"Defra cannot properly challenge costs or be confident
of getting full value for money from its arm's length bodies if it
does not have the necessary information. It will need this in order
to know that scarce resources are being well spent and that cost
reductions are genuinely being achieved."
Amyas Morse, head of the National Audit Office, 22 July
2011
The Department for Environment Food and Rural Affairs needs to
scrutinise and challenge its arm's length bodies so that it can
oversee cost reductions with minimal disruption to frontline
services, according to a report today by the National Audit Office.
Those bodies understand their own costs reasonably well; however,
the Department still has more to do to achieve the full
understanding of the relationships between cost, outputs and
outcomes needed to be confident that it is securing value for
money.
The Department does not want to micro-manage its arm's length
bodies and so gives them considerable operational autonomy. It has
begun to develop ways of more systematically collecting high level
financial management information from arm's length bodies and has
now rolled out a standard template for collecting financial
management data. However, the template does not include data on
costs of frontline delivery and focuses on the monitoring of
expenditure against high level budgets. It therefore does not show
whether the full costs of frontline activities are accurately
measured and well managed.
This study uses four of the Department's larger delivery bodies
as case studies. The report notes that the Department has few
indicators to assess whether the costs of activities in these
bodies are high or low. All four of the bodies that the NAO
examined have started to assess costs against internal benchmarks.
However, Defra has not requested this data. Arm's length bodies
have struggled to identify external cost benchmarks.
The Department does not have comparable information about the
unit costs of front-line work. This is partly a reflection of the
diverse nature of the activities undertaken by Defra's arm's length
bodies. But the Department has not asked arm's length bodies to
explain the basis of their cost calculations.
Publication details:
HC: 1279, 2010-2012
ISBN: 9780102969962