The Ministry of Justice is responsible for developing and delivering governmental policy and programmes relating to criminal, civil and family justice systems.
However, while the NAO's 2011 report revealed improvements in some areas, including its governance structures and the centralisation of its financial management, it also found that the ministry "still has a great deal to do".
Last year's report condemned the inconsistency and organisation of the department's financial management processes.
This year, the NAO identified ‘gaps in financial reporting skills' as a key factor behind the department's failure to produce its reports in time for the deadline of the 2011 summer parliamentary recess.
The head of the NAO, Amyas Morse, lauded the "considerable and welcome improvements" the ministry had made in its efforts to achieve cost-reduction targets.
Following the government's 2010 Spending Review, the Ministry of Justice is set to experience a 23 per cent reduction in funding over the next three years.
As such, the department is seeking to achieve a savings target of £1bn through cuts of 10 per cent to frontline expenditure, and significant savings in back office function costs.
In 2010-2011, the Ministry of Justice and its arms-length bodies spent £10.4bn, with 93 per cent of costs directed towards courts and tribunals, legal aid and offender management.
Staffing within the department makes up 38 per cent of total ministry expenditure, with 74 per cent of all staff working in the National Offender Management Service.
Since the NAO's 2010 report, the ministry has restructured its governance model to ensure finance is represented at the most senior levels, including within the new departmental board, the executive management committee and the financial management committee.
It has also worked to ensure that internal financial training and communications have been improved, and has reworked its financial modelling to make more accurate predictions on future expenditure.
However, Morse warned that the ministry "should not underestimate how much there is still to do", singling out the collection of fines, and assets-due and error rates in the Legal Services Commission's payment of legal aid as two areas needing further improvement.