BIS needs more coherent planning, rather than short-term fire fighting, to meet its spending review challenges and deliver better value for money.

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A report by the NAO has commended the Department for Business, Innovation and Skills for keeping its financial management on track during a period of substantial organisational change. The spending watchdog warns, however, that the Department will have to manage a much tighter financial position following the 2010 spending review.

Following the spending review, the Department is targeting a 27 per cent reduction, after inflation, in core resources between 2010-11 and 2014-15. However, this does not take account of a near doubling in student loan payments arising from the higher education reforms, much of which the Department expects will be repaid sometime after 2014-15. Once these are included, the Department’s total spending is forecast to reduce by 6 per cent, after inflation, during the four year period.

The Department is also working on a number of other reforms associated with the settlement, including attracting private investment into Royal Mail, setting up the Green Investment Bank by September 2012, and providing £1.3 billion to modernise the Post Office network.

The Department has worked hard over the last 18 months to improve its financial management, and current practices have enabled it to keep its day-to-day financial management on track.

However, the Department recognises that its current financial management capacity and skills will not be sufficient if it is to manage the substantial challenges ahead. It is implementing a number of change programmes aimed at integrating financial management across the department and its partner organisations. The outcomes of this are as yet unclear and the NAO has identified key areas for action. These include improving the quality of information available to support decision-making, strengthening cross-department arrangements for scrutinising investment proposals, and improving sponsorship of partner organisations.

"The Department should meet the challenges posed by the 2010 Spending Review through coherent strategic planning, rather than short term fire-fighting.

"Until it does so, the Department will not achieve the value for money it needs from its financial management activities."

Amyas Morse, head of the National Audit Office


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