognition in line with accounting standards.
An MoD spokesperson said the AWE capital project costs were all recognised as assets within the department's balance sheet as it expects to receive benefits from them in the future.
“No money is missing,” they said. “The £6.1bn balance subject to the NAO’s qualification relates to accounting processes dating back many years.
“A review is being undertaken to ensure that these assets are correctly valued and accounted for. If the review identifies that these assets are overvalued, this will be corrected within our next set of financial statements.”
Elsewhere in the MoD’s annual report and accounts for 2024-25, NAO head Davies flagged the £2.56bn shortfall in provisions for legal and other liabilities that the MoD recognised in last year’s annual report and accounts.
Davies, whose full title is comptroller and auditor general, said the figure came from compensation and costs for settling legal claims associated with personal-injury cases and fallout from the February 2022 data breach identifying Afghan nationals who previously worked for the UK government.
As Civil Service World previously reported, the MoD kept the NAO in the dark about the data-breach, which was covered by a super-injunction until July this year, while the department worked to support those affected.
The NAO said the department had been expensing costs related to its Afghan Relocations and Assistance Policy and the Afghanistan Response Route as they were incurred, but had not considered whether a provision was required for their future obligations.
The NAO said the situation represented a “material omission” from the MoD’s 2023-24 accounts, and that the department “did not have appropriate authorisation from parliament“ for the expenditure.
Davies issued a “qualified opinion on regularity“ in respect of the £2.56bn figure because it resulted in a breach of the department’s non-budget expenditure-control total.
Bullying, harassment and discrimination settlements rocket
The MoD’s 2024-25 annual report and accounts also shows that settlements paid out following claims of bullying, harassment and discrimination increased significantly year-on-year.
In 2023-24, the department identified payouts of £1,749,000 for bullying, harassment and discrimination settlements in the “special payments over £300,000” section of the annual report and accounts.
The same section of the 2024-25 report, now described as relating to “bullying, harassment, discrimination, physical and sexual abuse and assault”, details spending of £4,533,000 – two-and-a-half times more than the previous year’s figure.
The MoD did not provide detailed commentary on the settlement figure, however it has introduced a range of measures following the emergence of a series of high-profile allegations of bullying and sexual harassment recent years.
New interventions referenced in the annual report and accounts include the launch of the Defence Serious Crime Command and a Victim and Witness Care Unit.
In November 2023 it emerged that 60 female senior civil servants at the department had written to permanent secretary David Williams complaining of sexual assault, harassment and abuse at work – and describing the in MoD’s culture as “toxic”.
In February 2024, a survey of female staff working in the defence sector conducted by the Prospect union found sexual harassment was “seen to be tolerated by employers and often left unpunished”, with the MoD viewed as the major problem area.
Prospect said 61% of female members working at the MoD said they had experienced sexual harassment at work, compared with 60% at agencies or ALBs and 47% in the private sector.