The BBC Governors have today laid before Parliament two independent studies by
the National Audit Office (NAO): The BBC's definition of overheads and BBC
Outsourcing: The contract between the BBC and Siemens Business Services for the
provision of technology services.
The reports were commissioned by the BBC Governors' Audit Committee as part of
its programme of value for money reviews and are published by the Governors
along with their response and a response from BBC Management.
Jeremy Peat, Chairman of the Audit Committee, said: "The Board of Governors -
and in future the Trust - is responsible for ensuring the BBC invests its money
wisely on behalf of licence fee payers.
"The programme of value for money studies
continues to provide us with constructive and independent insight into whether
the BBC is achieving best value for the public, along with important learning
points for the future.
"We look forward to further developing the programme and
to strengthening our relationship with the NAO under the new Charter, which will
include the NAO reviewing the extent to which the BBC's future self-help targets
are being met."
Sir John Bourn, Comptroller and Auditor General and Head of the NAO, said: "I am
pleased that my value for money reviews on the BBC are supporting the Governors,
and through them licence fee payers and Parliament, in assessing whether licence
fee income is being used to best effect."
The BBC's definition of overheads report
Governors welcome the NAO's confirmation that, since they approved the overhead
reduction target in 2000, the percentage of overhead as a proportion of 'output
spend' has reduced from 24% to 12%.
The NAO acknowledges there is no universal and standard classification of the
costs that make up overheads but conclude that the BBC's measure - which splits
content and non-content expenditure - demonstrates that the Corporation is
putting its resource into front-line services.
Governors accept the NAO's recommendations for ensuring overhead targets and
measures support the BBC in achieving best value for licence fee payers.
include: linking overheads measurement with the wider performance measurement
framework; clearer reporting to stakeholders; aligning overheads to business
needs; and comparing performance with others (benchmarking).
Governors have endorsed Management's plan to address the recommendations.
BBC Outsourcing: The contract between the BBC and Siemens Business Services for the provision of technology services
The NAO concludes that the deal with Siemens is delivering benefits: savings are
being achieved; performance against targets is high; and the BBC and Siemens
consider the partnering relationship is constructive.
Governors are satisfied that the partnership has delivered a number of major
benefits to the BBC and the services have provided value for money.
recognise some important learning points for the future and welcome the NAO's
recommendations for strengthening performance management.
Governors already had
in hand an internal review of technology governance and will ensure these issues
are addressed as part of that.
Governors welcome the NAO's acknowledgement that the BBC's estimated savings in
the first year of the 10-year contract are in excess of £20m and that an
additional £4m is expected from 2006/2007 onwards as redundancy savings
Governors believe that this year-on-year saving, together with
the £150m Siemens paid for BBC Technology Ltd at the outset of the
partnership, shows that the deal has been a financial success for the BBC.
However, the NAO report highlights the fact that total savings under the
contract could not, in practice, be guaranteed; that the savings made so far,
while substantial, are not fully in line with the figures reported to the
Governors in September 2004; and that the use of the term 'guaranteed savings'
Governors have indicated to Management the importance of adequate
controls and processes to ensure that information put to the Board is full and
accurate and that any subsequent amendments are reported to the Board.
Governors welcome the measures proposed to address these points and note that
their own advisers in the Governance Unit now provide an independent resource
for them to examine investment proposals in detail and review their progress.
Notes to Editors
The two value for money reviews are available online at
In 2003, the BBC and the Government agreed an evolution in the
Governors' oversight of value for money. As a result, the Governors' Audit
Committee, in dialogue with the Comptroller and Auditor General - the head of
the National Audit Office (NAO) - established a programme of independent value
for money reviews. The reviews are undertaken by the NAO or other external
agencies. This is enshrined in the 2003 amendment to the BBC's Agreement with
the Secretary of State. All studies under this programme performed by external
agencies, including the NAO, are reported to the BBC Governors and subsequently
laid before Parliament by the BBC together with separate responses from
Governors and Management.
The Government's draft Charter and Agreement, published in March 2006,
stated that the arrangements should continue and set out how the Trust should
strengthen its relationship with the NAO. This included the NAO's involvement in
reviewing the extent to which the BBC meets its future self-help targets.
BBC Governance Unit