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In 200708, the Department for Environment, Food and Rural Affairs (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.
On the basis of a report by the Comptroller and Auditor General,[1] the Committee took evidence from the Department on the steps taken to improve its management of expenditure and to improve the cost-effectiveness of its delivery bodies.
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