Committee publication · Report · 22 May 2026 · HC 94

Second Report - NAO financial audit insights 2024–25

Inquiry: NAO financial audit insights 2024-25

Government response deadline: 22 July 2026

Summary

This Public Accounts Committee report examines the NAO's financial audit findings for 2024–25. It concludes that government's £1.1 trillion annual spending faces persistent accountability gaps: account publication delays, 14 bodies with qualified accounts (including DWP and HMRC with 36 and 20 years of persistent fraud/error qualifications), £7 billion in departmental write-offs, weak financial skills in digital transformation projects, and £73.4 billion in future compensation scheme liabilities. The committee recommends HM Treasury strengthen support for timely reporting, tackle systemic qualification issues, analyse project cancellation losses, build finance capacity for digital transformation, and benchmark UK compensation schemes internationally.

Key findings

Only 64% of government bodies published 2024–25 accounts by summer recess, below the 76% pre-COVID target; timeliness has not recovered despite improvements from the 2019–20 nadir of 42%.
14 government bodies received qualified audit opinions in 2024–25; DWP and HMRC have persistent fraud/error qualifications spanning 36 and 20 years respectively, with DWP overpayments (excluding state pension) at £9.3 billion or 6.2% of accounts.
£6.6 billion written off by 17 main departmental groups in 2024–25, with Ministry of Defence alone incurring £1.6 billion in project cancellations; government policy changes triggered £290 million (Home Office Rwanda scheme) and £472 million (Department for Transport road schemes) losses.
Government bodies lack necessary financial skills and governance frameworks for large-scale digital transformation; NS&I transformation programme costs rose from £1.7 billion (2020) to £3.0 billion (2024), while Bank of England's comparable programme cost £431 million with better controls.
Compensation scheme liabilities reached £73.4 billion (end 2024–25), up £11.8 billion year-on-year; annual payments doubled from £2.5 billion (2023–24) to £4.9 billion (2024–25), with clinical negligence representing 82% (£60 billion) of future liabilities; total lifetime impact estimated at £102.8 billion.

Recommendations

HM Treasury should increase support for government bodies to achieve the 70% target for 2025–26 accounts publication before summer recess, and write to the Committee if the target is not met explaining why.
HM Treasury and Government Finance Function should increase support for departments with qualified accounts and report in one year on the success of these actions.
HM Treasury should analyse root causes of large reported losses, identify lessons learned to avoid wasted investment, and report back to the Committee by year-end.
Government Finance Function should set out how it will ensure finance teams have necessary skills to apply appropriate financial controls and governance to digital transformation projects.
HM Treasury should undertake international comparison of compensation schemes to identify best practice in design, funding and administration, and report by year-end including benchmarking UK scheme costs as percentage of GDP.

Tone

Critical

Topics

public-financeaccountabilitydigital-transformationfraud-and-errorcompensation-schemes

Key actors

HM Treasury, Government Finance Function, National Audit Office, Department for Work & Pensions, HM Revenue & Customs, Environment Agency, Ministry of Defence, Committee of Public Accounts

Notable line

“… accounts have been qualified for 36 years. This enormous figure has been accepted for far too long and action led by the Treasury should be taken to reduce it.”

Key Quotes

“We particularly consider losses incurred from cancelling projects after large sums have already been invested to be very poor value for money.”
— Committee of Public Accounts · On departmental write-offs and cancellations

“We think this embedded culture is unacceptable and suggest that the HM Treasury begins discussions as to how these accounts can be regularised within a reasonable timescale.”
— Committee of Public Accounts · On persistent qualifications at DWP and HMRC

“This should not be the automatic expectation of these departments.”
— Committee of Public Accounts · Rejecting suggestion that fraud and error are inherent to DWP and HMRC systems

“… this improvement was only possible due to significant and sustained commitment of time, effort and resources by the agency over a number of years.”
— Environment Agency · On achieving clean audit opinion after five consecutive qualifications

“Transparency and accountability for how government spends taxpayers' money is being undermined by some government bodies taking too long to publish their accounts.”
— Committee of Public Accounts · Opening conclusion on account publication delays

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Source · parliament.uk record ↗