From the Guardian today:
Jeremy Hunt’s UK Film Council plan criticised by audit office
DCMS told it failed to carry out reliable financial analysis of costs and savings in ‘bonfire of the quangoss
guardian.co.uk, Thursday 10 March 2011 00.01 GMT
The National Audit Office has criticised Jeremy Hunt‘s plan to cut bodies such as the UK Film Council, after finding that a hasty decision-making process led to a failure to carry out a reliable financial analysis of costs and savings.
An NAO investigation into the financial affairs of Hunt’s Department for Culture, Media and Sport also found a history of premeditated planning to overspend budgets allotted to arm’s length public bodies.
The budget excess was £110m in 2010/11 and £95m in 2009/10. “It should cease its practice of planning to overspend,” the report said.
Last summer the culture secretary announced swingeing cuts and closures among the 55 public bodies that fall under the remit of the DCMS – which include the Arts Council, Sport England and the British Library – as part of a so-called “bonfire of the quangos“.
The UK Film Council was the most high-profile casualty among 14 bodies earmarked for merger or closure with John Woodward, chief executive of the body responsible for backing films such as The King’s Speech, criticising the decision as having been taken with “no notice and no consultation”.
The NAO has produced a 34-page report into the financial management in the DCMS which has found that overall the department is not achieving value for money with its £5.7bn annual expenditure.
The NAO said that the DCMS “chose not to approach” public bodies to ask for information and that therefore the programme of mergers and closures was “not informed by a financial analysis of the costs and benefits of the decision”.
“The department did not obtain sufficient financial data about the bodies and based its decisions on estimates that did not take account of the full costs of closure such as lease cancellation, redundancy and pension crystallisation costs,” the NAO said. “It was therefore not in a position to estimate reliably what the cost of closing its bodies was, the value of future savings, or what the payback period would be.”
The DCMS set aside a £39m budget to cover “general restructuring costs” however the NAO said that given the lack of financial analysis “it is therefore not clear yet how realistic this budget is”. The report specifically cites the example of the Film Council, which has been responsible for handing out more than £160m of lottery money to more than 900 films, for which the DCMS is criticised for “not performing a sufficient analysis of the financial implications of the decision”.
The UK Film Council has an annual administration budget of around £3m, which Hunt has said would be better spent directly on making films. Its wind-down cost, obtained under the Freedom of Information Act, amounts to £11.3m.
The NAO also criticised the DCMS for opting to apply a blanket flat rate cut to the budgets of arts and culture bodies. “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 report said.
“Financial management at the DCMS has improved, but there is still a way to go before I can say that it is achieving value for money,” said Amyas Morse, head of the NAO. “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. This can leave organisations exposed and unprepared for the future and lead to high overall costs or the displacement of costs elsewhere”.
A spokeswoman for the DCMS defended the approach adopted by the department arguing that a consultation has taken place.
“We had consulted extensively over the summer with our bodies, which meant that we could take swift and informed decisions immediately after the settlement,” she said. “We have worked hard to protect frontline delivery and ensured that ALBs [arm’s-length bodies] have access to a number of different funding routes to secure this. We continue to work closely with our diverse range of sponsored bodies, striking the balance in each case between giving them due freedom and exercising proper oversight.”