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Dateline: 10th March, 2011
NAO Criticises DCMS The Department for Culture, Media and Sport's decision in 2010 to close and merge a number of its arm’s-length bodies was not informed by a financial analysis of the costs and benefits of the decision, the National Audit Office has said in a new report on the Department's financial management. "The Department did not obtain sufficient financial data about the bodies and based its decisions on estimates that did not take account of the full costs of closure such as lease cancellation, redundancy and pension crystallisation costs," the report issued today says. "The decision was also not informed by an estimation of future savings or of what the pay-back period would be. In responding to the new Government’s review of recent spending decisions, the Department cancelled seven projects with a total value of £73 million, without ascertaining the financial penalties that might be incurred." Talking of the cuts to the budgets of the arts and culture sector, the report said that "undifferentiated top-slicing of budgets can leave organisations exposed and unprepared for the future, and can lead to higher overall costs or the displacement of costs elsewhere." It criticised the flat rate cuts to the sector and the 50% cut in the DCMS' own administration costs and those of a number of larger bodies. It believs that, while the Department was influenced by the desire to make quick decisions, the use of standard flat rates does not differentiate sufficiently between the existing cost bases of the different bodies and so the Department cannot yet know the ultimate impact on frontline delivery. The report finds that the Department has improved the maturity of its financial management in specific areas, both within its Finance function and more broadly across its sponsor teams, but this review of financial management across the Department as a whole has found that it is not possible to conclude that the Department is achieving value for money. The Department's Board, the report says, is not giving sufficient attention to performance, financial and a risk management across the Department and its arm’s-length bodies, nor does it have a consistent approach to overseeing its arm’s-length bodies and does not consistently obtain information on the financial activities of its these bodies. In addition, the Department has made decisions based on insufficient financial e information and analysis. In making future decisions, the Department should stop applying standard flat rate cuts to budgets and make awards to arm’s-length bodies that take further account of their differing cost bases and the differing impact that cuts may have on frontline delivery; and use a full analysis of costs, future savings, and pay-back periods when making decisions to merge or close arm’s-length bodies and to cancel projects. On the positive side, however, the report says, "Our previous studies have acknowledged evidence of good financial management within the Olympic programme." In summing up, Amyas Morse, head of the National Audit Office, said, "Financial management at the Department for Culture, Media and Sport has improved, but there is still a way to go before I can say that it is achieving value for money. Some decisions have been made based on insufficient financial information and analysis, as exemplified by the decisions to merge and close some arm’s-length bodies. This can leave organizations exposed and unprepared for the future and lead to high overall costs or the displacement of costs elsewhere. "In previous reports on the Olympic programme, I have recognised the positive role played by financial management. I expect to see the finance function gain similar influence within the Department overall, and a commitment to take decisions based on appropriate and accurate information. The Department should also seek a new, more coherent approach to the challenging task of overseeing its arm’s-length bodies." The NAO audits most public-sector bodies in the UK and produces value for money reports on the implementation of Government policies. We reported on Culture Secretary Jeremy Hunt's cost-cutting plans on 16th September, 2010.
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