Despite the fact that the Department for Environment, Food and Rural Affairs has made improvements in its financial management, the NAO cannot yet conclude that the Department is achieving value for money in its financial management activity. This is because the spending watchdog expected faster progress in improving performance since it last reported in 2008 and a higher level of financial maturity, given the resources spent and the focus on financial management.
The Department has undertaken a number of projects designed to strengthen its financial management. These have had some positive results, such as revised management reporting and improved forecasting, although the Department has not fully assessed all the benefits of these projects.
The Department has improved its financial capacity and capability, by increasing the number of permanent, qualified finance staff and also by offering financial skills training courses for non-financial staff. However, there are still weaknesses in financial capability; and financial skills could be better integrated across the Department. The Department should also focus on improving its commercial skills, such as contract management.
Internal control and risk management, both in the Department and its arm’s-length bodies, have improved, but the Department should now focus on developing greater oversight of those bodies. The Department has started to work more closely with them, but it needs to be more proactive in its engagement, so that this becomes ‘business as usual’. It should also develop a strategic model for engagement with its arm’s-length bodies, to understand the risks that they face and opportunities open to them.
Since 2002, Defra has consistently underspent against its Parliamentary estimate. The underspend in 2010-11 was £530 million (10 per cent). The Department has, however, improved its management of expenditure against its departmental expenditure limit, reducing its underspend in 2010-11 to £34 million (one per cent of expenditure).