The DCMS has cut its quango without taking into consideration the cost implications for doing so, a National Audit Office investigation has revealed.
Last year, the Chancellor George Osborne made it abundantly clear that all decisions in government must be made after understanding the cost and financial risk implications of those decisions. Seems like Jeremy Hunt’s department either has not received the memo or did not pay any heed to the Chancellor’s directive.
The NAO report, Financial Management in the DCMS, says there was no thorough financial analysis before the department decided to cut quangos such as the UK Film Council and the Football Licensing Authority. It points out costs of cutting staff, the resultant redundancy costs or the financial penalties for terminating property leases before their terms were up did not factor into the decision at all.
“Undifferentiated top-slicing of budgets can leave organisations exposed and unprepared for the future, and can lead to higher overall costs or the displacement of costs elsewhere,’ the NAO report said. ““Despite setting a £39 million budget to cover general restructuring costs across the department and its arm’s-length bodies, the DCMS has not identified what those costs would be, or what proportion would be borne by bodies themselves. It is therefore not clear yet how realistic this budget is.”
The decisions to cut some budgets by 15% such as the Football Licensing Authority and British Film institute while other budgets such as the Royal Parks Agency were cut by 20%-25% – these were done in an arbitrary fashion without any due diligence, the report suggested. In addition, the spending watchdog criticised the department for budget over commitment of £95 Million in 2009-10 and £110 Million in 2010-11.
“It based its decisions on estimates which did not take account of the full costs of closure such as lease cancellation, redundancy and pension costs. The decision was not informed by an estimation of future savings or of what the pay-back period would be.”
However, there were some positives in the report as well. According to the report, the financial management at DCMS has “improved” but there is still a long way to go before taxpayers gets “value for money”. It also praised the DCMS on managing Olympic finances well so far.
“Some decisions have been made based on insufficient financial information and analysis, as exemplified by the decisions to merge and close some arm’s-length bodies,” Amayas Morse, the Head of the NAO said. “This can leave organisations exposed and unprepared for the future and lead to high overall costs or the displacement of costs elsewhere.”
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