AMYAS MORSE, the comptroller and auditor general, has again qualified his audit opinion on the Ministry of Defence’s accounts.

The National Audit Office has qualified its opinion for the seventh year running because the MoD has again failed to comply with the accounting requirement under IFRS for determining whether a contract contains a lease (the kind of contract which provides the department with exclusive or near-exclusive use of assets and capability).

“I have qualified my opinion for a seventh year because the department is likely to have omitted a material value of leased assets and associated liabilities from its statement of financial position,” Morse said.

“I cannot quantify the impact of these omissions on the accounts with certainty because, as a result of its accounting policies, the department has not maintained the records, or obtained the information required to do so.”

The MoD previously confirmed that compliance with the standard is possible for existing contracts – but in practice this would create significant challenges.

There would be a need for changes in business systems and processes, as well as for wider interaction by the department with its supplier base to obtain the necessary asset and liability information, the NAO said,

In 2015-16 the MoD formally decided to improve compliance with IAS 17 for new single contracts impacting a single site, with effect from 2016-17.

The MoD intends this to act as a pilot to allow it to develop further understanding of the challenges and resources required to improve compliance and intends to review the progress and results of this exercise during 2016-17 including consideration of whether it can be expanded further, the NAO said.

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