FINANCIAL MANAGEMENT IN THE FOREIGN AND COMMONWEALTH OFFICE
Publication of the Committee's 3rd Report, Session 2009-10
Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:
"Praise is due to the Foreign and Commonwealth Office for making significant progress in recent years in how it manages its finances. Recognizing long-standing weaknesses in its systems, including a lack of financial skills and personal accountability, the Department established a project for improvement with the means for measuring progress. It also recruited professionally qualified staff at the top, including a new finance director, and upped the number of accountants in its finance area.
"The benefits have been tangible across the Department in the form of better financial skills and understanding of the importance of good financial management and improved confidence in the figures, leading to better informed decisions.
"The FCO has demonstrated its keenness to share across government what it has learnt about improving financial management practice but the Treasury has perhaps not done enough so far to lead the process.
"The Department is well aware that it must not let up but work to make sure that all the improved practices and procedures become an integral part of its everyday activities. It now has better information on the costs of individual embassies but must work towards a better grasp of the costs of its activities around the world, to maximize efficiency in a tough economic climate. This Committee was pleased to hear that the Department had no plans to sell off historic residences, which are national assets."
Mr Leigh was speaking as the Committee published its 3rd Report of this Session which, on the basis of evidence from the Foreign and Commonwealth Office, examined its developing financial management capability and capacity, and on the challenges it faces to embed sound financial management at all levels across its business.
Against a backdrop of historically weak financial management, the Foreign and Commonwealth Office has made considerable progress over the past three years to improve the accuracy, reliability and timeliness of financial information. Having recognised the need to take action, the Department set up its 'Five Star Finance' Project with a series of targets and milestones, which is due to be completed in the summer of 2010. The challenge is now to complete the project successfully, and to ensure that all the improved procedures and practices are embedded in the normal running of the business.
It was encouraging to take evidence on the positive steps taken by the Department based on firm leadership from the top. In particular, the Department has benefited from recruiting a professionally qualified finance director, taking full advantage of having an experienced non-executive director on the Board, and increasing the number of professionally qualified accountants within the finance function. The Department is also playing its part in sharing good practice across Whitehall, although it was unclear to the Committee whether the Treasury was doing enough to lead the process of sharing knowledge of financial management practice across the whole of government.
Following four successive years of significant under-spends, the Department has strengthened its budget management and costing of activities, including having better information on the costs of individual embassies. The Department now needs to move to the next level, with increasingly refined costing of its different activities, and benchmarking costs across different locations to help drive efficiency.
Over half of the Department's expenditure of some £2 billion is paid out in foreign currency. As a result of the weakening of sterling against other major currencies, the Department has suffered a significant reduction in its purchasing power. To provide budget certainty, the Department forward purchases US dollars, euros and yen.
The Department confirmed that its aim is to maximise the benefits from each of its embassies in pursuit of British trade and foreign policy interests, and that it has no plans to sell-off any of its prestigious buildings around the world.