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.