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• Full report - Financial management at the BBC

The BBC has strengthened its approach to managing its finances but should improve its financial reporting systems, according to a report by the National Audit Office (the NAO) for the BBC Trust published yesterday. This is to ensure the BBC can monitor more frequently how its spending aligns with its strategic and editorial priorities.

The NAO’s findings included the following:

• The BBC has successfully challenged its costs through a series of efficiency programmes. However, limitations in its financial systems mean that financial reporting is slow and resource intensive and that the BBC cannot easily monitor what it is spending against its strategic and editorial priorities, which will become more critical as resources become squeezed.
• Following recommendations in previous NAO reports, the BBC has begun to benchmark its costs, both internally and with other organizations, but it is not clear that the results of benchmarking have so far influenced the BBC’s cost reduction plans.
• The BBC is making more effective use of the skills and independence of its non-executive directors to help it scrutinize and challenge major financial decisions, following concerns raised previously by the Public Accounts Committee that the BBC did not subject spending decisions to sufficient challenge.
• When comparing annual results against forecasts, the BBC has underspent against its forecast by at least 3 per cent in each of the last four years. The NAO notes that some level of underspend may be prudent; however, there needs to be close scrutiny to ensure that the BBC is clear about how much resource could be available for reallocation.

The NAO also recommends that the BBC Trust and Ofcom work together to explore the scope for coordinating the information they require the BBC to report to them, as current separate reporting arrangements and timescales take up resources that could be better used elsewhere.

In its response to the NAO report, also published yesterday, the BBC Executive has committed to further improving the integration of its financial and performance reporting. The Executive is already upgrading its financial systems over the next eighteen months, to produce simpler, more standardised reports.

The Trust is satisfied that the actions the Executive has set out are appropriate. In its response to the NAO’s report, it has said:

• The Trust welcomes the NAO’s overall conclusion that the BBC’s approach to financial management provides effective support in delivering value for money for the BBC. We also welcome the NAO’s finding that the BBC has established strong governance arrangements and there is effective challenge at senior levels, including from the Trust and non-executive directors.
• The Trust will closely monitor the implementation of improvements to the BBC’s financial reporting arrangements, and will challenge the Executive to go even further in some areas such as the quality of information available to senior managers.
• While the Trust requires specific financial and performance information from the Executive as part of its role to scrutinise the BBC’s performance on behalf of licence fee payers, it will work with Ofcom to identify whether there are opportunities to co-ordinate the financial information that each body requires from the BBC.
• The Trust will ask the Executive to report back on the progress against the actions agreed in response to today’s report.

Anthony Fry, BBC Trustee with lead responsibility for value for money, said:

"We are pleased that the NAO has concluded that the BBC’s approach to managing its finances has improved and supports the BBC’s delivery of value for money for licence fee payers.

"At a time when the BBC’s resources are being squeezed and when it needs to achieve substantial savings over the next few years, getting this right is more important than ever and we will ensure that the improvements the Executive has committed to make are delivered – and that it goes even further where possible."

Amyas Morse, head of the National Audit Office, said today:

"The BBC has strengthened its approach to financial management which has helped it meet savings targets in the past. I welcome the improvements it has made.

"The BBC now needs to make sure it can monitor more frequently how its spending decisions align with its strategic and editorial priorities. This will put it in a better position to decide how best it uses its shrinking resource, in a way that offers value for money for the licence fee payer and still delivers the performance viewers and listeners expect."

Notes for Editors

1. Under the Delivering Quality First programme, the BBC is required to achieve sustainable savings of 20 per cent of its annual spending by 2016-17. The BBC also needs to manage its pension fund deficit, the reorganisation of its estate and its response to technological developments.
2. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained from The Stationery Office on 0845 702 3474.
3. The National Audit Office scrutinizes public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Amyas Morse, is an Officer of the House of Commons and leads the NAO, which employs some 860 staff. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of more than £1 billion in 2011.