Save content
Have you found this content useful? Use the button above to save it to your profile.
AIA

NAO qualifies DCMS asset valuations

by
26th Feb 2013
Save content
Have you found this content useful? Use the button above to save it to your profile.

The National Audit Office qualified the Department of Culture, Media and Sport’s accounts due to discrepancies arising from the BBC’s valuations of non-current assets such as land and buildings.

In his Report into the 2011-12 DCMS accounts, the comptroller and auditor general Amyas Morse noted that the department had been put under pressure by the need to focus on the 2012 London Olympics. Its finance department had also been overwhelmed by trying to consolidate the accounts of 46 subsidiary bodies, some with their own subsidiaries, into the department’s overall accounts.

Even though the DCMS was granted an extension to prepare the accounts, it still failed to pass muster.

Museums and galleries apply the Charities statement of recognised practice (SORP), Lottery distributing bodies report under a Treasury direction and the BBC applies international financial reporting standards (IFRS), the report noted.

It was the BBC’s use of IFRS that led to the qualification. International GAAP permits tangible non-current assets such as land, pland and buildings including Broadcasting House (pictured above) to be recorded on at depreciated historic cost, which is how the BBC accounts were prepared.

But the Whitehall financial reporting manual requires departments to record these assets at fair value.

“Both treatments are correct within the respective accounting frameworks applied,” Amyas noted.

But, he continued:  “While I am unable to quantify the financial impact of this non-compliance due to the absence of reliable valuation information, given the cost of the assets involved, there is likely to be a material misstatement of assets recognised in the Group Statement of Financial Position. As a consequence, I have qualified my opinion on the group financial statements value.”

Assets estimated to be worth £755.5m have not been recorded as required at fair value, but the BBC indicated it would give the DMCS fair value figures in future years.

The auditor general’s report also includes an emphasis of matter section on the restatement of the accounts for 2010-11. In the previous year, only two sets of accounts were consolidated into the department’s full accounts. Treasury guidance stipulates that the department should apply  IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ to restate comparative information from prior years to include figures for the additional entities.

Once again, the lack of capacity hindered the DCMS finance department, and even with additional help bought in, it was unable to meet the statutory deadline. But the department took advantage of an exception that IAS 8 allows when a robust restatement exercise is considered impracticable.

“I have considered the use of the exemption and I agree that it would be impractical to produce robust comparative information because the time and cost to reproduce this data would be prohibitive,” the NAO chief noted.

He welcomed the department’s promise to undertake a review of its 2011-12 accounts process and said it should help the department “learn the lessons from this year to ensure it can account to Parliament in a timely manner in the future”.

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.