Corporate report

Security and Intelligence Agencies Financial Statements 2022-23 (HTML)

Published 22 September 2023

Introduction

This Statement summarises the use of resources by the Security and Intelligence Agencies (‘the Agencies’) for the year ending 31 March 2023. Each of the Agencies produces its own full set of Annual Reports and Accounts in accordance with the Government Financial Reporting Manual and HM Treasury directions but, for reasons of national security, they are not published. They are audited by the Comptroller and Auditor General and shown to the Chair of the Public Accounts Committee in accordance with the procedure for handling such material set down by the relevant Secretary of State under the Intelligence Services Act 1994. In line with these arrangements this Statement comprises only a Statement of Outturn against Parliamentary Supply and Consolidated Statement of Net Expenditure together with appropriate notes and a Governance Statement.

Accountability Report

Statement of Accounting Officer’s Responsibilities

Under the Government Resources and Accounts Act 2000, HM Treasury has directed the Security and Intelligence Agencies to prepare, for each financial year, a Financial Statement detailing the resources acquired, held, or disposed of during the year and the use of resources by the Agencies during the year.

The individual Agency accounts are prepared on an accruals basis and must give a true and fair view of the state of affairs of the Agencies’ net resource outturn, application of resources, changes in taxpayers’ equity and cash flows for the financial year then ended.

For reasons of national security, these accounts are not published. They are audited by the Comptroller and Auditor General and shown to the Chair of the Public Accounts Committee in accordance with the procedure for handling such material set down by the Secretary of State under the Intelligence Services Act 1994.

As a consequence of these arrangements, HM Treasury has directed that a Financial Statement should be published in accordance with Section 5 (2) of the Government Resources and Accounts Act 2000, and that this should comprise only a Statement of Outturn against Parliamentary Supply and Consolidated Statement of Net Expenditure together with appropriate notes.

In preparing the Financial Statement, the Accounting Officer (AO) is required, within the limitations imposed by the interests of national security, to comply with the Government Financial Reporting Manual prepared by HM Treasury, and in particular to:

• observe the Accounts Direction issued by HM Treasury (HMT), including the relevant accounting and disclosure requirements, and apply suitable accounting policies on a consistent basis;
• make judgements and estimates on a reasonable basis;
• state whether applicable accounting standards as set out in the Government Financial Reporting Manual have been followed, and disclose and explain any material departures in the Financial Statement;
• prepare the Financial Statement on a going concern basis; and
• confirm that the Financial Statement as a whole is fair, balanced and understandable and take personal responsibility for the Financial Statement and the judgements required for determining that it is fair, balanced and understandable.

The responsibilities of an AO, including responsibility for the propriety and regularity of the public finances for which the AO is answerable, for keeping proper records and for safeguarding the Security and Intelligence Agencies’ assets, are set out in HMT’s Managing Public Money.

Accounting Officer’s Declaration

I consider there to be no relevant audit information of which the National Audit Office (NAO) auditors have not been made aware. I have taken all steps necessary to make myself aware of any relevant audit information and to establish that NAO auditors are aware of that information.

I can confirm that the financial statement as a whole is fair, balanced and understandable and that I take personal responsibility for the financial statement and the judgement required for determining that it is fair, balanced and understandable.

Simon Case CVO
Cabinet Secretary
18 September 2023

Governance Statement

Scope of Responsibility

This Governance Statement for the period ending 31 March 2023, covers the Single Intelligence Account (SIA), which is the funding vehicle for the Security and Intelligence Agencies (the Agencies): the Secret Intelligence Service (SIS), Government Communications Headquarters (GCHQ) and the Security Service (MI5).

The SIA is managed differently to accounts in other parts of Government. The Prime Minister has overall responsibility for intelligence and security matters and is accountable to Parliament for matters affecting the Agencies collectively. The Agency Heads have a statutory duty to provide annual reports on the work of the Agencies directly to the Prime Minister as well as to their respective Secretaries of State, and may at any time report to either of them on any matter relating to their work .

The Secretary of State for Foreign, Commonwealth and Development Affairs is the responsible Secretary of State for SIS and GCHQ, and the Secretary of State for the Home Office for MI5 . The Agencies ensure that the appropriate Secretary of State is briefed on matters that could become the subject of Parliamentary or public interest and on issues, which they need to be aware of in discharging their wider Ministerial responsibilities. There are well-established arrangements for seeking Ministerial clearance for operations when required.

In line with the responsibility assigned to AOs in Managing Public Money the Principal Accounting Officer (PAO) acts to ensure that the SIA operates effectively and efficiently in support of national security policies, aims and objectives. In 2022-23 Simon Case replaced Sir Stephen Lovegrove and resumed the role of PAO with effect from 15 September 2022. The Heads of the Agencies are each AOs in their own right, with delegated authority from the PAO.

Legal and Parliamentary oversight

The Agencies’ operations are conducted within a framework of legislation that defines their roles, activities, and arrangements for their oversight. The main statutes are the Security Service Act 1989, the Intelligence Services Act 1994, the Regulation of Investigatory Powers Act 2000 (RIPA), the Justice and Security Act 2013, and the Investigatory Powers Act 2016 (IPA 2016).

The oversight framework for investigatory powers helps to ensure that public authorities, including the Agencies, act in ways that are compatible with the Human Rights Act 1998. The Investigatory Powers Tribunal was established in October 2000 under RIPA and provides a right of redress for anyone who believes they have been a victim of unlawful action by a public authority improperly using covert investigative techniques. The Tribunal is also the appropriate forum to consider claims brought against the Agencies alleging the infringement of human rights.

The IPA 2016 created the Investigatory Powers Commissioner role, to approve and oversee the use of investigatory powers by public authorities. The Investigatory Powers Commissioner, Sir Brian Leveson, assumed his responsibilities on 21 October 2019 and is responsible for the constitutional function of independently balancing the public interest and the rights of the individual, particularly in assessing when it is justifiable for these rights to be interfered with. The Investigatory Powers Commissioner has assumed the functions of the former Intelligence Services Commissioner, Chief Surveillance Commissioner, and Interception of Communications Commissioner, as well as additional functions provided for by the IPA 2016.

Parliamentary oversight of the three Intelligence Agencies is provided by the Intelligence and Security Committee (ISC), which examines the expenditure, administration and policy of the Agencies . The ISC can also oversee certain operational matters in specific circumstances, subject to the parameters set out in the Memorandum of Understanding between the Government and the ISC . The ISC’s independence from Government was enhanced in July 2013 with the Justice and Security Act which makes the ISC a statutory Committee of Parliament and formalises its remit . Additionally, the Chair of the House of Commons’ Public Accounts Committee sees the Annual Report and Accounts of the Agencies through the NAO.

The Governance Framework

Financial responsibility for the SIA lies with the PAO. The Prime Minister and the PAO are supported in their engagement with the Agencies by a small team in the Cabinet Office, which includes a professional accountant. The governance at the centre is complemented by comprehensive governance structures in each of the three Agencies.

There are different governance arrangements in place for the Agencies to ensure appropriate oversight and accountability for Agency spending, without compromising the need for operational secrecy necessary to protect national security. Special arrangements have been agreed for the implementation of the Government’s transparency agenda by the Agencies. To help drive good financial management, the Agencies are required to produce all the data required of other government departments for the transparency agenda and share it with the relevant teams in HMT and the Cabinet Office. However, this data is not published because of risks to national security. In line with other departments, the Agencies are also required to produce and maintain a business plan. These plans are discussed with the ISC at a strategic level and there is regular reporting from the Agencies to the ISC.

As with other departments, where specific investment plans either exceed the delegated financial authority given to Agency Heads by the Chief Secretary to the Treasury through the PAO or fall within the HMT definition of complex, Agency Heads must seek prior approval from the PAO and HMT. For reasons of national security, the Cabinet Office runs parallel arrangements for the Agencies, through the Deputy National Security Adviser (DNSA), with regard to the Cabinet Office controls. Within these arrangements, the Agencies ensure that taxpayers get the best possible value from SIA spending whilst protecting operational sensitivities.

Each of the Agencies produces their own Annual Report and Accounts and these are independently audited, in full, by the Comptroller and Auditor General. The Agencies also produce their own Governance Statements which reflect their individual circumstances. For this reason, this Governance Statement focuses on the SIA level structures and aggregated risk position, making reference to the individual statements of the Agencies as necessary.

The Agency Heads, supported by Deputies, meet regularly to discuss strategic issues affecting the Agencies. Each Agency also has their own Board which comprises both the senior management and Non-Executive Directors, and an Audit and Risk Assurance Committee, which meet regularly. The Cabinet Office-led structures in place outlined below enable effective management of finances and complement those of the Agencies.

Cabinet Office Governance of the Security and Intelligence Agencies

The Financial Steering Group (FSG) is the highest level of financial and performance governance. It is chaired by the PAO and attended by the Agency Heads, HMT Seniors, DNSA, and the Agency Finance Directors. The Group meets quarterly, and provides an opportunity for the PAO to meet the Accounting Officers and HMT to discuss key financial and strategic issues, such as the implementation of Spending Review commitments, delivery of cross-SIA collaborative programmes, progress on efficiency plans and in-year financial management. The FSG met four times in 2022-23; two meetings were chaired by Simon Case, one by Sir Stephen Lovegrove, and one by DNSA.

The Performance and Risk Reviews were introduced in 2021-22. They are chaired by the PAO and are a forum to hold the Agency Heads to account on their financial and strategic performance for their individual organisations, including reviewing business and associated financial risks. Three separate meetings are held every quarter; one with each agency head (Director General MI5, Chief of the Secret Intelligence Service known as ‘C’, and Director GCHQ), as well as their respective Director General Strategy and Finance Director. DNSA and a representative from either the Home Office or the Foreign, Commonwealth and Development Office also attends. Eleven Performance & Risk review meetings took place during 2022-23. Five were chaired by the Cabinet Secretary, five by Sir Stephen Lovegrove, and one by DNSA. A twelfth Performance & Risk Review was held early in 2023-24.

Frequent working-level meetings support these structures. HMT chairs a quarterly stocktake with the Agencies at Director level aligned with the FSG meetings. The Cabinet Office also chairs regular meetings with representatives from across the Agencies and HMT to provide peer review and discussion of the spending forecasts, cash management, and application of HMT policy papers.

Governance of the National Cyber Programme (NCP)

This Governance Statement also covers £335.7m investment in the (National Cyber Programme) NCP in 2022/23. The NCP is managed by a team in the Cabinet Office, which reports to the DNSA who is the Senior Responsible Owner (SRO) for the fund.

The National Cyber Strategy, the Integrated Review Refresh, and the National Security Council guide the NCP’s strategic direction. Accountable departments are held to account following good practice set out by the NAO to ensure this programme is being managed effectively and delivers value for money, and a performance framework has been set up to measure and ensure strategic progress. Accountable Departments must submit business cases for approval by the Cabinet Office Programme Board before resources are released.

Compliance with the ‘Corporate governance in central government departments: code of good practice’ (2017)

The individual Agencies follow the principles of the ‘Corporate governance in central government departments: code of good practice’ (2017) where relevant and practicable. Any areas of departure are set out in each of the Agency’s own governance statements. The Agencies collectively are not a ministerial department and so are not accountable to Parliament in the way described by the Code. Parliamentary oversight mechanisms are as described above. As each Agency has its own Accounting Officer, there is no SIA management board as described by the Code. The FSG (see above) has responsibility for those financial issues requiring Cabinet Office oversight or co-ordination.

Information Security and Protection

No information security incidents were reported to the Information Commissioner’s Office during 2022-23.

Risk Assessment

The Cabinet Office regularly discusses individual Agency and cross-SIA strategic and financial risks with Agency Finance Directors, working-level Agency finance contacts and HMT, which inform the discussion with the PAO at the FSG. The Agencies formally report their top risks to the PAO through the Accounting Officer’s Quarterly Report which is prepared for review and discussion at each FSG meeting. These look at the key business, strategic and financial risks faced by the Agencies and include the risks to delivery of their collaborative transformation programmes, their missions, their efficiencies targets set at SR20 and SR21, and their underpinning core capabilities. Taken together these measures mean that the PAO has confidence in the effectiveness of risk management and internal control within the SIA.

Accounting Officer Systems Statement

A separate Accounting Officer Systems Statement has not been produced for the SIA as it has been judged that all the relevant information, within national security constraints, is contained within the Governance Statement.

Review of the Effectiveness of Risk Management and Internal Control

As PAO for the SIA, I have responsibility for reviewing the effectiveness of governance structures. I have been provided with the full, unpublished, versions of the individual Agency Governance Statements. I have been provided with a written handover by my predecessor, which has given me suitable assurance over the level of agency oversight during 2022-23 and I am content that these Governance Statements represent a true picture of each Agency’s position.

I, and my teams in the Cabinet Office, conduct regular reviews of the agencies at both working and senior levels. We are working with UKIC on a number of areas of financial management that have been identified for improvement.

Simon Case CVO
Cabinet Secretary
18 September 2023

Parliamentary Accountability and Audit Report

Statement of Outturn against Parliamentary Supply

In addition to the primary statements prepared under IFRS, the Government Financial Reporting Manual (FReM) requires the SIA to prepare a Statement of Outturn against Parliamentary Supply (SOPS) and supporting notes.

The SOPS and related notes are subject to audit, as detailed in the Certificate and Report of the Comptroller and Auditor General to the House of Commons.

The SOPS is a key accountability statement that shows, in detail, how an entity has spent against their Supply Estimate. Supply is the monetary provision (for resource and capital purposes) and cash (drawn primarily from the Consolidated fund), that Parliament gives statutory authority for entities to utilise. The Estimate details supply and is voted on by Parliament at the start of the financial year.

Should an entity exceed the limits set by their Supply Estimate, called control limits, their accounts will receive a qualified opinion.

The format of the SOPS mirrors the Supply Estimates, published on gov.uk, to enable comparability between what Parliament approves and the final outturn.

The SOPS contain a summary table, detailing performance against the control limits that Parliament have voted on, cash spent (budgets are compiled on an accruals basis and so outturn won’t exactly tie to cash spent) and administration.

The supporting notes detail the following: a reconciliation of outturn to net operating expenditure in the consolidated SOCNE, to tie the SOPS to the financial statement (note 1); a reconciliation of outturn to net cash requirement (note 2); and, an analysis of income payable to the Consolidated Fund (note 3). An Outturn by Estimate line note is not included due to national security considerations (this is usually SOPS note 1).

The SOPS and Estimates are compiled against the budgeting framework, which is similar to, but different to, IFRS. Further information on the Public Spending Framework and the reasons why budgeting rules are different to IFRS can also be found in chapter 1 of the Consolidated Budgeting Guidance, available on GOV.UK.

Summary Tables – mirrors part 1 of the Estimates

Summary Table, 2022-23 all figures presented in £000s

Type of Spend	Outturn Voted	Outturn Non-Voted	Outturn Total	Estimate Voted	Estimate Non-Voted	Estimate Total	Outturn vs Estimate saving/(excess) Voted	Outturn vs Estimate saving/(excess) Total	Prior Year Outturn Total 2021-22
Departmental Expenditure Limit					-
Resource	3,208,600	-	3,208,600	3,313,914	-	3,313,914	105,314	105,314	2,936,425
Capital	1,156,257	-	1,156,257	1,172,426	-	1,172,426	16,169	16,169	919,035
Total	4,364,857	-	4,364,857	4,486,340	-	4,486,340	121,483	121,483	3,855,460
Annually Managed Expenditure
Resource	12,593	-	12,593	33,900	-	33,900	21,307	21,307	130,722
Capital	1,622	-	1,622	2,200	-	2,200	578	578	-
Total	14,215	-	14,215	36,100	-	36,100	21,885	21,885	130,722
Total Budget
Resource	3,221,193	-	3,221,193	3,347,814	-	3,347,814	126,621	126,621	3,067,147
Capital	1,157,879	-	1,157,879	1,174,626	-	1,174,626	16,747	16,747	919,035
Total Budget Expenditure	4,379,072	-	4,379,072	4,522,440	-	4,522,440	143.368	143,368	3,986,182
Non-budget Expenditure	-	-	-	-	-	-	-	-	-
Total Budget and Non-Budget	4,379,072	-	4,379,072	4,522,440	-	4,522,440	143,368	143,368	3,986,182

Figures in the areas outlined in thick line cover the voted control limits voted by Parliament. Refer to the Supply Estimates guidance manual, available on GOV.UK, for detail on the control limits voted by Parliament.

Net Cash Requirement 2022-23, all figures presented in £000

2022-23 Outturn	2022-23 Estimate	2022-23 Outturn compared with Estimate saving/ (excess)	2021-22 Outturn
3,849,831	4,020,365	170,534	3,376,788

Administration Costs 2022-23 all figures presented in £000

2022-23 Outturn	2022-23 Estimate	2022-23 Outturn compared with Estimate saving/ (excess)	2021-22 Outturn
62,547	69,277	6,730	78,768

Figures in the areas outlined in bold are voted totals subject to Parliamentary control. Although not a separate voted limit, any breach of the administration budget will also result in an excess vote. In 2022-23 the administration cost framework was revised and some costs were reclassified as programme with an associated reduction in administration cost.

Notes to the Statement of Outturn against Parliamentary Supply

SOPS 1 Reconciliation of outturn to net operating expenditure

	2022-23 £000	2021-22 £000
Total resource outturn in Statement of Outturn against Parliamentary Supply	3,221,193	3,067,147
Add Other Net Adjustments	415,892	283,600
Less Income Payable to the Consolidated Fund	(2,526)	(3,137)
Net Operating Expenditure	3,634,559	3,347,610

As noted in the introduction to the SOPS above, outturn and the Estimates are compiled against the budgeting framework, which is similar to, but different from, IFRS. Therefore, this reconciliation bridges the resource outturn to net operating expenditure, linking the SOPS to the financial statements.

As noted in the introduction to the SOPS above, outturn and the Estimates are compiled against the budgeting framework, which is similar to, but different from, IFRS. Therefore, this reconciliation bridges the resource outturn to net operating expenditure, linking the SOPS to the financial statements.

SOPS 2 Reconciliation of net outturn to net cash requirement

	Outturn £000	Estimate £000	Net total outturn compared with Estimate saving/(excess) £000
Resource Outturn	3,221,193	3,347,814	126,621
Capital Outturn	1,157,879	1,174,626	16,747
Accruals to cash adjustments:
Adjustments to remove non-cash items	(604,137)	(692,075)	(87,938)
Other Net Adjustments	50,978	-	(50,978)
Adjustment to reflect movements in working balances	23,918	190,000	166,082
Net Cash Requirement	3,849,831	4,020,365	170,534

As noted in the introduction to the SOPS above, outturn and the Estimates are compiled against the budgeting framework, not on a cash basis. Therefore, this reconciliation bridges the resource and capital outturn to the net cash requirement.

SOPS 3 Amount of Income to the Consolidated Fund

SOPS 3.1 Analysis of Income Payable to the Consolidated Fund

In addition to income retained by the department, the following income relates to the department and is payable to the Consolidated Fund (cash receipts being shown in italics).

	Outturn 2022-23 Accruals £000	Outturn 2022-23 Cash basis £000	Outturn 2021-22 Accruals £000	Outturn 2021-22 Cash basis £000
Income outside the ambit of the estimate	1,896	1,896	2,489	2,489
Excess cash surrenderable to the consolidated fund	630	630	648	648
Total income payable to the Consolidated Fund	2,526	2,526	3,137	3,137

Parliamentary Accountability Disclosures

Losses and Special Payments

	2022-23 No. of cases	2022-23 £000	2021-22 No. of cases	2021-22 £000
Losses and Special Payments	605	6,744	510	22,509
Total	605	6,744	510	22,509

Simon Case CVO
Cabinet Secretary
18 September 2023

The Certificate and Report of the Comptroller & Auditor General to the House of Commons

Opinion on the financial statement

I certify that I have audited the financial statement of the Security and Intelligence Agencies for the year ended 31 March 2023 under the Government Resources and Accounts Act 2000. The financial statement comprises:

• the Consolidated Statement of Net Expenditure for the year then ended; and
• the related notes including the significant accounting policies.

The financial reporting framework that has been applied in the preparation of the financial statement is applicable law and UK adopted international accounting standards.

In my opinion, the financial statement:

• properly presents the Security and Intelligence Agencies’ net operating expenditure for the year ended 31 March 2023; and
• has been properly prepared in accordance with the Government Resources and Accounts Act 2000 and HM Treasury directions issued thereunder, within the limits imposed by national security.

Opinion on regularity

In my opinion, in all material respects:

• the Statement of Outturn against Parliamentary Supply properly presents the outturn against voted Parliamentary control totals for the year ended 31 March 2023 and shows that those totals have not been exceeded; and
• the income and expenditure recorded in the financial statement have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statement conform to the authorities which govern them.

Basis for opinions

I conducted my audit in accordance with International Standards on Auditing (UK) (ISAs UK), applicable law and Practice Note 10 Audit of Financial Statements and Regularity of Public Sector Bodies in the United Kingdom (2022). My responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statement section of my certificate.

Those standards require me and my staff to comply with the Financial Reporting Council’s Revised Ethical Standard 2019. I am independent of the Security and Intelligence Agencies and the Cabinet Office in accordance with the ethical requirements that are relevant to my audit of financial statements in the UK. My staff and I have fulfilled our other ethical responsibilities in accordance with these requirements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Conclusions relating to going concern

In auditing the financial statement, I have concluded that the Security and Intelligence Agencies’ use of the going concern basis of accounting in the preparation of the financial statement is appropriate.

Based on the work I have performed, I have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Security and Intelligence Agencies’ ability to continue as a going concern for a period of at least twelve months from when the financial statement is authorised for issue.

My responsibilities and the responsibilities of the Accounting Officer with respect to going concern are described in the relevant sections of this certificate.

The going concern basis of accounting for the Security and intelligence Agencies is adopted in consideration of the requirements set out in HM Treasury’s Government Financial Reporting Manual, which requires entities to adopt the going concern basis of accounting in the preparation of the financial statements where it is anticipated that the services which they provide will continue into the future.

 Other information

The other information comprises information included in the Introduction and the Accountability Report, but does not include the financial statement and my auditor’s certificate and report thereon. The Accounting Officer is responsible for the other information.

My opinion on the financial statement does not cover the other information and, except to the extent otherwise explicitly stated in my certificate, I do not express any form of assurance conclusion thereon.

My responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statement or my knowledge obtained in the audit, or otherwise appears to be materially misstated.

If I identify such material inconsistencies or apparent material misstatements, I am required to determine whether this gives rise to a material misstatement in the financial statement itself. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact.

I have nothing to report in this regard.

Opinion on other matters

In my opinion, based on the work undertaken in the course of the audit:

• the parts of the Accountability Report subject to audit have been properly prepared in accordance with HM Treasury directions made under the Government Resources and Accounts Act 2000;
• the information given in the Introduction and the Accountability Report for the financial year for which the financial statement is prepared is consistent with the financial statement and is in accordance with the applicable legal requirements.

Matters on which I report by exception

In the light of the knowledge and understanding of the Security and Intelligence Agencies and their environment obtained in the course of the audit, I have not identified material misstatements in the Introduction and Accountability Report.

I have nothing to report in respect of the following matters which I report to you if, in my opinion:

• Adequate accounting records have not been kept by the Security and Intelligence Agencies and the Cabinet Office or returns adequate for my audit have not been received from branches not visited by my staff; or
• I have not received all of the information and explanations I require for my audit; or
• the financial statement and the parts of the Accountability Report subject to audit are not in agreement with the accounting records and returns; or
• the Governance Statement does not reflect compliance with HM Treasury’s guidance.

Responsibilities of the Accounting Officer for the financial statement

As explained more fully in the Statement of Accounting Officer’s Responsibilities, the Accounting Officer is responsible for:

• maintaining proper accounting records;
• providing the C&AG with access to all information of which management is aware that is relevant to the preparation of the financial statement such as records, documentation and other matters;
• providing the C&AG with additional information and explanations needed for his audit;
• providing the C&AG with unrestricted access to persons within the Security and Intelligence Agencies and the Cabinet Office from whom the auditor determines it necessary to obtain audit evidence;
• ensuring such internal controls are in place as deemed necessary to enable the preparation of financial statement to be free from material misstatement, whether due to fraud or error;
• ensuring that the financial statement gives a true and fair view and are prepared in accordance with HM Treasury directions made under the Government Resources and Accounts Act 2000, within the limits imposed by national security;
• ensuring that the Accountability Report is prepared in accordance with HM Treasury directions made under the Government Resources and Accounts Act 2000; and
• assessing the Security and Intelligence Agencies’ ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Accounting Officer anticipates that the services provided by the Security and Intelligence Agencies will not continue to be provided in the future.

Auditor’s responsibilities for the audit of the financial statement

My responsibility is to audit, certify and report on the financial statement in accordance with the Government Resources and Accounts Act 2000.

My objectives are to obtain reasonable assurance about whether the financial statement as a whole is free from material misstatement, whether due to fraud or error, and to issue a certificate that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial statement.

 Extent to which the audit was considered capable of detecting non-compliance with laws and regulations, including fraud

I design procedures in line with my responsibilities, outlined above, to detect material misstatements in respect of non-compliance with laws and regulations, including fraud. The extent to which my procedures are capable of detecting non-compliance with laws and regulations, including fraud is detailed below.

Identifying and assessing potential risks related to non-compliance with laws and regulations, including fraud

In identifying and assessing risks of material misstatement in respect of non-compliance with laws and regulations, including fraud, I:

• considered the nature of the sector, control environment and operational performance including the design of the Security and Intelligence Agencies and Cabinet Office’s accounting policies.
• inquired of management, the Security and Intelligence Agencies’ head of internal audit and those charged with governance, including obtaining and reviewing supporting documentation relating to the Security and Intelligence Agencies and Cabinet Office’s policies and procedures on: identifying, evaluating and complying with laws and regulations; detecting and responding to the risks of fraud; and the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations including the Security and Intelligence Agencies and Cabinet Office’s controls relating to compliance with the Government Resources and Accounts Act 2000 and Managing Public Money;
• inquired of management, Security and Intelligence Agencies’ head of internal audit and those charged with governance whether: they were aware of any instances of non-compliance with laws and regulations; they had knowledge of any actual, suspected, or alleged fraud,
• discussed with the engagement team regarding how and where fraud might occur in the financial statement and any potential indicators of fraud.

As a result of these procedures, I considered the opportunities and incentives that may exist within the Security and Intelligence Agencies for fraud and identified the greatest potential for fraud in the following areas: revenue recognition, posting of unusual journals, complex transactions and bias in management estimates. In common with all audits under ISAs (UK), I am required to perform specific procedures to respond to the risk of management override.

I obtained an understanding of the Security and Intelligence Agencies’ framework of authority and other legal and regulatory frameworks in which the Security and Intelligence Agencies operate. I focused on those laws and regulations that had a direct effect on material amounts and disclosures in the financial statement or that had a fundamental effect on the operations of the Security and Intelligence Agencies. The key laws and regulations I considered in this context included Government Resources and Accounts Act 2000, Managing Public Money, Supply and Appropriation (Main Estimates) Act 2022, employment law and tax legislation.

Audit response to identified risk

To respond to the identified risks resulting from the above procedures:

• I reviewed the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described above as having direct effect on the financial statement;
• I enquired of management, the Security and Intelligence Agencies Audit and Risk Assurance Committees and in-house legal counsels concerning actual and potential litigation and claims;
• I reviewed minutes of meetings of those charged with governance at the Security and Intelligence Agencies and the Boards; and internal audit reports;
• in addressing the risk of fraud through management override of controls, I tested the appropriateness of journal entries and other adjustments; assessed whether the judgements on estimates are indicative of a potential bias; and evaluated the business rationale of any significant transactions that are unusual or outside the normal course of business.

I also communicated relevant identified laws and regulations and potential risks of fraud to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

A further description of my responsibilities for the audit of the financial statement is located on the Financial Reporting Council’s website. This description forms part of my certificate.

Other auditor’s responsibilities

I am required to obtain appropriate evidence sufficient to give reasonable assurance that the Statement of Outturn against Parliamentary Supply properly presents the outturn against voted Parliamentary control totals and that those totals have not been exceeded. The voted Parliamentary control totals are Departmental Expenditure Limits (Resource and Capital), Annually Managed Expenditure (Resource and Capital), Non-Budget (Resource) and Net Cash Requirement.

I am required to obtain evidence sufficient to give reasonable assurance that the expenditure and income recorded in the financial statement have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statement conform to the authorities which govern them.

I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control I identify during my audit.

The financial statement discloses the use of resources by the Security and Intelligence Agencies. As explained in the introduction, for reasons of national security it does not comply fully with international accounting standards as interpreted by the HM Treasury’s Government Financial Reporting Manual. The unpublished constituent accounts, which I audit in accordance with International Standards on Auditing (UK) are, however, fully compliant. My opinion on each of these is unqualified.

 Report

I have no observations to make on this financial statement.

Gareth Davies
Comptroller and Auditor General
18 September 2023

National Audit Office
157-197 Buckingham Palace Road
Victoria
London
SW1W 9SP

Financial Statement

Consolidated Statement of Net Expenditure for the Year Ended 31 March 2023

	2022-23 £000	2021-22 £000
Income	(138,308)	(159,342)
Total operating income	(138,308)	(159,342)
Staff costs	1,329,146	1,201,483
Other costs	2,443,721	2,305,469
Total operating expenditure	3,772,867	3,506,952
Net Operating Expenditure	3,634,559	3,347,610

Simon Case CVO
Cabinet Secretary
18 September 2023

Notes to the Consolidated Statement of Net Expenditure

1. Statement of accounting policies and disclosure

This is the consolidated Financial Statement of the individual Security and Intelligence Agencies. This financial statement has been prepared in accordance with the accounts direction issued by HM Treasury under the Government Resources and Accounts Act 2000 and applies, within the limitations imposed by the interests of national security, the relevant requirements of the 2022-23 Government Financial Reporting Manual. The accounting policies contained in the FReM apply International Financial Reporting Standards (IFRS) as adapted or interpreted for the public sector context. Where the FReM permits a choice of accounting policy, the policy which is judged to be the most appropriate to the particular circumstances of the Agencies for the purpose of ensuring the Financial Statement is presented properly, has been selected.

1.1 Accounting convention

These accounts have been prepared under the historical cost convention, modified to account for the revaluation of property, plant and equipment, intangible assets and inventories.

1.2 Basis of consolidation

These accounts are based upon a consolidation of the individual Security and Intelligence Agencies’ accounts. Transactions between entities included in the consolidation have been eliminated in accordance with IFRS10 – Consolidated Financial Statements.

2. Events after the reporting period

There are no reportable events after the reporting period. These accounts have been authorised for issue by the Principal Accounting Officer on the same date as the Comptroller and Auditor General’s Audit Certificate

Annex A: Unaudited Core Tables

Tables 1 to 2 – Core Tables (unaudited)

The SIA comprises the budgets of the three Security and Intelligence Agencies – the Security Service, the Secret Intelligence Service and the Government Communications Headquarters. During the financial year 2022-23, the PAO delegated authority to spend to the three Agency Heads, who are themselves Accounting Officers, at levels agreed with HM Treasury. The Security and Intelligence Agencies operate within a separate statutory framework.

Table 1 – Total departmental spending for the Security and Intelligence Agencies

The years from 2016-17 to 2019-20 are part of the SR15 settlement. 2020-21 is part of the SR15 settlement, as modified by SR19. 2021-22 was agreed by the SR20 settlement. The years from 2022-23 represent the settlement achieved under SR21.

Table 2 – Administration budget for the Security and Intelligence Agencies

Administration budgets are in line with the SR15, SR19, SR20 and SR21 settlements.

Table 1 - Security and Intelligence Agencies total departmental spending

	2016-17 Outturn £’000	2017-18 Outturn £’000	2018-19 Outturn £’000	2019-20 Outturn £’000	2020-21 Outturn £’000	2021-22 Outturn £’000	2022-23 Outturn £’000	2023-24 Plans £’000	2024-25 Plans £’000
Resource DEL
Security and Intelligence Agencies	2,268,170	2,390,876	2,534,770	2,755,052	2,859,811	2,936,425	3,208,600	3,518,390	2,462,930
Total Resource DEL	2,268,170	2,390,876	2,534,770	2,755,052	2,859,811	2,936,425	3,208,600	3,518,390	2,462,930
Resource AME (note 1)
Spending in Annually Managed Expenditure	13,065	16,437	15,482	438	18,744	130,722	12,593	38,277	-
Total Resource AME	13,065	16,437	15,482	438	18,744	130,722	12,593	38,277	-
Total Resource Budget	2,281,235	2,407,313	2,550,252	2,755,490	2,878,555	3,067,147	3,221,193	3,556,667	2,462,930
Capital DEL
Security and Intelligence Agencies	603,276	576,195	602,208	636,423	794,967	919,035	1,156,257	1,283,019	1,204,200
Total Capital DEL	603,276	576,195	602,208	636,423	794,967	919,035	1,156,257	1,283,019	1,204,200
Capital AME (note 1)
Spending in Annually Managed Expenditure	-	-	-	-	-	-	1,622	2,221	-
Total Capital AME	-	-	-	-	-	-	1,622	2,221	-
Total Capital Budget	603,276	576,195	602,208	636,423	794,967	919,035	1,157,879	1,285,240	1,204,200
Departmental Spending	2,884,511	2,983,508	3,152,460	3,391,913	3,673,522	3,986,182	4,379,072	4,841,907	3,667,130
Non Budget spending	-	-	-	-	16,161	-	-	-	-
Total departmental spending	2,884,511	2,983,508	3,152,460	3,391,913	3,689,683	3,986,182	4,379,072	4,841,907	3,667,130

Note 1: The total allocations in this table for the agencies for 2023-24 and 2024-25 do not include either depreciation (ring-fenced RDEL) or inter-departmental transfers. Both depreciation and inter-departmental transfers will be calculated and allocated during the Estimates process in those financial years and added to the totals shown here. There are no figures published in the SR21 Settlement Letter for AME. 

Table 2 - Administration budget for the Security and Intelligence Agencies

	2016-17 Outturn £’000	2017-18 Outturn £’000	2018-19 Outturn £’000	2019-20 Outturn £’000	2020-21 Outturn £’000	2021-22 Outturn £’000	2022-23 Outturn £’000	2023-24 Plans £’000	2024-25 Plans £’000
Resource DEL
Security and Intelligence Agencies	67,194	69,961	73,486	77,541	75,159	78,768	62,547	572,039	99,000
Total administration budget	67,194	69,961	73,486	77,541	75,159	78,768	62,547	572,039	99,000