Forestry Commission Wales (FCW) has followed previous audit recommendations and developed clear and appropriate priorities. It has also improved its core processes such as procurement and managing grants and risks, and is now making good progress in meeting the expectations of its commercial timber customers. However, planning gaps in areas such as spatial, workforce and financial planning are hampering progress, according to a report published today by the Auditor General for Wales.

Today's report found that FCW has made significant progress in providing a clearer corporate direction. The findings show FCW's clear strategic priorities are well supported by a stronger corporate culture where staff appear united around a clearly understood corporate direction and have a greater understanding of their own role in delivering FCW's objectives.

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But challenges remain for its successor if forestry in Wales is to continue to improve, says the Auditor General.

Forestry Commission Wales (FCW) has followed previous audit recommendations and developed clear and appropriate priorities. It has also improved its core processes such as procurement and managing grants and risks, and is now making good progress in meeting the expectations of its commercial timber customers. However, planning gaps in areas such as spatial, workforce and financial planning are hampering progress, according to a report published today by the Auditor General for Wales.

Today's report found that FCW has made significant progress in providing a clearer corporate direction. The findings show FCW's clear strategic priorities are well supported by a stronger corporate culture where staff appear united around a clearly understood corporate direction and have a greater understanding of their own role in delivering FCW's objectives.

In April 2013, the functions of FCW, the Countryside Council for Wales and Environment Agency Wales will transfer to a new body, Natural Resources Wales. Several key decisions have therefore been postponed and some long-term plans replaced by short-term measures. For example, FCW dropped its intention to develop a comprehensive formal spatial plan to assess priority tasks in favour of reviewing them case by case. This has also affected FCW's ability to predict the financial and staff resources required to deliver its objectives.

Some aspects of managing timber production and sales remain weak. The FCW has not developed its resilience to the risk of falling income from timber, and its EU funding has declined in the last four years. In 2007-08, the FCW generated £14.6 million in income from other sources, but by 2010-11 this had fallen to £5.8 million. This failure to diversify income has made FCW particularly vulnerable to the risk of falling timber prices.

The report makes a number of recommendations to be taken forward by Natural Resources Wales, and include:

• Linking corporate priorities to local planning, resource allocation and workforce planning;
• Further strengthening core business processes such as procurement and risk management;
• Managing its resources more effectively to include increasing income from non-timber sources and improve procedures around timber production and forecasting; and 
• Developing a culture of continuous improvement by enhancing learning from review, scrutiny and challenge.

Auditor General for Wales, Huw Vaughan Thomas said today:

Forestry Commission Wales has made marked progress since we first reported in 2008 but significant challenges remain for its successor, Natural Resources Wales. The new organisation needs to ensure that in developing its core business processes and ways of working it builds on the strengths we have found in some of FCW's processes, and addresses the weaknesses we found elsewhere. Given the current financial climate, Natural Resources Wales will need to develop its means of income to bolster its resilience to any drops in timber prices.

Notes to Editors:

• This report examines whether Forestry Commission Wales (FCW), where appropriate together with the Welsh Government, has effectively implemented previous audit recommendations to optimise the long-term benefits of forestry.
• In order to deliver the Welsh Government's forestry objectives, FCW: manages the Welsh Government woodland estate (some 38 per cent of forestry land in Wales); regulates forestry in Wales (including issuing licences for felling and replanting); and supports the Welsh Government in delivering its grant scheme to encourage woodland creation and more sustainable woodland management in the private sector.
• In 2010-11, FCW generated £14.13 million from timber sales. It received the majority of the remainder of its £50 million costs from the Welsh Government, with some funding from European grant schemes.
• The Auditor General and the auditors he appoints in local government are the independent statutory external auditors of most of the Welsh public sector. They are responsible for the annual audit of the majority of public money spent in Wales, including the £14 billion of funds that are voted to Wales annually by the Westminster Parliament. Elements of this funding are passed by the Welsh Government to the NHS in Wales (over £5 billion) and to local government (nearly £4 billion).
• The Wales Audit Office's mission is to promote improvement, so that people in Wales benefit from accountable, well-managed public services that offer the best possible value for money. It is also committed to identifying and spreading good practice across the Welsh public sector.