Committee of Public Accounts: Press Notice


Publication of the Committee's 40th Report, Session 2007-08

Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:

"In two successive years, 2006-07 and 2007-08, this major government department budgeted to spend more than the funding limits it had been given by the Treasury. As the risk of overspending became clear, the Department had to make in-year budget cuts to its planned activities.

"This is a clear example of poor financial management harming the delivery of services. The Department has now established more rigorous financial and outcome monitoring systems but the many lessons of what had gone wrong should be closely studied.

"Foremost among them are that a taut financial management culture has to be instilled throughout the organization, from the Management Board downwards. Central to that culture is recognition of the need constantly to scrutinize and challenge the financial management of resources and hold budget holders to account."

Mr Leigh was speaking as the Committee published its 40th Report of this Session which, on the basis of evidence from the Department for Environment, Food and Rural Affairs, examined the steps taken by the Department to improve its management of expenditure and to improve the cost-effectiveness of its delivery bodies.

In 2007-08, the Department received £3,617 million from the Treasury. The Accounting Officer is expected to manage these resources efficiently and effectively to deliver a range of services and operations within the funding provided by Parliament. The Department failed to allocate final budgets to each of its business areas until five months into the 2007-08 financial year because:

planned expenditure was in excess of funds provided;

budget holders did not declare all financial commitments from the outset; and

the costs of unforeseen floods and the outbreaks of animal disease had to be managed.

A similar situation had arisen in 2006-07 when the Department had to make mid-year budget reductions of £170 million to avoid the risk of overspending. The late notification of the reductions had an adverse impact on performance. The Marine and Fisheries Agency, for example, had to defer its vessel decommissioning grants scheme to trawler owners intending to leave the fishing industry.

The Department's problems in managing its expenditure in the last two years result in part from the difficulties faced in sponsoring 31 delivery bodies, each with its own administrative functions. Few of the organisations are using the Department's Shared Services Organisation and their approaches to setting budgets and monitoring progress differ. Obtaining timely and realistic financial reports from delivery bodies was also difficult. A lack of awareness amongst the Department's Board Members of good financial management practice, together with cultural issues which did not prioritise financial management at a corporate level, added to the challenges.

The Department's Management Board has since put in place more rigorous financial and outcome monitoring systems. Having agreed budgets for 2008-09 that accord with the Department's allocation from the Comprehensive Spending Review 2007, the problems of 2006-07 and 2007-08 are not expected to recur in 2008-09.