3. Financial management
7. We were dismayed by the comments of the Comptroller
and Auditor General on the 2001-02 Defra Resource Accounts which
highlighted some key areas of weakness in Defra's financial management.
In particular the National Audit Office was critical of Defra's
systems of budgetary control and considered that weaknesses in
this area led to a significant underspend in 2001-2002. There
was a danger that, as a result of poor financial management, the
Department was not equipped to respond quickly and effectively
to change. This is particularly pertinent at the moment because
the ongoing Haskins Review is likely to recommend radical changes
in the way the Department delivers its rural policies. We accept
that Defra is now working to bolster financial management and
ensure that flexibility is built into the budgeting process. The
Department told us of an 'activity baseline review' they were
carrying out in order to "work out with our Ministers whether
we are spending the right sums of money on the right sorts of
things."[6]
We warmly welcome the steps
the Department is taking to match its policy priorities with appropriate
resources and to develop its ability to respond to changes in
priority. We expect there to be sufficient improvement in Defra's
financial management to enable the Comptroller and Auditor General
to issue a clear audit opinion in 2002-03 and beyond. We urge
the Department to continue to attach a high priority to improving
its financial management systems in order efficiently and effectively
to deliver policy and programmes, and ensure proper accountability
to Parliament.
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