The Department oversees the police service, and central government provides most of its funding, but individual forces have traditionally bought many goods and services independently. With central government funding being reduced by some £2 billion in real terms over the spending review period, however, the Home Office has taken a role in providing leadership and support to help forces improve their procurement and make savings. Many forces are now working with others to improve their buying power and make administrative savings, but most collaborations involve few forces and nearly half of all forces still have independent procurement teams.

Some forces have set up regional or national approaches to purchase common goods and services which many other forces take advantage of. However, common specifications for many types of goods and services do not exist, which reduces scope for collaborative buying. The NAO found at least nine separate specifications for each of five common types of equipment used by police officers, such as boots, body armour and high-visibility jackets. The NAO estimates forces could save up to a third of their costs in such areas, for example by agreeing a common specification for a uniform, such as that agreed by the Prison Service.

The Home Office’s efforts so far have been hampered by the lack of timely, accurate and detailed data, with national level data collection enjoying limited success and expenditure data up to two years out of date. This makes it difficult for it to target its interventions. Forces also reported mixed views about the support the Department provides. It has set up frameworks for body armour and vehicles which forces are legally compelled to use, and forces are on the whole positive about these, but it has been slow to build on this despite support from two-thirds of forces for further mandatory frameworks.

There are also tensions between the Department’s strategy to increase procurement at a national level, and its reforms to increase local accountability, such as the introduction of Police and Crime Commissioners.  The Department, forces and Commissioners will need to work together more effectively to identify and deliver further savings, particularly given the need to minimize the impact that cost reductions have on frontline policing.

The C&AG recognises that the duty to produce the Trust Statement was introduced in 2010-11 and the transition period was short. Key systems which maintain data relating to fines and penalties – which are case management systems, and not designed for financial reporting – did not have the capability or functionality to support financial statements.

As a result of these issues, HMCTS has not been able to produce the records required to support key areas of the 2011-12 accounts. Specifically:

• HMCTS were not able to provide sufficient evidence over the opening balance of receivables – although summary electronic records were available in all cases, HMCTS could not provide the original case files for audit purposes for several older debts;
• management are unable to prove the accuracy or completeness of the cash balance recognised in the Trust Statement; and
• HMCTS do not possess accounting records supporting the imposition of fixed penalties necessary for accruals-based financial statements. HMCTS are operationally responsible for fixed penalty collections, but information concerning the point of issue of fixed penalties is provided by local police forces. This, however, is not sufficiently robust to provide a reliable figure for use in the Trust Statement.

HMCTS was, for 2011-12, able to produce a listing of individual in-year transactions and debt balance in the Trust Statement. This is a significant improvement on 2010-11, when no transactional information was available, and has allowed the C&AG to confirm that, in all material respects, the transactions relating to fines and penalties processed by HMCTS, and recorded in the financial statements, conform to the relevant statutory and other authorities.

HMCTS continues to face a critical challenge given that the systems and processes for fines and penalties were not designed for financial reporting. In respect of the issues affecting his opinion on the financial statements, the C&AG recognises that HMCTS is working to improve the quality of the information available and expects these issues to be progressed as systems capability is increased. HMCTS should continue its ongoing review of the existing systems, and also consider how better financial reporting might help to improve collection and enforcement.

The Chief Executive Officer (CEO) of the SFO, Phillippa Williamson, left the organization on 16 April 2012. However, there is no evidence that due process was followed in instigating this voluntary redundancy (for example, determining whether alternative positions within the Civil Service were sought).

The CEO’s severance agreement provided for payment of £407,000 to MyCSP (who administer the Principal Civil Service Pension Scheme for the UK Government) to cover all additional pension costs arising from the early departure. The SFO should have gained approval from the Cabinet Office for this payment, but there is no evidence that the approval was obtained and therefore the NAO has deemed the payment irregular.

In addition, a special severance payment of £15,000 was made. Departments are required to gain Treasury approval in advance of making payments which are in excess of contractual amounts. There is no evidence that approval was sought and therefore this payment is also deemed to be irregular.

The new SFO Director, David Green, assumed office on 21 April 2012, and was therefore not party to the severance arrangements. He has decided against seeking retrospective approval for the transactions because he believes they were inappropriate. On becoming aware of the issue, the Director sought legal advice which confirmed that the agreement was legally binding and the SFO was legally obliged to make the payments. He commissioned an independent review into the matter with the results being shared with the Attorney General’s Office and has taken steps to ensure that all future exit packages are appropriately reviewed.

The National Offender Management Service, an Executive Agency of the Ministry of Justice, faces substantial financial and operational challenges, including a vulnerability to unexpected changes in the prison population, and will find it more difficult to meet its savings targets following decisions to drop some sentencing reforms designed to reduce the size of the prison population.

The National Offender Management Service achieved value for money in 2011-12, as it hit its savings target of £230 million while restructuring its headquarters and it has broadly maintained its performance, such as in reducing reoffending.

As a result of some sentencing reforms not going ahead, the Ministry of Justice lost around £130 million of savings. Given the loss of these reforms, the prison population is now unlikely to fall significantly over the next few years. This limits the Agency’s plans to close older, more expensive, prisons and bring down costs. The Agency’s savings target for 2012-13 of a further £246 million is challenging and it currently projects it will spend £32 million more than its budget. Its cumulative annual savings target increases to over £880 million by 2014-15. The Agency currently has a £66 million shortfall in the £122 million needed over the next two years to fund early staff departures aimed at bringing long-term reductions in its payroll bill.

The Agency has restructured its headquarters, reducing staff numbers by around 650 from around 2,400. Despite having fewer staff at its headquarters, prison governors, probation trust chief executives and other stakeholders consulted by the NAO generally regarded the restructure positively, considering it produced a more efficient organization with greater clarity on accountability. The Agency relies on the probation profession to deliver reforms and to reduce costs, but there are some tensions in the relationship. The NAO found that the Agency has done much to ensure knowledge of probation is captured at its headquarters but has recommended the Agency continue to engage with probation trusts to address their perception it lacks understanding of probation issues.

The Agency’s responsibility for offenders means that its core business is managing risk. It has strong risk management mechanisms at its headquarters and in the oversight of prisons. However, there are gaps in how the Agency consolidates the recording of risks from prisons at a regional level, meaning the Agency may be unaware of risks in different areas.

September 2012

A report published today by the National Audit Office has found the UK Border Agency and Border Force have achieved both cost reductions and performance improvement since 2010, but insufficiently coherent planning and delayed delivery of key projects have hampered faster progress.

By automating processes and becoming more flexible, the Agency aims to cut costs by at least £350 million between 2011 and 2015, partly through reducing the number of staff by 4,500 full time equivalents.

However, the Agency has not based its target operating model on clear performance priorities and there is a lack of detail in, for example, exactly how caseworking will change and how changes in operations could affect costs and performance levels. The current business unit structure does not offer the Agency the flexibility it needs to respond to unpredictable levels of applications for immigration and asylum.

The Agency is reliant on the successful implementation of the £385 million Immigration Case Work IT system and wider changes to business processes within caseworking and better working practices in the Border Force to deliver further savings and improvements in service delivery. Immigration Case Work is a year behind schedule and exceeded its original 2011-12 budget by £28 million. Despite progress being slower on Immigration Case Work than expected, the Agency reduced its staff levels more quickly than planned, with 2,100 full-time equivalent staff leaving during 2011-12. This resulted in a need to hire new staff to deal with spikes in demand.

Achieving these significant changes require strong leadership and good communication, which today’s report finds have not been evident enough to date. There have been well-documented problems within the Border Force.  Only one-quarter of staff believe the Agency’s board has a clear vision for the future, while fewer than one in five consider that the organisation manages change well. 

The Agency has recognised its deficiencies and is preparing a new transformation programme for launch in the autumn.  Its aim is to reduce management layers and bring root and branch change to operations and performance by 2015.

The errors highlighted in today’s report include £20.4 million paid to legal aid providers where the claim was not in compliance with the statutory fee regimes; and £15.2 million relating to legal aid payments for people who were not eligible or whose eligibility could not be proven. The total estimated amount of irregular payments has fallen by 28 per cent when compared with the 2010-11 accounts (from £49.5 million to £35.6 million).

The Commission has made significant improvements in the level of total irregular expenditure reported in 2011-12 when compared with 2010-11. The main areas of improvement are immigration and family Legal Help schemes (where estimated irregularity has fallen from £14.0 million to £2.8 million) and the Civil Representation Scheme (where irregularity has fallen from £18.2 million to £12.8 million).

However, irregularity has increased for some schemes. For example, claims made by solicitors and advocates in relation to Crown Court cases, which since 1 January 2011 have been administered by the Commission instead of HM Courts and Tribunals Service, have seen the estimated irregularity increase significantly since 2010-11 from £1.0 million to £4.5 million.

The Commission continues to take steps to improve, such as further strengthening compliance testing and examining the root causes of error. This is particularly important at this time in light of the planned legal aid reforms under the Legal Aid, Sentencing and Punishment of Offenders Act 2012.

In 2010-11, the C&AG also limited the scope of his audit opinion in respect of the receivables balance (debt owed to the Commission by people receiving legal aid), as the Commission was unable to provide sufficient evidence to support the value of the balance.  The Commission has undertaken a substantial amount of work in 2011-12 to review and cleanse the recording and reporting of debt. The C&AG has, as a result of this work, been able to provide a clear opinion in this respect for 2011-12.

• In Kent, a project to improve the way that they prepare for Crown Court trials.
• In Northumbria, a partnership with the third sector to support Black and Minority Ethnic women who have experienced domestic abuse, honour-based violence and forced marriage.
• In Warwickshire, the creation of a ‘one-stop shop’ Justice Centre.

The report is structured according to 12 widely-accepted principles for running a successful project. It then draws out, under each principle, specific examples of good practice emerging from the projects that we examined.

March 2012

However, today’s report also concludes that, while financial control is good, the Home Office could do more to integrate its financial and operational planning and thereby understand better the link between resources and performance. In addition, many of the strengths which the Department demonstrates in its core business are much less apparent in its ‘change programmes’ which it must manage more effectively.

According to the NAO, the Department is starting to benefit from its new governance structures. There are qualified professional finance staff at senior levels and clearer information is relayed by senior management. There are stronger control mechanisms in place over capital spending and the key elements of financial control – good planning, monitoring and reporting – are being carried out well.

However, today’s report highlights current challenges to financial management in the Home Office. The Department has clear plans to reduce costs in its core activities but business areas have not fully considered efficiency and effectiveness when evaluating where cuts should be made. The Department will need to achieve further savings of £1.1 billion a year by 2014-15 but a third of this sum remains uncertain.

Reductions in funding from the Home Office mean that police forces must make savings worth around £1.5 billion by 2014-15 through efficiency improvements; but, in 2011, around two-thirds of forces had shortfalls in their cost reduction plans, amounting to £500 million in total. The Department will shortly be in a position to confirm how far this savings gap has been covered in the plans.

There are risks to the successful delivery of the Department’s change programmes, specifically in respect of the development of the National Crime Agency (NCA) and Disclosure and Barring Service (DBS) and the phasing out of the National Policing Improvement Agency (NPIA). The Department needs to control costs, especially transition costs, more strongly and explicitly.