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Foreign Office does not achieve 'value for money' on embassies

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The National Audit Office (NAO) has attacked the Foreign and Commonwealth Office (FCO) for frittering away millions of pounds on its embassy buildings and overseas estate

In the report released today (attached right), the government’s spending watchdog found that a third of all FCO building projects had run over budget by more than 10 per cent and that, since 2002, this cost overrun since had ballooned to nearly £57 million against a total of £250 million.

Among the findings was poor monitoring of capital projects with the Manser Practice’s Harare Embassy - which came in way over budget - being singled out as a prime example of inadequate oversight over the progress of the capital project portfolio’.

The report reads: ‘The Foreign and Commonwealth Office lacks a clear strategy and comprehensive data to manage its overseas estate effectively, according to a report published today by the National Audit Office. 

It goes on: ‘The FCO is taking positive steps to adapt its properties to new global challenges but has not achieved value for money in the management of its estate as a whole.’ 

The report comes as fears grow about whether the FCO will continue to plough money into its larger embassy projects such as Tony Fretton’s Warsaw Embassy.

Key NAO findings

- We collated data on 42 projects completed since 2002. A third of the projects we analysed exceeded their initial approved budget by over 10 per cent, and two-thirds of projects were delivered late. We estimated the total cost overrun since 2002 to be approximately £57 million against a total of £250 million. Information was not available to enable us to quantify the extent of the total delays across the capital portfolio.

- The terms of reference for the FCO Investment Committee require it to ‘monitor 3.8 approved projects quarterly’ and ‘review projects forecast to exceed agreed budget or forecast completion days.’ Our review of Committee minutes and discussions with members showed this did not always occur. For example, although the 54 per cent cost increase (to £27 million) in Harare was detailed in an Investment Committee submission in April 2008, there was no evidence of Committee discussion until January 2009. Our recent report on the FCO’s financial management also identified weaknesses such as post-project reviews not being shared with the Investment Committee.

- Controls over in-year capital spending across the portfolio are poor, with a 3.9 consistent failure to match spending to budget. In 2008-09, the Estates and Security Directorate was allocated £120 million capital funding. Late in the financial year, it identified a predicted underspend of £5.7 million. In an attempt to deal with this, the Directorate brought forward spending which resulted in a £11 million (9 per cent) overspend, despite an office-wide drive to stay below budget.

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