Press Release - Managing financial resources to deliver better
public services
20 February 2008
Since 2003, government departments have improved the management
of their finances. But stronger financial management is now more
important than ever to ensure that every pound of public money is
spent to best effect in an increasingly challenging financial
environment.
Central government manages more financial resources than ever
before, and these are expected to grow to £678 billion a year by
2010-11 – some £11,000 for every person in the UK. But, many
departments have tighter settlements under the 2007 Comprehensive
Spending Review than they had under previous spending rounds.
Today’s report, a follow-up to the NAO’s 2003 report, looks at how
capable departments are at managing their financial resources.
With Treasury guidance and support, Departments are producing
better information about their financial performance. It is, for
example, helping them to manage their assets better, helping them
to dispose of any they no longer need. Their finance functions have
seen an increase in the number of professionally qualified staff.
Most departments now have a professionally qualified Finance
Director on their main Board, and non-executive Directors are
providing robust, independent challenge to these Boards. Together,
these developments have raised the profile of financial resource
management at the very top of departments.
However, six departments, accounting for over £45 billion (eight
per cent) of total central government expenditure, still do not
have a professionally qualified Finance Director on their main
Board, despite the Treasury requirement that they do so by December
2006. Only 40 per cent of departments invariably provide
decision-makers with a full analysis of the financial implications
of policy proposals. Financial management matters are not
automatically included in the performance assessment criteria of
Permanent Secretaries and other Senior Civil Servants. And, not a
single Permanent Secretary holds a professional finance
qualification.
Management of financial resources is the responsibility of
everyone in a department, not just the central finance team. The
Treasury and other stakeholders have taken steps – such as through
their Finance Skills for All training course, to improve the
financial skills and awareness of non-finance staff, who are
usually the budget holders responsible for the day-to-day
management of departments’ financial resources. But take-up remains
low. Nearly 70 per cent of departments cited the level of skills of
non-finance staff as one of the three most significant barriers to
improving financial resource management across government.
Departments have not improved their record of forecasting how
much money they need each year, particularly in relation to capital
spending such as money spent on building projects. In at least four
of the five years between 2002-03 and 2006-07, three departments
under-spent their capital budgets by more than ten per cent
compared with their final forecasts. Over the same period, the
aggregate total of under-spending on capital in excess of 10 per
cent was £4.9 billion across the whole of government.
As part of the 2007 Comprehensive Spending Review, Treasury
required departments to state the cost of achieving each of their
Departmental Strategic Objectives. Although some departments have
already made significant progress here, by bringing together
financial and service delivery information, more than half of
departments have not.
NAO recommendations include that all departments ensure that
they have a professionally qualified Finance Director at Board
level. They should also include in their appraisals of senior
managers how well they have managed their financial resources. And
they should bring together information on spending and on
performance results so their boards can improve the basis on which
they evaluate policy proposals, allocate resources and assess
business performance.
Tim Burr, head of the National Audit Office said
today:
“Departments’ financial management has improved since
2003. But, tighter financial settlements, the drive for efficiency
savings and rising public expectations about the quality of public
services mean that there should be no let-up in the government’s
efforts to extract maximum value from its use of taxpayers’
money."
Notes for Editors:
- Six departments do not have a qualified finance director on
their board. The largest of these departments are the Ministry of
Defence (accounting for over £40 billion of total government
expenditure), and the Department for International Development
(accounting for nearly £5 billion of total government expenditure);
see paragraph 6 of the report. The remaining four departments are
the Crown Prosecution Service, the Office of Fair Trading, the
Office of Gas and Electricity Markets and the Water Services
Regulation Authority (OFWAT).
- Three departments under-spent their capital budgets by more
than ten per cent compared with their final forecasts. These were
the Department for Constitutional Affairs (now the Ministry of
Justice), the Home Office and the Department for Culture, Media and
Sport.
- Departmental Strategic Objectives are the overarching aims of
departments as specified in the 2007 Comprehensive Spending
Review.
- Press notices and reports are available from the date of
publication on the NAO website, which is at http://www.nao.org.uk/.
Hard copies can be obtained from The Stationery Office on 0845 702
3474.
- The Comptroller and Auditor General is the head of the National
Audit Office which employs some 850 staff. He and the NAO are
totally independent of Government. He certifies the accounts of all
Government departments and a wide range of other public sector
bodies; and he has statutory authority to report to Parliament on
the economy, efficiency and effectiveness with which departments
and other bodies have used their resources.
Press Notice 9/07
All enquiries to Donna Watson, NAO Press Office: Tel: 020 7798
7038
Mobile: 07917 555 388