Ministry of Justice financial management

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today 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. So is the fact that it was the only government department to miss the deadline for producing its accounts for 2009-10.

“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. Unpaid court fines and penalties have been increasing year-on-year. As government devolves more to arm’s length bodies it is crucial that all government departments ensure rigorous accountability.

“We welcome, therefore, the assurance by the Ministry’s accounting officer that he is now giving financial management the attention and priority it deserves. We will want to see evidence that improvements really are being made.”

Margaret Hodge was speaking as the Committee published its 16th Report of this Session which, on the basis of evidence from the Ministry of Justice (the Ministry), examined strengthening accountability, improving financial management, and recovering costs and collecting fines and penalties.

Strong and effective financial management and control are crucial to any organisation and especially so for the Ministry which delivers its services through a wide range of arm’s length bodies and agencies, including the courts, prisons and probation services. The Ministry’s Spending Review settlement is tough, requiring a 23% reduction to its resource budget over the next four years.

The Ministry has a range of financial management processes in place but lacks a consistent approach across its business, and, to date it has not integrated financial management into its policy and operational workings. Until recently it was failing to place a sufficiently strong focus on financial management. So, for instance, it was the only major government department to deliver its 2009-10 accounts late. We welcome the assurances given to us by the Ministry’s Accounting Officer that he and his team are now giving financial management the attention and priority it deserves. We look forward to seeing the evidence that these improvements really have delivered, and that is why we have decided to call the Accounting Officer to give evidence again in a year’s time.

It is essential that the Ministry implements its Spending Review settlement on the basis of a full understanding of the cost and value of its services, so that financial cuts are best targeted to minimise the impact on frontline services. Yet the Ministry and its arm’s length bodies currently lack the detailed information they would need to do this. It is not good enough that by December 2010, the Ministry expects to have enough information on only 61% of the cost of its staff activities in its largest agency, with the remaining 39% due by December 2011. 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 terms of its arm’s length bodies, striking the right balance between oversight and direction is difficult, but, as other bodies across Whitehall have found, having a clear direction, the details of which are formally agreed by both parties, is essential. So too are strong leadership and a shared sense of purpose. The Ministry now needs to make full use of all the levers available to it to oversee the performance of its arm’s length bodies, such as framework documents, operational reviews, and accountability meetings.

Fee recovery and fines collection have to be priority areas for improvement. In 2009-10, the Ministry recovered around 82% of the cost for Family Court and Civil (Magistrates’ Court) business. Going forward, the Ministry needs to improve recovery rates where it does not currently recover the full cost of services provided. On fines collection, there was little sign of the sustained improvement we were promised when we last took evidence in 2006. The Ministry considered it had made significant improvements to the fine payment rate, which had risen to 90% over the six months to 30 September 2010. But outstanding fines and penalties over six months old rose again in 2009-10 and stood at just under £1.5 billion at 31 March 2010. Confiscation orders were a major component of this outstanding balance, with no one department taking the lead for enforcement and monitoring, resulting in a lack of co-ordinated recovery action.