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Department for Environment, Food and Rural Affairs: Managing front line delivery costs

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.

"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

Notes for Editors

  • In 2009-10 the Department for Environment, Food and Rural Affairs spent £4.2 billion through its 19 non-departmental public bodies and executive agencies. This NAO report examines four of the Department's larger delivery bodies: Animal Health, the Centre for Environment, Fisheries and Aquaculture Science, the Environment Agency and the Food and Environment Research Agency.
  • Ultimately, departmental accounting officers are accountable to Parliament, but the Chief Executives of non-departmental public bodies, as Accounting Officers in their own right, also have that accountability. In addition to the sponsoring department, the board of a non-departmental public body has the responsibility of holding the body to account and ensuring value for money.
  • Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained from The Stationery Office on 0845 702 3474.
  • The Comptroller and Auditor General, Amyas Morse, is the head of the National Audit Office which employs some 880 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.

PN: 50/11