Annex F
FINANCIAL MANAGEMENT REVIEWS
INTRODUCTION
1. The Treasury are undertaking a programme
of reviews of financial management in Government departments.
A review of ODPM has been undertaken but the Treasury do not intend
to release individual reports in full while the programme is still
underway. This note provides a summary of the findings and recommendations
in the ODPM review.
SUMMARY OF
THE REVIEW
REPORT
2. The central findings of the review were
that ODPM had successfully tackled the legacy of financial problems
and uncertainty that followed successive Machinery of Government
changes, including the creation and break up of the Department
for Environment, Transport and Regions. This had taken the form
of increased skills in central finance and a commitment from the
top of the Department to build on this and enhance financial skills
in the line. There was also a sound understanding of the challenges
ahead to move the quality of ODPM's financial management to the
next stage.
3. In respect of Local Government expenditure,
the systems for payment of grant were found to function well and
there was sound expertise amongst staff working on local government
finance.
4. The key areas the review identified for
development pointed to the Department achieving a further enhancement
of its financial management by end 2006-07, including:
— improving strategic financial planning
and developing a systematic linkage between strategy, finance,
performance and risk throughout the Department. A significant
component of this should be to strengthen the culture of identifying
and delivering efficiencies;
— defining clearly the financial management
responsibilities at key levels: the Board, central finance and
the line (including NDPBs). This should be accompanied by increased
importance attached throughout the Department to regular monitoring
and detailed scrutiny of financial performance data, with risks
identified early and action taken swiftly to address poor performance.
It should also include a strengthening of cost awareness, so that
value for money is more consistently achieved in procurement and
the delivery of programmes and projects;
— given capital-rich pattern of spending,
strengthening the understanding of Resource Accounting and Budgeting
(RAB) in key financial posts, particularly in the line, and developing
a greater understanding of the resource implications of capital
spending to ensure effective delivery will be very important;
— rolling out the Local Management
Accountancy Teams (LMATs) which sit in the line providing professional
financial support to Directors, and promoting best financial management
practice and compliance with corporate policies; and
— establishing a closer and tighter
financial relationship with the Housing Corporation and English
Partnerships, which account for about a quarter of ODPM's main
DEL. A separate internal review is underway on this.
5. For the Local Government DEL the key
challenge identified was to develop more robust structures, mechanisms,
and modelling tools, both to understand the cost implications
of policy decisions and risks to the DEL, and crucially to link
them to decision-making in a stronger and more collective way.
6. This challenge involves using the levers
available to ODPM and HMT to improve these aspects of financial
management across Government as a whole, for instance through
the New Burdens assessments.
7. The Review also considered the relationship
between ODPM and the Treasury, which it found to be generally
strong and open. It highlighted areas for improving ODPM's financial
management where the Treasury could assist. These include clarifying
and revisiting the thresholds for which capital projects need
Treasury approval; considering whether capital grants to the private
sector should score in Capital DEL rather than Resource DEL, as
at present; and assessing the accumulated impact of "ring-fenced"
budgets (ie budgets which can only be spent on a purpose specified
by Treasury).
8. An action plan for taking forward the
review findings is attached listing each of the detailed recommendations.
ODPM Finance
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