A Parliamentary watchdog has called on the Ministry of Justice (MoJ) to improve its financial management following a critical report.

The Public Accounts Committee (PAC) published a report on the MoJ this week (25 January), criticising the ministry for not placing a strong enough focus on financial management as it embarks on spending cuts set to trim 23% from its £9bn budget.

The PAC, a select committee of the House of Commons, said it was concerned that the MoJ would not make the best decisions in reducing its spending due to a failure to monitor its own cost-base. It criticised the department on issues including not understanding the costs of its activities, not having enough visibility of the costs of policy proposals and not having a consistent approach to financial management.

The PAC also criticised the department for late return of its accounts in 2009-10 and for failing to recover £1.5bn worth of unpaid fees and penalties that it was due.

Margaret Hodge MP, chair of the committee, said: "If the Ministry of Justice is to minimise the impact on its frontline services of its tough spending settlement, it must fully understand the cost and value of those services. But the Ministry and its arm's-length bodies currently lack that detailed information. It is simply not acceptable that, after two years' work, the Ministry still does not fully understand the cost of its staff activities in its largest executive agency."

A MoJ spokesperson said: "The Ministry of Justice notes the criticisms in the PAC report, which is based on data from 2008 and 2009. Since then, as the report states, significant progress has been made in the way that the department manages its finances.

"We have made significant progress in standardising processes, financial data and the underlying systems. We place a strong emphasis on strong financial management and tackling the wide range of issues in this area. A major programme of work is underway to complete system integration by the end of 2012-13."

The MoJ issued proposals in November 2010 to achieve spending cuts imposed on the department as part of the coalition Government's comprehensive spending review. The planned cuts include a £350m reduction in the legal aid budget.

Click here to read the PAC report.