BBC's budget management 'slow and resource intensive', says watchdog - The Guardian

The BBC's stewardship of its £3.9bn annual spend is "slow and resource intensive", according to a report by the public spending watchdog.

On Tuesday the National Audit Office (NAO) published a report on financial management at the BBC saying the corporation should do more to streamline internal financial reporting, and monitor more closely whether its spending decisions were aligned with its strategic and editorial objectives.

The NAO's report added that the BBC had strengthened its approach to managing its finances, but outlined several areas in which it could be improved further.

It comes as the BBC grapples with the implementation of former director general Mark Thompson's £700m Delivering Quality First cost-saving scheme.

"The BBC's internal financial reporting and planning processes are slow and resource intensive," the NAO said.

According to the NAO, the process of agreeing the BBC's annual budget "consumes more management time than in comparable organisations".

"It takes between five and six weeks from the end of each month for that month's financial results to reach the executive board," it added.

"The delay has the potential to hinder the BBC's ability to take decisions at corporate level in [the same] year, should it need to do so."

The report said the corporation's internal reporting processes were slowed down by finance systems that "do not allow it to produce automated reports showing spending against its priorities. Preparing this analysis requires significant manual effort."

It added: "We were told of one instance where BBC staff had opted not to request information that would be useful in running the business due to the effort it would take."

Amyas Morse, conptroller and auditor general of the NAO, said: "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."

In its response to the report, BBC management said it agreed with its first three recommendations relating to strategic and editorial objectives, the streamlining of its reporting arrangements and risk identification.

However, the executive did not comment on the fourth recommendation, that the BBC Trust and media regulator Ofcom should work together to explore the scope for "harmonising regulatory reporting requirements".

BBC Trustee Anthony Fry said: "We are pleased that the NAO has concluded that 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."

The report did not address the issue of pay. On Thursday MPs will question BBC executives, including Fry and chief financial officer Zarin Patel, over the £450,000 payoff agreed for former director general George Entwistle.

The BBC received £3.6bn in licence fee income in 2011-12, with a further £300m generated by its commercial activities, the NAO said.

The NAO said the corporation faced "significant financial management challenges" after the level of the licence fee was frozen two years ago, along with additional funding responsibilities such as the BBC World Service.

It added that the BBC's pension deficit had widened further by £251m in 2011-2012 to £1.2bn despite reforms and additional contributions, with the possibility that it "may well increase further".

The report said the BBC had "successfully challenged its costs" through a series of efficiency programmes while "broadly improving its performance", maintaining audience numbers and increasing audience approval numbers.

But it said the BBC needed to do more with its benchmarking of costs, both internally and against outside organisations, otherwise "the BBC cannot be confident that its savings targets are pitched at the right level".