'Poor financial management

25 Jan, 2011

The Ministry of Justice risks making ‘ill-informed’ cuts to services when attempting to slash £2bn from its budget, unless it gathers adequate data and fully understands what it spends, the Public Accounts Committee (PAC) said today.

In a report on financial management at the MoJ, the government spending watchdog says there is a risk that, in cutting its budget by 23% from £9bn to £7bn, the ministry ‘will not achieve best value for money and will not understand properly the impact of cost reductions on frontline services’ without ‘combined financial and operational performance data’ and ‘a full understanding of its costs’.

The report says that the MoJ ‘lacks a consistent approach’ and that until recently was ‘failing to place a sufficiently strong focus’ on financial management. However, the report says that ‘the general direction of travel is right and the ministry is to be congratulated on its improvements so far’.

The PAC report also criticised the failure of the MoJ to recover £1.5bn in uncollected fines and penalties, up from £900m in 2005/06.

Committee chair Margaret Hodge MP said: ‘If the Ministry of Justice is to minimise the impact on its frontline services of its tough spending settlement, it must fully understand the cost and value of those services. But the ministry and its arm’s length bodies currently lack that detailed information.

‘It is simply not acceptable that, after two years’ work, the ministry still does not fully understand the cost of its staff activities in its largest executive agency. This is indicative of the poor state of financial management in this ministry.

‘We do not share the view of the ministry that there is little it can do to influence the behaviour of its arm’s length bodies. Improvement is badly needed here, as it is in the area of fee recovery and fines collection.’

Hodge criticised the MoJ for being the only government department to deliver its accounts late in 2009/10.

‘There is a risk that the ministry will make ill-informed cuts to services if it makes cost savings without a proper understanding of value for money,’ the report says. ‘Given the size of the central resource available to the ministry, a comprehensive understanding of the costs and value of services must be a priority.’

In October, the government ordered the MoJ to cut its budget by 23% from £9bn to £7bn by 2014/15. The Public and Commercial Services Union warned at the time that 15,000 of the department’s 80,000 jobs would be put at risk.

In November, the PAC grilled MoJ permanent secretary Suma Chakrabarti after a July report of the National Audit Office found that the MoJ lacked understanding of the costs of its policy proposals, and did not properly understand the costs of its activities in prisons, the probation service and the courts.

Chakrabarti admitted at the time that the department had a ‘fair way to go’.

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